Uganda has finally let go of its long-standing plan to liberalize private-sector pensions following conclusions that private foreign firm would have an undue advantage over their local counterparts.
Rwanda which aspires to be a private sector led economy in line with its Vision 2020 devised a privatization plan following alleged mismanagement from some contributors of the NSSF.
Happy to pensions in the private hands, some officials argued private firm were likely to be more aggressive in mobilizing contributions, potentially growing the pool of savings and long-term capital in the country’s financial system.
However, on Wednesday, Labor Minister Janat Mukwaya, announced the government’s plans to dump privatisation saying, all statutory retirement contributions from employees on formal company contracts will continue to be managed by the state-run National Social Security Fund (NSSF).
According to Mukwaya, allowing competition would be a “surrender of both the banking and non-banking financial sector to foreign capital because indigenous firms will have a very limited role to play.”
In Uganda, all private sector workers are legally obliged to contribute 5 percent of their salaries to the NSSF as social security savings to be redeemed as a lump sum on retirement. While the government operates a separate pensions scheme for public workers, whose benefits are entirely funded by the state.
All private sector workers are legally obliged to contribute 5 percent of their salaries to the NSSF as social security savings to be redeemed as a lump sum on retirement. Their employers add a further 10 percent.
As one of the major investors in Uganda’s financial markets, the NSSF has has been collating pension payments for decades, and as at June 2017, it had 7.9 trillion shillings ($2.16 billion) under its management