I read with keen interest and watched in awe as Mr. Morrison Rwakakamba the Presidential Assistant on Research and Information made arguments against the liberalization of the pension sector in Daily Monitor 9th May 2014 and NTV Fourth Estate Sunday 11th May 2014 respectively. Chris Obore, a fellow panelist on the latter forum summed it up well when he referred to the arguments as a classic case of ideological anarchy prevalent in the NRM party and by extension the government. Though harsh on the surface, the scathing review by Chris Obore may actually be the best description of the status quo in Uganda today on all matters economics, education, health, pensions, infrastructure development, social policy etc.
For the last 20 or so years, social policy in Uganda has been structured to telling people that they need to bear market risks and fend for themselves to finance their home construction, education for their kids, medical care etc. Having adopted the IMF and World Bank inspired Structural Adjustment Programmes of the 1980s, the Ugandan state pulled out of all sectors that are key to social protection e.g. housing (for civil servants, lecturers, teachers etc), job creation, banking (for mobilizing citizens savings), medical care, utilities (for economic production), tourism, agriculture etc. So it is surprising that a state that has been absent from all these key facets of social policy, can now be expected to be the guarantor and overseer of the pension sector.
The URBS Act 2011 Article5, Section 1 (h) indicates promoting long term capital development as one of its core functions! This is re-echoed by The Ministry of Finance Planning and Economic Development in their press statement in the Daily Monitor of 12/05/2014. The key issue we need to probe here is whether this long term capital “freed up” by liberalization of the pension sector, will be allocated to sectors and ventures that will spur “job-creating economic growth and development”. The prospects don’t indicate that this will be the case. For a long time, because of the unfettered financialisation, a lot of the long term capital that would ideally be going into production of tangible goods and products needed for both domestic consumption and exportation has ended up in buying financial assets e.g. government debt. None of these government securities are owned by local SACCOs or Community Cooperatives etc. They are majorly owned by off shore investors and banks! The pension funds will follow the same paradigm like their banking cousins! The investment in financial assets e.g. fixed deposits, treasury bills and bonds has not generated benefits to the wider society! If you look at the banking sector, on average, 70% of their asset portfolio comprises of the loan book and government securities! These assets are backed by customer deposits. So, who are the banks lending to? According to the Bank of Uganda State of The Economy Report, March 2014 ,Trade and Commerce take the lion’s share of private sector credit. Trade and Commerce in Uganda deals primarily in importation of finished goods to sell off through wholesalers and retailers. Ideally, these banks and pension funds would be financial intermediaries, to collect spare cash (savings) in the economy and link it to the agricultural firms and industrial corporations to produce the goods we need. This would help foster job creation, technology and skills transfers and further generate foreign exchange by exporting to regional markets like DRC, Rwanda and South Sudan. But this is not happening.
Civil Engineer and Socio-economic commentator.