I understand the Finance, Planning and Economic Development Committee which you chair, together with the Gender, Labour and Social Development Committee are spearheading the process to amend the NSSF law. How far have we gone, especially on the issue of partial access to member savings?
Yes, we are handling the NSSF Amendment Bill. Last week, we built a consensus on the famous mid-term access. Basically to qualify, for midterm access, a member will need to have saved for more than 15 years and be below 45 years of age or be between 45 and 55 years old and has saved for at least 10 years.
NSSF had initially wanted mid-term access on only voluntary savings, which are very minimal but we have been able to reach an agreement between them and the workers and now midterm access has been extended mandatory contributors as well. We are also looking at introducing provisions which give way for using savings as collateral especially for those who are looking for mortgages.
I understand there is an impasse of who, between the Ministry of Gender Labour & Social Development and the Ministry of Finance should manage NSSF. That, in fact, there is also a push and pull in parliament between the Gender, Labour and Social Development and the Finance, Planning and Economic Development committees over who should lead the NSSF reform agenda in parliament. Some sections of the workers are accusing you of colluding with NSSF and some officials in the Ministry of Finance, to keep NSSF in the finance ministry which they say is wrong because workers affairs should be under the labour ministry. What do you have to say?
Yes, it is true, there is a proposal in the bill to remove NSSF from the Ministry of Finance. Actually, there is the pressure to define the minister responsible for NSSF as the minister for gender, which we are totally against.
First of all, the colluding allegations are all propaganda. We do not have to collude- what interests do we have to collude? The NSSF management is doing their job, time will come and they will leave. I am doing my job as chairperson of the committee and time will come and I will leave, and the people in finance will equally leave. Even the people in the gender and labour ministry will leave, so there is no strong reason for us to pull ropes. We just have to make some of these decisions rationally for the good of our country.
The fact is, the NSSF of today, is a non-bank financial institution. It receives savers money in terms of contributions, it invests the money and pays benefits to the retirees and other circumstantial benefits in accordance with the law. So we are telling the workers unions, that NSSF, being a large non-bank financial institution, let it be managed by the people who have the expertise in managing funds, investments, the economy etc. And there is no way you can manage the fund when you are not the one appointing key people at NSSF. You see the line minister, appoints the board which is responsible for making decisions, including investment. Where we are disagreeing with the unions, is that they want a matrix kind of management, where some elements of NSSF report to gender and others to finance. How can you say the ministry of gender appoints the board and then the ministry of finance is in charge of investment decisions, which decisions are made by the board that was not appointed by them? Do I need to collude with someone to see that?
We are making a law to last for a long time, we don’t want a lot of back and forth. We want systems which move and that is why we are saying, take the management of the fund to finance ministry but make sure you have workers representation on the board. We are making a tripartite arrangement, where the board has the government, workers’, and employers’ representatives. The employers contribute significantly and they have their association- the Federation of Uganda Employers (FUE), and to be fair to them, we are giving them four positions on the board- they are the majority. But the workers’ unions seem to want everything- even the president has also disagreed with them.
We are not colluding with anyone. My argument is that NSSF managing money- big money. The last time we checked it was controlling about 40% of government’s domestic debt- through securities. You can’t just leave this fund to people whose core competence is handling gender and labour issues- the truth is NSSF as a fund transcends labour. What we are saying is that the Gender and Labour Ministry may be suitable, but not suitable enough. Maybe, when NSSF started in 1985, it was a very small fund, but now it has grown to UGX13 trillion. It can affect the economy. We need to check; put roadblocks- we need to measure the risks and the people who have got the competence are not necessarily the workers or the unions. We need the finance experts and they are at the ministry of finance.
That said, the two committee are sitting this week and we hope to reach an agreement on the management of the Fund- which ministry will lead.
Back to partial access- you must have seen the letter which the NSSF MD wrote to the members, where he says once the MPs pass the law for partial payment, they are ready and willing to pay members who qualify a portion of their savings. What is your view about that letter?
I think they are not telling the public the truth, that law (the NSSF Amendment Bill) has nothing with what the public is asking- the Covid-19 related emergency access because the law came much earlier.
The NSSF Managing Director manages that fund in accordance with the law and the law as it now does not provide for emergency benefits and even in the amendments we are working on, it is unlikely that we shall shift from the principles of pension funds. There are other social arrangements like the Social Assistance Grants for Empowerment (SAGE) which gives cash grants to senior citizens, but such things cannot really be accommodated in the law like this one. The mid-term access we are talking about does not relate to emergency funds like is being suggested by the Covid-19 access protagonists.
In NSSF’s letter to members, there is an insinuation that parliament is delaying the passing of the amended law. The Managing Director appeals to members to reach out to their members of parliament and urge them to fast-track and urgently pass the NSSF Amendment Bill. What’s your comment about that?
First of all, it is important to know that NSSF is not the owner of this bill. I do not know whether they know that. They are acting as if they own the bill. The bill belongs to the ministers. They (NSSF) are all over as if they are the sponsors of the bill. Whatever they want to harmonise they should harmonise with the minister first, then the minister becomes the channel through which their position passes to get to parliament. Sometimes I even wonder why they keep speaking to the public giving positions on a bill they do not own.
You as an individual heading the finance committee you must be aware of what is happening in the economy, do you have an individual position on the savers who are clamouring to have some emergency money for Covid-19?
My view is, they may not achieve what they want in the current circumstances but we should pick lessons. Some time back, we had a debate, whereby there were strong proposals to create tiers in the pension funds, whereby you, for example, have tier one, which is NSSF which we have now, and you have tier two and three- the rest of the tiers should be opened to the contributors to determine how these funds can be used. But right now, the law does not give the savers any leeway to use the savings the way they want.
Going forward it is high time we began, pushing for increased savings especially more of voluntary savings- which allow the savers to determine how the funds are invested and how the funds can be utilised, and when the funds should be withdrawn. This can only be achieved in a liberalized environment. Because in reality, the 15% contribution may not accommodate all the demands we are loading onto it and still be able to leave something for the saver at retirement.
It is high time the savers began thinking about how they open up the pensions sectors, in order for them to be able to negotiate what and how they want the money to be used. But in the current circumstances, it may be impossible for them to achieve what they are advocating for. Because it is true the fund doesn’t have the money. It has invested the money in some assets.
You talked about the liberalization of the pensions sector; are you a pro-liberalization person or against liberalization and in what way would you like this liberalization to take place?
I am for partial liberalization like I have told you. Whereby we have the first tier which is mandatory like NSSF of ours, having some percentage and then we have other tiers which are open and liberalized. Like the way Kenya, Tanzania and Ghana are doing it. It is only Uganda that is still somewhat closed, but many countries are going for partial liberalization.
So, when are we likely to see the Amended NSSF Bill passed by parliament? Will it be this year?
Yes, this year, but I cannot tell exactly when. Parliament is being prorogued this week on Thursday that means this session of parliament will have come to an end. On 4th June, we have a state of the nation address, and the budget will be read on the 11th of June- so my committee will expire. For this process to be concluded, committees will have to first form again and from my past experience, this has always been from early July. The earliest this bill can come on the floor of the house is in August if we work around the clock. But we will pass it soon because it has some really good proposals, which shouldn’t be lost.
The full impact of Covid-19 on the Ugandan economy is yet to unfold. The United Nations Capital Development Fund (UNCDF) and Makerere University have released an initial impact report that says up to 4 million jobs may be lost. One other major thing out of the report is that although the government has through Bank of Uganda come through with some easing on loans, the full extent of government’s intervention in the economy is not yet structured. As the chair of the finance committee, what’s your view in terms of how the government has intervened to save the economy and what would be your recommendations?
I do believe, the government is within our means trying to do something on the economy. For example, we know that of the USD491.5 million being borrowed from the International Monetary Fund (IMF), USD$340 million is going to Bank of Uganda, to stabilize the money markets. We also know that through BoU, there has been easing of pressures for businesses and individual on existing loans so as to improve cash flow for businesses. We also know that businesses will need new lines of credit and government has said that they are going to put more money in Uganda Development Bank (UDB), Uganda Development Corporation (UDC) and the Micro-Finance Support Centre to enable individuals and companies access to credit.
According to motions presented in parliament last week, we also know that Government is borrowing USD300 million from World Bank’s International Development Association (IDA) and we know that part of this money will be applied to supporting a faster recovery, supporting businesses and injecting liquidity into the economy by improving the cash flow of firms in the sectors of the economy that have been heavily affected by the crisis (e.g. manufacturing, tourism and horticulture) as well as improving the productivity and resilience of the agricultural sector by improving access to higher quality agriculture inputs. The details of this will unfold in the coming days.
But His Excellency’s view has been that we can’t drive the whole response at once. He has been more focused on health and the welfare of the vulnerable. In all this, we need to remember that our envelope is very small. Even what we are doing now, we are borrowing- cutting here and there and trying to cover first the health situation. Going forward, the full extent of the economic interventions will be revealed, but I do not see that happening this month because the focus of the government is still on health and saving people. The president thinks the economy can recover especially if we focus on import substitution. He is becoming inward-looking to see what opportunities this situation presents. He thinks we can manufacture most of the things we have been importing and we can draw lessons to start manufacturing most of the things locally.