Boost From NSSF

PROPSECTS IN the economy are looking brighter.Demand for consumer goods appears to be picking up after a slump earlier this year and investor confidence is improving as the Sudan and Congo crises approach resolution.More importantly the privatisation of Uganda Commercial Bank has led to a sharp drop in commercial borrowing rates. Bank base rates are now around 12 per cent. This makes it much more affordable to borrow and invest in the Uganda economy. Over the next few years this will definitely have a dramatic impact on economic growth.However the announcement in the Budget that the NSSF monopoly will be scrapped will be an equally significant boost to Uganda’s economic prospects.The NSSF will continue to exist and to manage its huge asset base. However it will have to compete to manage future savings with private sector pension funds. As a result, the NSSF and these private sector funds will have to demonstrate to the public that they can provide the best return on worker’s savings.The NSSF has got an extensive property portfolio but will now need to look for more varied investments that provide a higher return on capital. Inevitably funds are now going to flow into private sector bond issues and equities in the stock market.The combination of lower bank base rates and greater liquidity in the pension funds as a result of liberalisation is going to make much more capital available for private sector investment.These fundamental structural changes in the economy will have a very positive impact in the next few years. Economic growth will accelerate as the private companies find capital for investment becoming more affordable.Ends