Unleashing the pension sector, social protection and security to Ugandans

People walk past Workers House in Kampala. The building houses NSSF, the body that over looks workers’ savings. Below is the Pension Towers under construction in Kampala. If completed, it will house pension offices. PHOTOs BY ABUBAKER LUBOWA & faiswal kasirye 

By Benard Mujuni

In Summary

Pension reforms
In 2008, this newspaper reported that Civil servants will, starting the next financial year, would pay five per cent of their monthly salaries into a pension savings scheme if the Cabinet approved a proposal from the Public Service Ministry.

The plan, tailored along the NSSF model, was meant to plug a perennial deficit in the government pension scheme. “We are considering adopting the NSSF structure for the first five years and I believe this will make life easier for civil servants,” Mr Stephen Kiwanuka Kunsa, the commissioner for pensions at the Public Service Ministry then, told commissioners at a workshop. He was presenting a paper on pension management and reforms in the public service.

Under the NSSF model, private sector employers with five or more employees deduct five per cent of their workers’ gross monthly pay and top it up with 10 per cent.
The workers, or their next of kin, receive the money as a lump-sum when they retire at 55, emigrate, become disabled or die.

Civil servants would match their private sector counterparts with government’s contribution rising from 10 to 17 per cent after five years, giving the civil servants a 23 per cent monthly pension contribution inShare

Uganda is currently undergoing a revolutionary wave in areas of social development. First, the government is currently developing a comprehensive social protection policy framework that will impact on everybody’s livelihood. Secondly, the social security and pension sector is undergoing reform with institutions coming on board to regulate the pension sector.

The people of Uganda should take interest to know the implications of having these institutions in place. For lack of space I will dwell on the area of social security.

What is social security? Where did it come from? Was it already existing but without a homogenous name? Two competing paradigms dominate discussions on the theory and practice of development for a good part of the 20th Century, especially since the Second World War.

One was based on the ideology of capitalism as it evolved in Western Europe and North America and the other on the ideology of socialism as it was practiced in the former Soviet Union.

Both had important variations, especially with regard to the public provision of what may be called a broad range of social security requirements. The specific historical context of struggles and subsequent independence from colonial domination attracted a good number of developing countries to the model followed by the Soviet Union in so far as the role of the State was concerned in providing, what we shall later define as “basic social security.”

Bottleneck

However, given the structural characteristics of these economies, their overall economic backwardness prevented them from institutionalising social security arrangements to meet contingencies.

The socialist regimes provided both basic social security and contingencies since they did not recognise private property nor permitted the full play of the market mechanism in economic transactions. The capitalist countries of the west increasingly transformed themselves into ‘welfare states’ which also provided both basic social security (BSS) and contingent social security (CSS) i.e. social security to meet contingencies.

BSS refers to the social provision of a critical minimum to meet conditions ‘deficiency’ in such basic wants as food, health, education and housing. While CSS, socially-supported institutional arrangements, meet conditions of ‘adversity’ such as sickness, accidents and old age.

If there was something common between these two competing paradigms of socialism and welfare capitalism, it was in the arena of providing a more or less wholesome social security to the citizens. This should be the ultimate for Uganda. Over concentration of massive programmes in some sectors run the risk of mistargeting and as a result of overwhelming work, hence lack of absorption capacity.

Social security as it has been understood and practiced in both developed and developing countries largely refers to what may be called collective care arrangements to meet contingencies.

In fact, the very notion of social security evolved out of humanity’s quest for protection from hazards of nature’s furies in the primitive communities, and then from hazards of life and work in the modern societies.

But a generic definition of social security could be the one given by De Swaan(1988) i.e. “Social security arrangements are collective remedies against adversity and deficiency”. Uganda has had its share of policy deficiencies emanating largely from the Structural Adjustment Policies (SAP).

Currently the country is experiencing adverse effects of climate change such as Bududa landslides, massive elnino rains that deplete the national budgets by washing away bridges and roads, unclear disease outbreaks such as Ebola, measles in adults, drug resistant viruses, such as malaria etc. There is, therefore, a need to broaden the concept of social security as it is understood so far to focus on the informal sector in Uganda.

Debate
In fact a debate has already been initiated to broaden the concept of social security in developing countries. Dreze and Sen in their influential work on Hunger and Public Action (1989) deploy a broader concept of social security while distinguishing two different aspects, viz. protection and promotion. The former is concerned with “the task of preventing a decline in living standards” while the latter refers to “the enhancement of general living standards and to the expansion of basic capabilities of the population” (1989:16).

“Social security is no longer a matter of choice; it’s the ultimate for politicians & policy planners.” Basic Social Security is directly linked to the problem of deficiency of those who are not in a position to access minimum of resources to meet their economic and social requirements for a dignified life in their society. In Uganda, these are the majority.

The policy planners can no longer hide their face in the sand. The issue of minorities be they geographical, ethnic, regional, cultural or any other attribute-based are here to stay. The best the country can do is to integrate them in their policy planning processes and should be targeted with solutions. This takes care of human deprivation and vulnerability.

The notion of social security also seeks to take care of adversity i.e. contingencies of a wide-ranging nature. These could be hazardous situations arising out of human life and work, such as ill-health, injuries and accidents, unemployment, maternity, old age, death of an earning member, and so on.

These types of security arrangements are fairly common in the developed countries with the state playing an active role in financing and securing such arrangements. “It is therefore crucial that Uganda allocates at least 2 percent of its budget specifically to social protection programs such as cash transfers already benefiting the senior citizens.”

Unfortunately when extension of social security arrangements to developing countries are thought of, it is often these types of social security systems that attract the attention of policy makers, advisors and others concerned.

Our approach here is to advocate the adoption of universalisation to all the people who, by definition, face the problem of deficiency.

While this objective is taken care of in a good measure in the developed countries, it is still taken care of to a significant extent in the transition economies. The biggest gap is in the developing countries like Uganda where abject poverty is appalling.

I therefore commend the government for coming up with initiatives geared towards liberalisation of the pension sector. I also pray that whereas this is good for the formal sector, the informal sector should not be forgotten.

Seven Questions returns next week. Mujuni Benard is a social policy analyst. Formerly working with the-Equal Opportunities Commission