The Ugandan government is undertaking reforms in the retirement benefits sector to build an efficient and accountable system that protects the savings of workers and ensures a good return on their savings.

Retirees should have a social safety net that guarantees them a decent retirement. That is why there is a need to expedite the enactment of the Retirement Benefits Sector Liberalisation Bill, which, among other things, aims to ensure efficiency in the management of retirement benefits funds.

The current layers of bureaucracy at the NSSF purportedly meant to safeguard workers’ money are a major stumbling block to efficiency.

Recently, I watched the acting managing director of NSSF, Geraldine Ssali Busuulwa, explain to Members of Parliament the approval process the Fund has to undergo in order to invest.

Currently, the Fund collects about Ush60 billion ($23.2 million) a month, and these funds need to be invested in areas agreed on in the NSSF investment strategy. If not immediately invested, the cost to the members in terms of inflation will be high, resulting in reduced benefits for savers.

Ideally, these savings should be returned to members with a sufficient return to enable them to retire comfortably.

The NSSF Act mandates that all monies in the Fund, including the reserve account, will be invested as determined by the board of directors after consultation with the Ministry of Finance.

Furthermore, all investments must be done in accordance with the Public Procurement and Disposal of Public Assets Authority regulations, and subject to the Solicitor General’s approval.

All these approvals are not necessary and introduce encumbrances that prevent efficient performance of the Fund. These instruments are time sensitive and will not wait for a ministerial approval or Solicitor General’s clearance.

Recently, investment regulations, which provide a framework for investment of pension funds, made under the Uganda Retirement Benefits Regulatory Authority (URBRA) Act 2011, were gazetted.

Considering that the Capital Markets Authority (CMA) had already cleared both the Umeme IPO and the recent trading on the secondary market, this means they would have also done due diligence on the company, its directors, management and existing shareholders and found them to be worthy of a listed security.

The regulatory frameworks established under the CMA and URBRA, coupled with the investment strategy of NSSF, are adequate to ensure the safety of the savings and investments of the Fund.

What we need is to reform the governance structure of the NSSF by putting in place the required legislation. This mandate falls within the institution of parliament.

Currently, the NSSF assets are safe. The decision made by the board and management of NSSF to buy Umeme shares was good.

NSSF bought equity in Umeme at the IPO price of Ush275 ($0.10) per share; they are currently trading at Ush340 ($0.13). In 18 months, this investment has made a return of Ush7 billion ($2.71 million).

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If NSSF were to sell these shares today, the profit would be Ush23.6 billion ($9.14 million).

All five trade union members of the board of NSSF opposed this investment in Umeme, which brings into question their capacity to identify or analyse investment proposals.

To ensure that the board of trustees have the requisite capacity to make good financial or investment decisions in institutions such as the NSSF, the URBRA Act requires that trustees should be “fit and proper” in terms of integrity.

They should also have capacity to analyse investments. Unfortunately, trade unions are fighting these requirements, which are important for the soundness of the retirement benefits sector. The ongoing reforms in the retirement benefits sector, including reforming the NSSF, therefore need to be expedited.

Keith Muhakanizi is the Permanent Secretary in Uganda’s Ministry of Finance