Uganda, East Africa’s third largest economy will benefit from the liberalisation of the pension sector once Parliament approves the Pension Sector Liberalisation Bill into law, experts say. Speaking to over 30 journalists at a media sensitization campaign in Mukono, about 20 kilometres away from the capital city, Kampala, Racheal Sebudde, a senior economist at the World Bank said the sector will improve savings currently at slightly over 10% of the GDP.
Sebudde said pensions will be one of the crucial components of the comprehensive social protection system on top of supporting other broader macroeconomic goals by contributing to the developing of financial and capital markets. “We need to be hopeful about the sector,” she said. “Other countries including our neighbors Kenya have moved steps ahead…we can learn from them.”
Sebudde said Uganda’s economy has positive prospects because of the developments related to oil but also because of the huge investment in infrastructure. “If they go well we should expect more jobs, faster growth of economy and hence the ability of the people to save,” she said, adding pension schemes will also benefit from this growth. George Mulindwa, the business development manager at African Alliance said the contributory nature of the mandatory private sector scheme makes it even easier to assess the impact of reforming the pensions sector.
“The current allocation of NSSF assets is not optimal for the young workforce who comprises the majority of contributors,” Mulindwa said, opening up the sector will improve NSSF’s service delivery, he added. The current pension schemes comprise of the National Social Security Fund, the Public Service Pension Scheme under the ministry of public service and numerous occupational (employee-based) voluntary saving schemes. Once liberalization takes shape, competition is expected to stiffen and quality of service will be experienced by the savers. Already, NSSF-Uganda’s largest financial institution with a net worth of over Ushs 4 trillion in total assets-has responded to the liberalization process. It has so far held two annual general meetings with the aim of interacting with its members [slightly over 500, 000] about the current and future operations of the Fund. The Fund has also improved its customer service, reduced the time for paying its members on top of increasing interest rate paid to members.
Impact on capital markets, other opportunities
Mulindwa said, other factors constant, the sector will boost capital market activities, enhance the success of infrastructure and public private partnerships among other benefits. Busani Ngwenya, the managing director at Alexander Forbes, a financial services firm with operations in Uganda and abroad, said the regulatory framework of the sector must be strong enough to prevent mismanagement of members’ funds. He said that Uganda’s economy has positive prospects for growth in the sectors like manufacturing, services, agriculture, construction and real estate among others. Uganda’s economy has recorded a desired economic growth rate in the range of 6-7% in the last two decades, higher than the rate recorded by most of the countries in Africa.