The case of UGANDA
Balancing the pressures from
different stakeholders
World Bank Conference on
ALIGNING FINANCIAL SUPERVISORY STRUCTURES
WITH COUNTRY NEEDS
Presentation by
Candy W. Okoboi
Director Legal, Policy and Compliance - Uganda
A small economy indeed..
But OPEN
Area:
Population:
Agriculture:
Exchange rates:
Interest rates:
Capital:
236,040 sq km
28,195,754
80% of pop.
Liberalized
Liberalized
Free movement
GDP
ppp
GDP
growth
GDP
p/cap
Inf.
Inv.
Uganda
$46.06
billion
4.9%
$1,700
8%
23.4%
South Africa
$534.6
billion
4.6%
$12,000
4.6%
17.9%
Financial sector assets = 33% of GDP
The financial sector landscape
 15 commercial banks with assets under




30% of GDP
7 credit institutions with assets of under
1.5% of GDP
2 development banks
3 finance and leasing companies
19 insurance companies with assets
under 1.3% of GDP (90% non-life)
 1 statutory provident fund – The
National Social Security Fund (NSSF)
 1 stock exchange (Uganda Securities
Exchange) with market cap of
US$2,286m (8 listings & 15
Government bonds)
 1 collective investments schemes
manager (3 schemes)
 4 asset managers
 Bank of Uganda – prudential regulator
for financial institutions (commercial
banks and credit institutions)
 Capital Markets Authority – prudential
regulator of the securities market
 Uganda Insurance Commission –
prudential regulator of the insurance
companies and agents
 No prudential regulator for the
pensions industry
NSSF “not so rosy” picture
2000/1
2001/2
2002/3
2003/4
2004/5
Members’ Funds
(Million US$)
109
138
176
225
286
Total Investments
(Million US$)
94
119
158
198
262
Headline inflation
5%
-2%
6%
5%
8%
3
4
6
7
7
Interest Rate earned
members
contribution (%)
NSSF “not so rosy” picture
NSSF members
Total paid employees (2002)
NSSF coverage
NSSF funds/GDP
Active labour force
178,882
1,002,031
17%
3%
6,404,000
Figures as at June 2005
Outside NSSF
 Over 50 Private occupational schemes
 Current approximate assets US$60m
 Unfunded defined benefit Public
Service Pension Scheme with
escalating liabilities to Government of
approx. US$200m
High on the agenda
 Liberalization and independent
regulation of the pensions industry
 Fully funded public service scheme
 Enhancement of social security and
pensions products
 Expansion of pensions coverage
Supervisory structure
Who are the different
stakeholders and what are their
views?
Government / MOF






Financial sector deepening
Cost efficient regulatory structures
Reform NSSF
Increased domestic savings
Address public sector liabilities
In favour of CMA being reformed to
assume the regulation of the pensions
sector
Government / MOGLSD
 Reform of social security structure and
expansion of social security products
 Preservation of NSSF preferential status
 In favour of an independent pensions
regulator and have legislative proposals
to this effect.
Capital Markets Authority
 Development of institutional investor
base
 Self sustainability through expansion of
portfolio
 Economies of scope / market
development
 In favour of consolidated regulator with
CMA as the nucleus
Bank of Uganda
 Concentration of regulation of
commercial banks and credit institutions
and macro economic policy development
 Impromptu Regulator by virtue of “rogue”
provision of the law
 Keen on the merits of consolidated
regulation for NBFIs
 In favour of consolidated regulator with
CMA as the nucleus
Uganda Insurance
Commission
 Opportunities for institutional growth and
empowerment
 Growth opportunities for insurance
providers to offer pension products
 In favour of consolidated regulator with
UIC as the nucleus of a new body
altogether which will absorb existing
structures
Employees







Real returns!
Freedom of choice & flexibility
Wider scope of benefits
Universal coverage
Competitive forces for all
Conversion of NSSF to pension fund
In favour of independent regulator (as
opposed to Minister)
Employers
 Reduced liability
 Freedom of choice
 Reform of the NSSF to become market
responsive
 In favour of independent regulator (as
opposed to Minister)
NSSF
 Survive – averse to competition
 Preferential place in the liberalized
sector
 National provider
 Element of compulsory contributions
 In favour of independent pensions
regulator (prefer the Kenyan model)
Development partners




Speedy reform
Funded schemes for all categories
Cost and operational efficiencies
In favour of consolidated regulation for
the capital markets, pensions and
insurance industries
Balancing all these strong
sentiments
All-inclusive task forces
 The Social Security and Reform
Stakeholder Transition Group (STG)
appointed by the Minister of Gender,
Labour and Social Development in
January 2003
 Report on policy recommendations
regarding social security and pension
reform
 Recommended “new independent
consolidated regulator” with social security
mandate
All-inclusive task forces
 Pension Reform Taskforce (PRTF) by
the Ministry of Finance, Planning and
Economic Development in 2004
 Considered STG report as “starting
point”
 Stakeholder input to Cabinet policy
paper
 A case of too many cooks and
duplication of efforts
Interim supervision over NSSF
 Presidential directive to transfer the fund
to Finance from Labour in 2004
 Bank of Uganda interim regulator in view
of its resources
 Fund reports to Ministry of Finance and
Bank of Uganda
 Can a central bank adequately regulate
provident funds? Investment decisions lie
with Minister
Look to our neighbours
 “Local” solutions to local problems
 Similar socio-economic infrastructure
 In line with the overall strategy for
regional integration – the East African
Community
 Assume the neighbour’s mistakes;
Kenya’s model is already facing a lot of
challenges
Look to the Consultant
 External and independent views and
recommendations
 Impartial consideration of all stakeholder
opinions
 Home-grown solutions at risk
Unresolved preliminary
issues
 Policy direction and sequencing
 Leadership and coordination
 Clarity of mission: Social security reform
or pension sector reform or both?
Conclusion
 Preliminary issues to be speedily
resolved
 Consolidated regulation likely to take the
day
 Need to be exposed more to the
challenges of other markets in order
avoid those mistakes and arrive at the
best model for our circumstances.
Thank you for your kind
attention
CAPITAL MARKETS AUTHORITY
14 Parliament Avenue
Jubilee Insurance Centre,
P.O.Box 24565
Kampala – Uganda
www.cmauganda.co.ug