Uganda has ditched a long-standing plan to liberalise private-sector pensions after concluding the reform would hand foreign firms an advantage over their local counterparts.
All statutory retirement contributions from employees on formal company contracts will instead continue to be managed by the state-run National Social Security Fund (NSSF), Labour Minister Janat Mukwaya said on Wednesday.
The NSSF, which has been collating such payments for decades and had 7.9 trillion shillings ($2.16 billion) under management as of June, has faced accusations of mismanagement from some contributors.
The government came up with the privatisation plan in response to that criticism.
But Mukwaya said allowing competition would be a “surrender of both the banking and non-banking financial sector to foreign capital because indigenous firms will have a very limited role to play.”
There was no immediate comment from industry executives.
All private sector workers in Uganda are legally obliged to contribute 5 percent of their salaries to the NSSF as social security savings to be redeemed as a lump sum on retirement. Their employers add a further 10 percent.
The NSSF is one of the major investors in Uganda’s financial markets.
Some officials had argued private funds were likely to be more aggressive in mobilising contributions, potentially growing the pool of savings and long-term capital in the country’s financial system.
The government operates a separate pensions scheme for public workers, whose benefits are entirely funded by the state.