Opening up of the pension sector for more players will unlock savings that could push up growth in Uganda's capital markets, Bank of Uganda deputy governor, Dr Louis Kasekende, has said.
Kasekende said: "I would like to note that one of the most important reforms for stimulating capital market development in this country is the genuine liberalization of the pensions sector."
He was speaking at the launch of Uganda's capital markets 10- year master plan at Kampala Serena hotel last week. The plan was drawn up by Capital Markets Authority (CMA).
A capital market is a platform where companies, institutions or governments can get funds by dealing in shares, bonds, and other short to long-term instruments.
The most common form of accessing money is where companies float their shares on the stock exchange and the public buys them. Those who buy shares - usually referred to as investors - earn from their investment when the company declares a dividend.
Uganda's capital markets remains under-developed, dwarfed by Kenya's, with a few firms willing to list. There are at least 16 companies listed on the Ugandan bourse, with half of them cross-lists from Kenya.
The liberalisation of the pension sector has dragged on for more than 10 years due to opposition from workers' unions and powerful individuals who benefit from National Social Security Fund (NSSF) remaining the main player in the market.
More players in the pension sector mean that those in the informal sector can as well save for retirement in a licensed pension fund, which consequently scout for opportunities to invest the money, especially in the capital markets.
Kasekende said: "We have been discussing pension reform for the last 20 years. We have put in place the appropriate regulatory structure. Now is the time to liberalize the sector and open it up to competition. Monopoly is never conducive to the vibrant growth of a market."
Liberalizing the pension sector needs a strong regulator to whip players whose pursuit for profits against all odds can be lethal for the poor savers. It is also prone to fraud. The Uganda Retirement Benefit Authority (URBRA) is in place to regulate it.
Meanwhile, Kasekende said the lines between a banking sector and a liberalized pension industry need to be clearly defined.
"The capital market is not a substitute for the banking sector. Instead, capital markets and the banking sector are complements; each catering for different needs of the economy in terms of financial services," he said.
Prime Minister Ruhakana Rugunda said privatized companies should ensure that they list their shares for the public to buy. The capital market master plan is also meant to push up the number of listed firms and have more Ugandans interested in the sector.
Keith Kalyegira, the chief executive officer of CMA, said impediments to the growth of capital markets in Uganda are due to limited supply of shares.
"Government needs to pronounce itself on the privatised companies, especially those that made contractual obligations to sell shares to Ugandans," Kalyegira said. "There has to be a discussion and a final decision made so that these companies are compelled to sell shares to Ugandans."
A host of companies such as Kakira Sugar Works Limited, Barclays bank, Uganda Telecom, and Sheraton hotel were expected to list their shares as per the Public Enterprises Reform and Divestiture Act (PERD) 1993.
Those firms have not yet listed. There are questions as to why government has not compelled them to list.