KAMPALA - With a pension sector starting to assume a vital role in Uganda's economy, the country now urgently needs a law that would limit the amount of pension funds to be invested overseas, according to an expert.
The continued absence of such a law, the Managing Director of African Alliance, Mr Gary Watson, says leaves the sector highly exposed and vulnerable, hamstringing efforts to expand it and position it for a more pronounced impact on the local economy.
"A large well-run pension industry is only possible if pension funds are used to develop the Ugandan industry," he said.
Currently Uganda has one pension fund, the National Social Security Fund, which holds about Shs400 billion, making it one of the nation's biggest cash depositories.
In a paper he presented to a pension fund discussion in Kampala last week, Gary noted that pensions have historically played a central role in any of the world's mature economies; providing long term financing to businesses and starting up massive projects that transform the economy via provision of employment and large scale production of goods and services.
But while NSSF has such great capacity to power the economy through provision of cheap capital to businesses, the investment decisions and choice of locations for those investments within the prevailing legal regime, rests absolutely with the managers, who are often profit driven.
If left alone, pension managers would almost certainly be inclined to invest in locations that offer higher rates of return; the US, EU, S. Africa and parts of Asia.
Watson said almost all other nations have put strict curbs on the maximum amount that can be invested in foreign markets: South Africa fixed hers at 25 percent, Kenya at 50 percent and Botswana, 70 percent. An assessment of the Ugandan situation, Gary suggests that the government would render it a big boost if it tied the limit at 50 percent.
Uganda, he said, should imitate its regional neighbours and liberalise its pensions sector, contending that such a development would spur efficiency.
But in the event of liberalisation, he cautioned, pension managers from the developed world must be compelled to administer the businesses locally so the country can benefit via expertise and technology transfer.
"If the management is done in Johannesburg, Nairobi or out there in the developed world, Uganda will never develop her own investment management industry. Instead there will be a number of salesmen but no capacity building," he said. | 
