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Uganda: Experts Warn On Pensions Measures
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New Vision (Kampala)
21 May 2008
Posted to the web 22 May 2008
Charles Bwogi
Kampala
THE increase in mandatory contributions to workers' schemes will create distortions that will make Uganda unattractive for global and regional investments, investment experts have warned.
They said an increase in the number of mandatory workers' savings schemes, reform initiatives by the Government and the various taxes that target the formal employment, would become counter-productive.
In a statement, the Investment Management Association of Uganda (IMAU) said if all the reform initiatives are effected, "the disposable income accruing to Uganda's workforce will fall to only 29%."
One of the initiatives is the proposed National Social Health Insurance Scheme, targeting the formal sector employees. The workers are supposed to contribute 8% of their gross earnings to the scheme.
This, the statement explained, would be an added burden to the employers and employees who are already choking on the huge 15% contribution to the National Social Security Fund.
The statement warned that the country needed to design solutions that would not discourage participation in the long-term saving systems, increase business costs or reduce Uganda's competitiveness.
"Too many reform initiatives can have noble objectives, but can in practice lead to counter-productive outcomes, significant distortions to the market economies and become financially unaffordable in the long-run," the statement said. The statement said the real solution lies in a proper actuarial study to map out the best strategy to mobilise savings to move forward.
"The question remains how these schemes are going to reduce poverty and enhance one's spending and saving power as opposed to 'overtaxing' the already limited taxable base of workers," it queried.
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The IMAU members include Stanbic Investments, Renaissance Capital, MBEA Brokerage Services, East African Underwriters, AIG Global Investment Company East Africa and African Alliance.
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