There’s another way Amongi can solve the pension problem

If you’re as young as I am, then you’ve only seen one government in power – and one ruling party; the National Resistance Movement.

It also means, you’ve lived under one economic system; the free market – or a mixed economy as the NRA called it after they captured power.

That economic system relies fundamentally on markets. Markets are where people sell and buy products. They are also where people make - or lose – money. Every decision in the market produces a result that favours or disenfranchises someone.

In the 90s the NRM undertook major structural reforms designed to make the free market work. One of those reforms was placing the private sector at the heart of the enterprise. The government agreed to get out of the market and take on a regulator role whilst allowing private players to take up position in the market.

Admittedly, this move was a hit. First, it delivered very good returns on capital. From the negatives in the 80s, the early 2000s were bringing home close to 15% of return on equity. This allowed people to hire more labour, take more people out of poverty, get more people to pay taxes and, a very small line of that economic miracle story was that gross national savings went up and up from then.

In 1998, some 170,000 people were active savers with NSSF, the membership was at about a million people. The numbers have only grown ever since.

That savings culture, albeit enforced, allowed for the lowering of interest rates at banks with pensions making the bulwark of money that commercial banks could now gamble with. It’s been a slow and painful journey but Uganda’s pensions in NSSF had started to do dramatic work in real estate, mortgage markets, financial markets and even short-term government bills and bonds offering.

For the workers in the 70’s & 80’s who endured the bad tide, pensions meant little. They came when they came and when they did, they weren’t much.  The generation following them, the 90s and 2000s are the ones going to make the big buck from that saving. The average payout from NSSF has been on a gradual rise and is currently at 13 million shillings – it isn’t much but what’s the baseline? The average pension payout in the 1980s was, by many records, about 800,000 Uganda shillings. It didn’t even help that the life expectancy then was 43 years and the pension payout was at 65 years. The net result was that many pensions were collected long after people had passed on.

Now with long life expectancy, and longer work periods, the returns will be more for the younger generations of Ugandan workers.

For people like Amongi, the worry shouldn’t be how NSSF invests its money – because clearly, that model is working. The worry should be how do you get a larger portion of Ugandans into the workspace and have them start saving their pensions early? How do you tweak the machine of the free market to benefit a larger majority of Ugandans?

Is that not what a Minister for Labour and Social Development should do?