NSSF Act: What you should know about midterm access to benefits

There is a disconcerting but growing trend in Uganda’s legislative processes called baiting. The initiators of a legislation usually want to achieve a particular set of selfish and, sometimes, anti-people objectives.

For fear of public uproars, they craft just one pro-people objective put it in their draft and popularise it so much as to make the entire Act appear as if it’s only about that bait.  This is exactly what I see in the handling of the NSSF (Amendment) Act, 2019 and the much hyped midterm access to savings. Whereas the Act is timely as in bringing the 1985 NSSF Act to terms with modern realities, it, in great measure, negates the principle of fairness required in legislative practice. Let’s take a deeper look at some of its provisions. 

First of all, there is no such a thing as midterm access to benefits by any of the workers currently contributing to NSSF. Under section 24A, such access is preserved only for voluntary contributors to NSSF and this is a new category of contributors being introduced by the Act for the first time.

I will painfully reveal to you, the standard contributors, that what you hear or read from our legislators and workers’ leaders is precisely a lie.  

Secondly, the Act seeks to expand social security coverage by making NSSF contributions mandatory for all workers in the formal sector regardless of the size of enterprise as opposed to the minimum of five workers per enterprise required to qualify employers to make such contributions under the current law. I am not opposed to widening of social security in the country but I think to require that an emerging enterprise with just one employee files returns and makes NSSF contributions is to muzzle it out of business. When this principle couples with the fact that the Act is enhancing penalties for offenders under the Act, including fines of up to Shs 10m, it may end up discouraging employers from recruiting workers thus breeding unemployment.  

Thirdly, the framers of this Act attempt to justify it by invoking Paragraph VII of the National Objectives and Directive Principles of State Policy and particularly argue that social protection and social security, which they debatably call human rights, should be accessible to all. They should know that the framers of the Constitution left social security and social protection out of Chapter Four of our constitution intentionally because they knew that you cannot prescribe human rights only for a certain economic class of persons. That a person has a right to save but not the right not to save. It’s an unusual attempt to make a human right enforceable against its beneficiary. 

Fourthly, the Act empowers NSSF to recover any amount owed to a defaulting employer from a third party, to cover that employer’s pending contribution. This would mean that NSSF is free to raid employers’ bank accounts and their business debtors.

Indeed, for a trader to supply another with goods on credit, he or she will first ask whether that person’s NSSF contribution for the previous month has been paid. This is an attempt by NSSF to turn every business person into its agent and will cripple enterprises since it introduces an additional but tedious cost of doing business. 

Fifthly, the Act defers taxes on contributions to the time of payment of benefits. In consequence, the tax burden will fall on a beneficiary. This is not fair because it’s NSSF which will be in possession of the savings and using them the way they want, moreover for a long time. How then does the law turn around to put the tax burden on a beneficiary who by that time will have waited for decades to access his or her savings?

On domestic borrowing the Act empowers the Board to use what it calls “in-house-expertise and fund managers” to negotiate and conclude domestic borrowing transactions by all including government. The NSSF Board will freely sit somewhere with the minister of finance and they conclude a deal without regard to the provisions of the Public Finance Management Act that call for stakeholder participation. Drawing from the precedence of the NSSF scandals, it is prudent to say that this is a corruption window. 

Lastly, it acknowledges that the Act creates a string of benefits but again seeks to empower the Board to create new benefits in consultation with the minister. There is no serious legal mind that will give a mere Board or even a minister equal legislative powers to those of parliament.  

Mr  Nuwagaba is an advocate in Mbarara. [email protected]