NSSF can still win

LAST WEEK the Minister of Labour suspended the Managing Director and the Corporation Secretary of the National Social Security Fund.Government has committed itself to reforming the pensions sector yet Dr Barongo and JB Kakooza were implacably opposed to any liberalisation. Their open defiance of government was probably responsible for their suspension.Nevertheless their suspension has highlighted the need to clarify certain contentious issues.In particular the NSSF is not going to be privatised or given away to foreigners as some people claim.The NSSF will continue to manage 250 billion shillings in workers’ deposits. It will not be privatised although the government may look for competent experts from outside to assist in its management.Some private sector financial institutions will be licenced to receive and invest workers’ savings in competition with the NSSF. This will inevitably lead to a higher rate of interest being paid on workers savings. The NSSF will not necessarily be the loser. After all, The New Vision is a public sector company that competes with the private sector and wins.However the NSSF will need to become more efficient. It will have to carefully analyse the returns from real estate investment. It will have to pay a competitive rate of interest on savings and inform savers annually of the amount accrued, instead of at the time of redemption. And it will also need a thorough audit of its assets to ensure that they cover its obligations.The NSSF should remain the market leader even in a liberalised pensions sector. Its huge deposit base will give it economies of scale that its competitors will not be able to match.