Tuesday, September 23, 2008


There is urgent need to review the NSSF Act
One of the issues the Parliament’s committee on Commissions, Statutory Authorities and State Enterprises investigating alleged political meddling in the management of the National Social Security Fund (NSSF) will have to address, is that relating to the legal application of a power of attorney.

A power of attorney is basically a legal contractual instrument created between the donor (person who gives the power of attorney) and donee ( the person to whom the power is given) for purposes of contracting/dealing with third parties.

Courts of law have developed principles that govern the operation of a power of attorney. One such principle is to the effect that an attorney acts on behalf and in the name of the donor. This means that the donor has imputed notice of all the information that the attorney has.

A donor of a power of attorney takes all the benefits and blame arising out of his attorney’s activities and therefore cannot escape liability. The court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy - to prevent the relations created between the parties and the influence arising therefrom being abused. By the very nature of this relationship, it’s clear that in the NSSF matter, the actions of Arma Ltd. can be imputed on the donor who is Security Minister Amama Mbazi.

That said, the public should be made aware that the latest NSSF financial scandal is largely due to the weak laws that govern the pensions sector and a corporate governance culture -that allows the Office of the President and the line ministries (in this case the Ministry of Finance) to wield too much power in the management of workers hard-earned savings.

The NSSF Act, the principle legislation that regulates the Fund, has many loopholes that can be exploited to literally run down the Fund. The law, for instance, gives the minister unilateral powers to appoint the management and board of NSSF bringing into play political considerations and influence when deciding who should manage the Fund.

This is wrong because such appointments are not normally made on merit. It’s political patronage that informs many of these decisions and the appointees are forever indebted to the appointing authority. This explains why decisions by public managers are mostly made in total disregard of publc interest.

Public corporations like the NSSF should be insulated from political oversight. They should be governed by independent regulatory bodies with clear legal mandates. In the case of NSSF, government must disabuse itself from the notion that it owns the Fund.

This calls for President Yoweri Museveni’s urgent intervention to deal with errant ministers for purposes forcing them to follow procedures when dealing with public assets. Parliament also has a duty to put in place legal mechanisms to check the growing mismanagement and misuse of workers’ savings. This calls for an urgent review of the NSSF Act .

For instance, Section 3 of the Act empowers the minister to appoint the board of directors . No special attention is given to the workers’ representatives. The law should compel the Fund management to consult workers’ representatives before undertaking big investments. And if government fails to act, then the 299,233 members can sue government and the Fund managers to bring them in line.

Mr Sserwanga is a journalist and advocate

No comments: