The NSSF Act (Amendment) Bill 2019: One Clause is Particularly Very Suspect

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Last updated on January 5th, 2023 at 07:14 am

Every Sunday evening I go to Kyengera trading center for a haircut done by a longtime friend – Robert. He has been cutting my hair since 2005. So he is literally a child hood friend.

Every time I am getting that haircut we are always talking about local village issues; like which muggaga (rich man) has bought the biggest chunk of land in town, how LC 1s are exploiting the community through exorbitantly charging residents for document authentication.

Occasionally, ever since I joined Law School and finished it, he now seeks my legal opinion on some of the contemporary community issues.

Last Sunday was different. I chose to be a wiseacre. I diverted from the usual talk and asked him whether he will save with NSSF now that the law is going to be amended to provide for voluntary contributions from people like him in the informal sector.


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“I can’t save with a government that is full of a murderous mafia with a den of ruthless thieves,” he retorted.

“I would rather save that money with an investment club in a private bank with a group of friends.”

His workmate, a fellow barber and 3 other customers readily agreed with him. I certainly found myself isolated with my elitist arguments in favour of NSSF.

“Eyo embozi ya baffele ba gavumenti,” his colleague responded in a tone that seemed to suggest that we conclude this rather incendiary conversation.

This conversation shows how the few people in the informal sector perceive anything that has a lot to do with government; immense suspicion.

I doubt they even read the merits of the bill but they have already formed an opinion.

When the NSSF Act  (Amendment) Bill  2019 was duly laid on table in Parliament mid last month, the media rushed to conclude that the most contentious issue was the taxation element at the point of receipt of the benefits. Not everybody agrees.

I find Clause 12 of the Amendment Act that seeks to amend section 30 of the NSSF Act 1985 by inserting immediately after subsection (1) more contentious.

It reads and I quote verbatim;

“Notwithstanding the provisions of any other law, the Board may use in-house expertise or fund managers in the investments, which may include lending to the government.”

With this Amendment, it is possible that Government and NSSF will negotiate secretly amongst each other on borrowing terms.

This, inadvertently or not, eliminates the Capital Markets Authority, that’s been playing a role in this process. This Clause automatically weakens Section 67 of the Uganda Retirement Benefits Regulatory Act which stipulates that schemes must have a prudent investment policy that seeks to maintain the capital funds of any scheme and generally secure adequate rates of return on investment.

It’s possible that due to the conflict of interest among the fund managers, government can secure loans from the fund at less prudent rates.

This Amendment has the adverse effect of making the capital markets stagnate since NSSF is a major player there.

It is not surprising that pioneer unit trusts provider firms such as Alliance Africa and Stanlib might have foreseen this last year when government published its Cabinet principles to amend the NSSF Act and subsequently chose to exit the market.

On August, 2019, I watched the NSSF Managing Director on NTV’s  “ON THE SPOT” show when he was defending government borrowing from the Fund.

He said, and I quote, “Government is the best borrower. Even if it doesn’t have the money, it can print currency and pay you.”

Much as the U.S government did this quantitative easing (printing money) to help ailing banks out of the 2008 crisis, this is bad practice for a retirement fund.

It is tantamount to stealing wealth from government creditors through inflation. And any accredited actuary would disagree with this practice.

It’s the entities that trade this bond market like the Fund that benefit more than ordinary citizens who get paid out of the fund because the fund gets that money first.

And whoever gets that money first drives up the value of whatever they decide to spend their money on.

By the time people further down the line get their hands on that “new money,” prices would have risen and that new money won’t buy as much as it did for those who get paid out of the fund.

Therefore, I do not agree with the Managing Director.

I think NSSF and its Managing trustee  (Director) should do more to increase confidence in the fund but this amendment pertaining to government borrowing is really suspect.

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