Post on 17-Jan-2023
Role of Social Security Schemes in Tanzania. Challenges Facing
NSSF and Members amid Government Failure to Confine
Withdrawal.
By:
Mohamed Juma Mwerinde.
UB No. 11 031 946
A Dissertat ion submitted to theDepartment of Development & Economic Studies (DDES)
University of Bradford
in part ial fulf i lment of the requirements for the award of the MSc inEconomic and Finance for Development,
March 2013
School of Social and Internat ional Studies Department of Development and Economic Studies University of Bradford Bradford, West Yorkshire BD7 1LP The United Kingdom
Word Count: The length of this dissertation is 12,932 words
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CERTIFICATION
The undersigned certi f ies that, he has read and hereby recommends
for acceptance by the University of Bradford, a Dissertation ti t led
“Role of Social Security Schemes in Tanzania: Challenges Facing
NSSF and Members amid Government Failure to Confine
Withdrawal” in partial fulf i lment of the requirements for the degree of
Masters of Science (Economic and Finance for Development) of the
University of Bradford.
…………………………………………………………………………
Dr Andrew Mushi
(Supervisor)
Date ………………………………………………………..
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DECLARATION AND COPYRIGHT
© Mohamed Juma Mwerinde
No part of this dissertation may be reproduced without the permission
of the author.
I declare that this dissertation is substantial ly my own original work
and has not been submitted in any form for an award at any other
academic institution. Where material has been drawn from other
sources, this has been fully acknowledged.
Signature ………………………………….
Date…………………………………
33
ACKNOWLEDGEMENT
It is my confession that this thesis report could not be completed without the clutch
up of a number of peoples around me. It is not easy to mention all who contributed,
but let it suffice to say that I appreciate all and the contributions made. Owing to
space constraints, allow me to mention a few of them; My heartfelt appreciation to
my principal Supervisor, Dr A. Mushi for his encouragement, intellectual support,
constructive criticism and tolerance from which production of this quality thesis
report have been able to achieve. I also recognize with gratitude the contributions
of all MSc. Economics and Finance for Development lecturers at Mzumbe
University and University of Bradford. They made me build confidence in critical
writings and thinking.
I as well lengthen my gratitude to NSSF management for allowing me to attend
classes and conduct study in their organization. I thank all NSSF staff especially
ones at the Head Office for their valuable contributions in getting data and annual
reports for supporting my research.
Last but not least, I recognize and appreciate the suffering my family and relatives
which experienced during the entire period of my study when they missed my
presence, love and care. I highly appreciate the patience, understanding,
emotional support and encouragement of my beloved wife Rachel Jonathan
together with my lovely children, Rebecca and Kiangi.
I remain fully responsible for any shortcomings in this work.
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DEDICATION
I dedicate this work to my Heavenly Father who gave me the ability to do
everything through his strength and willingness. I also dedicate this work to my
loving and caring parents, the late Mr and Mrs Mwerinde, as I have achieved my
success behind their care, love, courage and prayers, what they did continues to
make me prosper in my life. Finally, I dedicate this work to my loving wife, my
children, my brothers and sisters whose prayers, encouragement and support
made possible completion of this work may the Almighty God bless them all!
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Abstract
There has been a tendency of Social Security Schemes in Tanzania to
disburse pre-mature membership withdrawals. The practice is
contrary to the roles of the Schemes but the government has fai led to
arrest despite having adverse effects to both members and the
Schemes.
In analysing rationale behind this routine, Researcher faced
diff icult ies in obtaining data because the study is very new, there is
less l i terature related to it. However it was possible to review Social
Security policies, NSSF corporate plan, Blogs, Newspapers and other
publications and made as basis in drawing conclusion.
The study revealed that members lodging pre-mature withdrawal ends
up as beggars in the cit ies or l iving very poor l i fe in the vi l lages at
their old age. And that absence of saving habit among majority of
Tanzanian, bureaucrats in handling members’ benefit, lack of
uniformity among schemes, reduced coverage, poor social security
policies and deprived benefit package are the major reasons for
member ’s preference to withdrawal.
Social Security Policies and NSSF corporate plans are to be updated.
Withdrawal should be confined and Un-employment benefit introduced
as an alternative to withdrawal.
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CONTENTS;
Page
Certif ication ………………………………………………..……….……..…. i i
Declaration and Copyright …………………………………………………...i i i
Acknowledgement ……………………………………….………..….………. iv
Dedication ………………………………………………………..…………….. v
Synopsis …………………….……………………………………..…….…….. vi
List of Tables and Figures …………………..………………..………..….. ix
List of Abbreviations /Acronyms …………………………………………... xi
CHAPTER ONE: Overview of the Study
1.1.0 Introduction ………………………………………………………..….. 01
1.1.1 Background to the study…..... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 03
1.4.3 Research question …………………………………………………... 07
1.4.0 Research Objectives ………………………………………………... 07
1.2.0 Statement of the Research Problem …………………………….. 08
1.3.0 Significant of the Study……………………………………………... 09
1.5.0 Scope of the Study …………………….…………………...... ... ... . 10
1.5.1 Organization of the Study ….... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . 11
1.5.2 Limitation of the Study ………………………………………….…... 11
1.6.0 Research Methodology …………………………………………..…. 12
1.6.1 Data collection ……………………………………………………………...…. 13
77
CHAPTER TWO: Literature review.
2.1.0 Introduction ……………………………………………..……………………….. 14
2.2.1 Roles of Social Security institutions ……………………………….....14
2.3.0 Social Security Scheme in Tanzania and Problems
associated with ………………………………………………………… 18
2.4.0 Adequacy of Social Security in Tanzania and destines of pre-mature
membership withdrawers …..... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . 28
CHAPTER THREE: Review of Social Security Policies.
3.1. Introduction…………………………………………………………….....34
3.1 Review of Global Social protection floor policy …………………...34
3.2 Review of Tanzania social security policy (2003)…………….…...36
3.3 Review of Tanzania National Ageing Policy………………………...38
3.4 Overall Challenges facing Social security sector in Tanzania………………………………………………………………....40
CHAPTER FOUR; Impact and Challenge of Withdrawal Benefit toNSSF
4.0Introduction ………………………………………………………….….... 42
4.1 Roles and Functions of NSSF ..... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .…... 42
4.2 Adequacy of Benefits paid by NSSF…….………..….…………..... 44
4.3 Review of NSSF corporate plan 2009/10- 2012/13 …….…………48
88
4.4. NSSF and the Challenge of withdrawal benefit …….…….…..….51
4.5 Trends in withdrawal benefits in NSSF ……………………………..56
4.6 High membership withdrawal... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..56
4.7 Members’ complaints on barred withdrawal benefit …...... ... ... ...57
4.8 Why members prefer withdraw benefit ……………………………. 62
4.9 Provision of insufficient benefits to members ………………..... . 63
4.10 Provision of regular training to Employees and members …....65
4.11 Sufficient system of collecting members’ complaints..……..… 66
4.12 Whether there is di lemma in confining withdrawal…………..... 66
CHAPTER FIVE; Conclusions
5.0 Conclusions……………………………………………………………... 69
5.1 Recommendations for further research ………………………..…. 70
List of References ……………………………………………………..…... 70
List of Tables and Figures;
Graph No.1 Global Pension coverage by 2010…………………….………….…....16
Table No. 1 Global population coverage of social security………………………..17
Table No. 2 Tanzania Social security investments at 2009 …………………....… 21
99
Table No. 3 Variations among social security in Tanzania …………….…...….…..23
Graph No. 2 Social security coverage in Sub Sahara Africa ……………………… 29
Picture No.2 Elders Caring Extended Family …………………………………...….. 32
Table No. 4 Trends of NSSF membership and benefit payments …………..…… 32
Graph No.5 Stages of social protections ……….…………………………….….…. 35
Diagram No 1 How Social protection Invests in Human Infrastructure ……....….. 35Table No 5. Position of NSSF among other schemes in Tanzania……………..… 42Table No 6. Number of members and amount of pensions by each scheme……………. 43Table No. 7 NSSF Financial Position at 2008 …………………………………...…. 43Graph No. 3; World Un-employment benefits payments……………. 45Graph No 4; World Social security expenditure ………………………….......……. 46Picture No. 1; Retiree awaiting pension computation …………………………..…. 47Table No.8 Benefit Processing Period Performance ……………………….…… 48Table No. 12; Corporate plan 2009/10 – 2010/12 performance summary………. 49Table No. 9; NSSF investment portfolio trends ……………………………….……. 54Table No 10; Government loans from Pension Schemes ………………………… 54Table No 11; Countries with huge National Debt led to economic hardship …….55Table No. 13; Total benefits paid by NSSF 2002 to 2009 …………………...……. 56Graph No.6 Five Years Trend of Benefit Payments …..….…………………..……. 56Map No.1; Tanzania Social security survey …………………………………..……. 60Table No. 14; Social security coverage in Tanzania ……….………… 64Table No.15; Amount spent on employee training ………………………………… 65Table No16; Amount spent on Public Education vs corporate social responsibility……………………………..…………….…………. ……………….……65
List of Abbreviations /Acronyms;
CAG …………………..…………………………..…….. Controller and Audit GeneralCCK ………………..……………………………………....………. Chama Cha KijamiiCESCR …….……....…………. Committee on Economic, Social and Cultural RightsCUF ……….………..…………..………………..………………….. Civic United FrontGDP …………………………..……………………………….. Gross Domestic ProductGEPF ……………………..……...….. Government Employees Pension FundILFS ……………………….....……………….…..….. Integrated Labour Force SurveyILO …………………………..…………..…. International Labour Organization
ISSA …………………….....…...... International Social Security Association
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LAPF ………..………………………………..…….…… Local Authority Pension FundLHRC ……………………………..………..….. Legal and Human Right CommissionMKUKUTA ……… Mkakati wa Kukuza Uchumi na Kupunguza Umaskini TanzaniaNAOT …………............................................................... National Audit of Tanzania
NHIF ……………………...……..………..…... National Health Insurance Fund
NPF ……………………..….…………………..……………… National Provident Fund
NSSF ……………………………...………...…... National Social Security Fund
POAC ……..…..…….... Parliamentary Public Organizations Accounts Committee
PPF …………….……………………………..….…..…..…… Parastatal Pension Fund
PSPF …………….………………………….…………….. Public Sector Pension FundREPOA ……………..…..……………………………. Research on Poverty AlleviationSATF ………………………..……………………..…….…… Social Action Trust FundSPSS …………..……..………..…. Statistic Package for Social Scientist
SSRA …………………………….......… Social Security Regulatory AuthorityTAMWA ……………………………..……..….. Tanzania Media Women AssociationTASAF ……………………………….….………………. Tanzania Social Action FundTUCTA ………………………….…..……..…….. Trade Union Congress of Tanzania
UDHR ........................................................ Universal Declaration of Human Rights
UN ………………………………..…….………….……………..………... United NationURT ………………………………….…….……..………. United Republic of TanzaniaWDI ……………………………………..……………….. World Development Indicator
ZSSF …………………………...…..…………… Zanzibar Social Security Fund
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CHAPTER ONE Overview of the Study
1.0 Introduction;
Social security is a program designed to offer social protections
amongst members in a society. I ts history goes back from the
Palaeolithic era from which men l ived in groups known as Bands
formed for the purpose of social and economical protections. Due to
challenges and contingencies faced by these groups in search of
development, members of the bands assisted themselves by means of
physical and economical well beings. Kathy,(2007). The social groups
formed went through various reformations and adaptations until when
United Nation in i ts General assembly on 10 t h Dec 1948 adopted
Universal Declaration of Human Rights. Article 22 of this declaration
required everyone in a society to be protected, i t insists that;
“ Everyone, as a member of any society, has the right to social security and entitled
to realization, through national effort and international co-operation in accordance
with the organization and resources of each State from social and economical
contingencies”. UN (CESCR), (2008).
Following this declaration, International Labour Organization, (ILO) set Social
Security Convention No. 102 at its 35th conference 1952 which pointed out nine
minimum benefits to be paid by social security schemes as; Old Age, Invalidity,
Survivorship, Employment Injury, Maternity, Medical Care, Sickness,
Unemployment and Death. These benefits lock up social security functions to;
Provisions of Social safety,
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Redistribution of income, Diversification of risks, Social and economic stability,
There are three main types of social security programs depending on the country’s
economic capability. One is a protection to all by the government which is mainly
practiced by high income countries and the other two are insurance programs by
members contributing certified amount. All three, despite offering short terms
benefits majors in old age protection when members has undergone economical
inactive and became more vulnerable.
This study investigates role of Social Security Funds in Tanzania and
reveals consequences of government failure to confine withdraw. It
looks on destines of members of social security following increasing
tendency of withdrawals after government consent to members wil l ing
to quite protection and further tables out status of social security
coverage in Tanzania to see how ILO declaration No. 102 of social
security for all is achieved behind Schemes competing to pay
withdrawal.
Researcher reviewed various li teratures and publications which
guided him on conceptual frame work to build his own theoretical
views and analysis. Citing from Magazines, News Papers, Brochures,
previous researches, Annual reports from NSSF, SSRA publications,
Blogs, Government Bureau of Statistics together with Tanzanian
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Parliamentary discussions and presentations made it possible and
basis in drawing conclusion of this study.
1.1 Background to the study;
Following increasingly trends of pre-mature membership withdrawal from social
security schemes in Tanzania, the government passed a law to confine this benefit
but few days after the law enacted, members, activists, scholars and some
politicians revoked over it to the extent that the government detach the amendment
and allowed payments to members retrenched and wishes to terminate
membership with the Scheme to continue. Parliament of Tanzania (2012) and
The Citizen (26 July 2012).
A survey of all Schemes in Tanzania portrayed that it is only Parastatal
Pension Fund (PPF) that has withdrawal benefit clause il lustrated in
its Act. Baruti, (2011) identif ied. However, all other schemes un-
officially adopted this benefit without amending their Laws simply
because members prefer i t. Schemes without such an opportunity are
losing members from the very beginning during membership
registration. This is puzzling, i t means members are registering
themselves eye-marking withdraw in a near future. This compels
Social Security Schemes to compete for members just like any other trading
institutions. According to Barya, (2011) in Tanzania, schemes attract members by
assuring issuance of withdrawals. This is funny and contrary to roles of social
security schemes which advocates for lifetime members’ protection. Competitions
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in these Schemes should be in quality provision of benefits and efficiency rather
than entertaining withdraws. If this habit is not monitored, sooner all Schemes will
run without members to protect and the meaning of social protection in the country
will be lost.
NSSF Corporate plan (2007/08 – 2009/10) revealed the Fund to have an
increase of 162% in members’ premature withdraw from 2003 to 2007. This trend
is very high and dangerous to NSSF and members but unfortunately, the
government is comfortable to the extent of allowing withdrawal to continue.
Researcher is interested to know whose burden is it when members withdrawing
today become old and vulnerable! Will the government come back to Social
Security Schemes for a help or will offer them protection? Who will bear the costs?
Does the situation mean that government wants to make people happy today by
enjoying withdrawal benefit which ruins their old age life plan? It is learned that if
the government decide to offer coverage to all the elders in the country it will
spend 11.2% of its Gross Domestic Product by 2050. Help Age, (2011)
Schemes must portray to members and the government on the consequences of
pre-mature withdrawals. Members must be educated on how to maintain their
membership despite all the difficulties they are going through, for the betterment of
tomorrow during when their earning capacity will be lost. A good example is cited
from elders seen today begging in streets simply because they lost or did not
bother to join Social Security Schemes during their employment period as a result
are now living horrible and begging life around.
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Social Security Act No. 5 of 2012 restricts members of all pension funds
accessing their terminal benefits before reaching voluntary retirement age of 55
years or 60 compulsory. Immediately after Social Security Institutions started
implementing this Law, some employees in the private sector reacted harshly to
the new legislation. Some workers say the legislation is oppressive and are now
quitting jobs in protest. The Citizens 05 Aug (2012) presented this matter.
Report issued in the parliament revealed that population aged 65 years and above
in Tanzania are 1.4 million (3.2% of Tanzanian population) but only 4% are covered
by one of the scheme available leaving 96% of them distressed, begging and living
poor life around. Parliament of Tanzania Report, (2012). Following this report in
the parliament it was found necessary to confine pre mature withdrawal with
expectation of arresting the problem of old age protection in future. Now that the
move has failed it is expected that there will be more vulnerable elders than it is
today in the near future which will be a burden and shame to the government.
Allowing pre-mature membership withdraw has possibly produced attitudes that
National Social Security Fund (NSSF) is still a continuity of the previous National
Provident Fund (NPF) which members can treat their pension contributions like
savings in a Bank that can be accessed at any time according to members wish.
Mwakyusa (2012) presented NSSF Chief in the Daily-Newspaper addressing
Parliamentary Public Organizations Accounts Committee, (POAC) that the habit of
social security membership withdrawals though advocated by majority of
parliamentarians is not practised anywhere in the world. He insisted that is
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contrary to the basic intention of social security which invests money collected and
pay benefits from investment returns but mainly focuses on provision of pensions.
1.2 Research question;
Does government fai lure to expel withdrawal benefit in social security
a privi lege or thrashing to members and the Scheme?
1.3 Research Objectives;
This study reveals how roles of social security schemes in Tanzania
are achieved behind increasing membership withdrawals and
government fai lure to confine the situation. Following increasing
numbers of vulnerable elders in the country the government is
planning to set aside amounts in the main budget that wil l take care
of the unprotected elderes. Parliament report, (2012/13 ). However,
this study reveals a better way of strengthen Social Security benefits
and coverage than setting amount from the government budget which
all the years has a deficit ! Specific Objectives;
To identify reasons behind members of NSSF’s preference to
withdrawal. Tracing adequacy in coverage and benefits paid by NSSF if are the
reason behind increasing membership withdrawal. To discover destines of members of social security in Tanzania
following government failure to expel withdrawal benefit.
1.4 Statement of the Research Problem;
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Withdrawal benefit has been practised by all social security Funds in Tanzania
ever since their establishment. In reality, this is contrary to the roles of social
security schemes where protection is extended over the members’ life time.
Recently the government barred pre-mature withdrawal benefit from
these Schemes a case which raised strong arguments from Members,
Activists, Scholars and Some political leaders who objected that the move violates
human rights. TUCTA July 26, 2012. At last the government reverted to the
original state and allowed Schemes to continue paying withdrawal benefit to
members retrenched. SSRA, (2012)
Currently, not much has been researched to reveal the consequences of pre-
mature membership withdrawal in Social Security Schemes. The problem has
grown to the extent that government has planned to set amount in the 2012/13
budget that would take care of the vulnerable elders who are not protected by any
of the available Schemes.. Parliament report, (2012). This study intends to
identify the extent of the problem and suggests long lasting solution.
1.5 Significant of the Study;
This study criticizes government decision in reverting laws passed to expel pre-
mature membership withdrawal in Social Security Schemes. It explains the
extreme that poverty is exploding among members quitting the Schemes early
before they become old and enjoy their old age benefits from social security
schemes. Section 2.6 of the National Strategy for Poverty Reduction in Tanzania
2011-2015 (MKUKUTA) promised provision of social protection and rights of the
vulnerable with basic needs. This goal will never be achieved under pre-mature
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withdrawal environments. Sooner our elders will be distressed looting the streets
begging following lack of protection and loss of ability to generate income for their
basic needs.
Help Age, (2011) revealed that there are 2 million elders in the country today and
73% of them still engages in economic activities in small agricultural to generate
income due to lack of protection by any of the social security scheme. The elders
also carry a burden of HIV relative orphans and labour immigrants as a result
poverty. Destitution are common in this group, see Picture No.2.
ILO, (2011) urged Social Security Sector in the country to offer improved benefits
and extend coverage. This could well be done after barring pre mature withdraws,
now that the government has intervene and failed to confine it, obviously our
Schemes will continue covering less members and difficult to offer good benefit
packages as required.
1.6 Scope of the Study;
This study is confined to National Social Security Fund. It reviews
Annual Reports, Social policies, corporate plans, Publications and
Brochures available at the head office in Dar es Salaam Tanzania and
other publications related to this study. Research question of social
security members’ destine following government fai lure to confine
pre-mature membership withdrawal, is given a primary concern.
The study abided to NSSF following the reason that i t is the giant
social security provider in the country; i t holds 51% of the market
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share social security schemes in the country. NSSF corporate plan
(2009/10-2012/13).
1.7 Organization of the Study; This study is divided into three chapters. Chapter one begins with an
introductory part highlighting points which the Researcher intends to
cover. It also tackles the historical background of social security
worldwide and Tanzania in particular. The Second Chapter depicts the
literature review related to this study. Chapter Three is review of
NSSF operations, policies and presentation. Chapter Four is
interpretation of the study findings while Chapter f ive concludes and
recommends further studies of this research.
1.8 Limitations of the Study;
The study area on this research is something very new, no l i terature
has been presented directly concerning the government di lemma in
confining withdrawal benefit and destines of social security members
withdrawing today. For that matter Researcher abided to News,
Magazines, Flayers, Blogs, Reports, own experience of NSSF,
Discussions in the Parliament and review of Social policies available.
There is also a bureaucrat problem in issuance of documents at NSSF
offices. Most documents are treated as confidential and what is
revealed to the public cannot be used to retrieve enough data for
judgement. At the same time some of the reports are contradicting on
2020
same information that i t was so diff icult for Researcher to decide
which was true and which was not.
It was also so diff icult to use SPSS and STATA in interpretation of
data collected from this study fol lowing type of data used and
unfamiliarity of the software.
1.9 Research Methodology;
The approach to this study was to review information from customers,
the Fund and Activists as presented by news agencies, blogs,
publications, scholars and social securit ies’ reports.
As defined by Kothari, (2004). Research is an original or additional finding to
the already obtainable stock of knowledge collected for further development. But
Greenfield, (1996) put it as an arrangement for exploring collected data
in a way that i t wil l be relevant to the study in question. It is a
structure of the research conducted, measurements, collections and
analysis of research data.
There are three main types of research design;
1. Exploratory; Deals with discovery idea from l i terature survey,
experience survey and analysis of insight2. Descriptive; Describing a certain group or individual by means
of predictions on fact characters .3. Experimental; This are studies focused on determination of
causes and effects of a certain phenomenon.
2121
In this study Researcher chose exploratory type of research because
it is able to clearly define what he wanted and had adequate of
li terature.
1.10 Data Collection;
In this study only secondary data was collected and used. This
technique was preferred due to limited time available to the study
(three months only) and cheapness in collecting and availabil i ty of
data taking in to mind that the study was self sponsorship.
CHAPTER TWO Literature Review
2.1. Introduction;
The role and experience of Social Security in Tanzania is reviewed in
this Chapter. Weakness in practices that might be fuell ing upward
trends of withdrawals and reasons for government failure to expel i t,
is hereby tacked. Adequacy of Social security in terms of coverage
and benefit provision in the country is covered in this Chapter.
2.2. Role of Social Security institutions;
ISSA defines social security as an insurance programs and social assistance that
offers mutual benefit to qualifying members. It embraces national provident funds,
pension schemes and other social arrangement schemes that, according to the
respective country policies they form part of strategy on social protection program
for that country. ISSA 1927 Constitution, (2007).
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There are three types of social security schemes worldwide;
Social Insurance, a system where its members obtain benefits in respect
of contributions made to the scheme (pension, disability and unemployment
payments). It is most practiced by developing countries. Services scheme, one which provides social protections to the needy only. Basic security scheme, assistance by the government of basic needs to
the needy like poor people, refugees or havoc sufferers.
In Tanzania the dominant scheme is social insurance due to low economic
capability of the government to issue free coverage to all its citizens, however
there are some basic steps that the government is taking care of like free primary
education and health care to the elders though it is not practised adequately.
One of the major roles of Social security schemes is provision of social protection
and income security for members and basic needs for all the citizens. In African
countries this has not been possible. Ackson,(2010) revealed that in Tanzania it is
only 6% of the working force that are covered. In Global statistics, ILO, (2010/11)
presented that by the year 2010 coverage was 50% of the entire world population.
However, from that group only 20% enjoy adequate coverage. The main reason for
this poor coverage is said to be recession of informal sector which is the majority in
all countries especially developing ones. While attending these challenges, other
issues like poor country policies, increasing demographic of the ageing, extended
family structures, economic globalization and environmental developments raises
more challenges to social security schemes.
2323
Increasing demographic of the elders is indeed a challenge to Social Security
Schemes especially in developing countries whose economies are poor.
Worldwide, people aged 60 years and above by 2009 were 8% of the entire
population. The figure is rising fast that by the year 2050 Scardino, (2009)
projected it to hit 16%. Clause 22 of the declaration of human rights 1952, requires
all human being in any society to be covered by at least with the basic needs. This
makes Schemes to have an extra task of caring this group regardless that were
not contributing members. The issue is more challenging in Tanzania where none
of these schemes have not managed to pay the nine benefits stipulated in ISSA’s
recommendations, yet are now required to increase coverage to the entire society
who were initially not contributing members, at the same time handle high rate of
pre-mature membership withdrawals ILO,(2010).
Graph No. 1 Global Pension Coverage by 2010;
Source: ILO, (2010)
Graph No.1 indicates that while coverage of the working population in the Western
Europe is nearly 80%, in Sub Sahara Africa is only 20%. There is as well very poor
coverage of old age population in Africa as compared to the Western Europe. Sub
Sahara where Tanzania is located has the least coverage compared to the rest of
the world. From these data it is true that social security schemes in developing
2424
countries have extra tasks in extending coverage. Pre-mature withdrawal should
totally be banished.
Table No. 1 Global population covered by Social Security.
Source: US Census Bureau presented by Scardino, (2009). Table No 1 presents data of old age population in developing countries that are
projected to ripple by 2050 from 5.8% in 2009 to 15.0%. Projected data indicates
that by the year 2050, Developing countries will have the same coverage as it is
with Developed; this is due to convergence theory where by speed of improvement
of developing countries is bigger comparing to one developed. Precaution should
be taken today and a need of helping developing countries on strategies to widen
coverage and benefits issued to members which will be the solutions to poverty
alleviation must be taken this early.
The issue of increasing tendency of withdrawal should be curbed at this early
otherwise it will be chaos when this figure hits 15% in the 2050s. World strategies
if poverty alleviation should be employed hand in hand with social security
coverage and benefit indexing. There are as well at national level strategies like
TASAF and Action Aid, which should join effort with Social Security Schemes to
ensure coverage as a means to poverty alleviation. Scheme like NSSF have
2525
offices in at district and sub district level which could be easier to reach all the poor
in the country. This could be a good start off.
2.3. Social Security Scheme in Tanzania and Problems associated with;
The history of Social Security Scheme in Tanzania goes back beyond
the colonial era. Msalangi, (2003) identif ied presence of certain form
of social protection even before the coming of Colonial system that
were organized by customary laws and norms. The informal and
traditional social protections practiced were based on family and
community assistance. There were assistances during the time of
festivals and contingencies like famine, diseases, death and old age. People
were depending on family and clan members for communal assistance in form of
cash, food or sort of a kind. The formal social security schemes seen today are
revealed by Eckert, (2004) who says are a product of colonialism introduced to
save the interests of some Europeans and few elite Tanzanians working for the
colonial Government.
However, Barya, (2011) learned that Tanzania, Kenya and Uganda did not change
much the social security system inherited from colonial despite all the shortfalls
these schemes embraced! He further learned that this is the main reason why
schemes we have today have many shortfalls. I agree with Barya, (2011) that it
was necessary to change these Schemes to fit our environment that could take
challenges of our present society needs. However, it was difficult to have a
2626
universal scheme by the government due to poor economic capability of our
country.
Currently there is National Social Security Policy of 2003 which considers social
and economic changes occurring in the country and liberalizes this sector in
Tanzania. The reformation re-organized activities of social security providers to act
in response to the market demands considering free market economy.
Currently, present Social security institutions in Tanzania are;
• National Social Security Fund, (NSSF)
• Parastatal Pension Fund, (PPF)
• Local Authorities Provident Fund, (LAPF)
• Public Service Pensions Fund, (PSPF)
• Government Employees Provident Fund (GEPF)
• Public Service Retirement Benefit Scheme (PSRB)
• National Health Insurance Fund (NHIF)
• Tanzania Social Action Fund - TASAF)
• Social Action Trust Fund, (SATF)
• Zanzibar Social Security Fund, (ZSSF)
It is believed that despite a number of available Social Security Schemes,
coverage is still very poor. Baruti,(2007) sees that Tanzanian have potential
opportunities to be covered by Schemes available! However it is only of recent
2727
efforts the government has intervened to extend coverage with informal sectors
which is considered green pastures for all Schemes. Although Baruti, (2007)
advocates on this potential opportunities, he is not mentioning strategies to be
employed to add the omitted ones. He also has not identified how people in the
informal sector could be handled with matters concerning compliances. This group
is so difficult to maintain due to nature of their business and none existence of
permanent business place. Indeed this sector is potential but needs care on how
to handle.
Maghimbi at el, (2002) recognized that opportunities available for Social Security
have not been covered well by any of the Schemes in the country. He further
identified that Social Security Schemes in the country have failed to contribute
equitable economic growth and are there to flourish the rich out of the sweat of the
poor members of these schemes. He is eye marking things like credits granted to
some of the business people from contributions made by the poor members and
other investments made which are utilized by well off people leaving the poor
members not enjoying their sweats. The above statement is true to some extent
however, investment made by these schemes apart from offering employments
they are also contribute to the GDP and thus contributs to the economic growth of
the country. Beautiful buildings erected attract investments and more business at
the same time offers employment during constructions. Maghimbi at el, (2002)
suggests that members should be given first priority when it comes to credit
facilities.
2828
Table No. 2 Tanzanian social security investments at 2009, ($millions)
Source: Baruti, (2009)
Table No.2 indicates investments made by six Social Security Schemes in the
country that accumulated to 677.35 $million in the year 2009 only. This creates
employments opportunities, attracts more investors and contributes to the
country’s GDP. Government Securities have helped the government implement
some of its objectives set in the main budget together with in recurrent
expenditures that some the Social Security members are amongst.
Following a move to strengthen Social Security Schemes in the country, the
government formed a regulatory authority in 2008 to oversee this sector. The
board is Social Security Regulatory Authority, (SSRA) under provisions of Act, No.
8 of 2008. SSRA is mandated with roles to regulate, supervise, guide, monitor,
coordinates, and facilitate extension of Social Security Sector in Tanzania. It is
expected to play an important role in regulating variations within social security
schemes.
Among variations identified within schemes, include that presented by Ackson,
(2010) who learned that minimum pension currently paid by Social Security
2929
Schemes in the country are; NSSF - 47US.$, PSPF- 14US.$ and PPF - 37US.$
for members with the same credits but enrolled in different Schemes. Current
minimum wage of formal sectors in Tanzania is 59US.$. The summary revels that it
is only NSSF paying pension close to the minimum wage and at slightly
reasonable amount. However, the amount is still a challenge to the actual cost of
living which Kanywanywi, (2005) shows that a normal cost of living of five people
in Tanzania by 2004 was about 105 US.$, per month which is twice the amount
paid by highly paying pension fund in the country. In that matter amount paid to
retiree is vastly inadequately.
Another issue to be addressed by SSRA is coverage gap of the vast majority who
are engaged in the informal sector like agriculture, fisheries and traders. Efforts to
extend coverage to them are so little that researcher worries if they will be reached
at all. Since the economic backbone of Tanzania is agriculture, where ILSF (2006)
noted that 80% of the working force is in this sector, then there is a need of
extending social protection to this sector which dominates the backbone of the
country.
Another problem facing social security sector in Tanzania is variation in terms of
benefit paid, coverage category and contribution made between one scheme and
the other, Table No.3 summarises these variations. Dau, (2006) and Rutinwa at
el, (2008)
Table No 3. Variation among Social security schemes in Tanzania.
3030
Source: Dau, (2006)Total coverage in all Pension schemes available in the country is 901,000 out of
40,000,000 population of the country by 2009 which means that only 2% only of
the country population are enjoying social protection. ILFS, (2006). This puts off
track the concept of ILO convention No 102 of social security for all but also nullify
what the county’s constitutions proclaimed to its citizens of provision of Social
Security protection to all. URT Constitution article 11 (1) of 1977. Despite this
very low coverage, there are little efforts shown by the government to extend
coverage which means it is comfortable with the situation this is noticed from the
decision of allowing free withdrawal to any members leaving employment.
Although SSRA have shown remarkable efforts to start governing this sector,
government intervened and re allowed issuance of withdrawal to continue. At the
same time, social security policy, (2003) lacks comprehensive plans on how
coverage will be aggressively implemented. It has no strategies to maintain
present members to their retirement age no frequent indexing of benefits and no
comprehensive investments strategies to strengthen schemes financially.
It is the responsibility of the government to establish and facilitate extension of
social security coverage to non-covered ones and create awareness, sensitization
3131
and capacity building to the Schemes. According to Ackson, (2010), 10.5% of the
population in Tanzania is employed but its only 1.8% that are in a formal sector
with social protection, the rest 91.2 % are self employed which social security
sector have not covered. The coverage should be extended to farmers,
pastoralists, Traders and rural-based populations which are the majority and
currently neglected by all Schemes. BARUTI, (2008) See this as a golden
opportunities of Social Security sector in the country to extend their converage.
Perception of Social security in developing countries like Tanzania is
a di ff icult task following lack of f inancial capacityl, poor development
of insurance concept, government budget constraints, higher poverty
ratio and narrow coverage. Justino, (2003) in His working paper
traced the state of social security in developing countries giving the
case of India in which He identif ied well managed, endogenous
policies and wider coverage to have significant contribution in
development of social protections which helped positively in poverty
reduction among societies of developing countries. Countries with bad
social security policy have not achieved well in the case of poverty
reduction.
According to SSRA, (2011), confining membership withdraw in the
country was made with a good reason to strengthen pension benefit
and protecting members in wide adequacy at old age than it is today.
3232
This policy could not win majorit ies acceptance that researcher is
interested to know if the policy was really in favours of members,
social security schemes or the government. Dau, (2006) worked on
sustainabil i ty of benefits paid by Social Security Schemes in Tanzania
and noticed that are not adequate. In Researcher ’s view this could be
the reason for members’ restrain for barred pre mature withdraw. ISSA
Convention, (1952) (No. 102) requires Social Security Schemes to pay nine
benefits but none of Tanzanian Scheme has managed to pay all, it is only NSSF
that is currently paying seven others are paying even less.
Population aged 60 years and above in the country that are getting
pension are very few (4%) the reasons is depicted by ILO, (2010) that
is due to increasing numbers of pre mature withdrawals during loss of
employment. With this observation, i t is necessary for the government
in Tanzania to employ barred pre mature withdraw otherwise the
burden wil l l ie to the government when these member become old and
has no other means to support themselves. I t is true that members
are aware of the consequences of pre-mature withdrawal, but are
neglecting thinking that they wil l be taken care by the government in
time of their old age. There must be deliberate effort to let members
maintain their membership to the retirement age.
3333
Tanzania is not alone in challenges associated with Social Security
reformations, King and Cecil, (2006) presented challenges faced by Social
Security in United States when introducing changes to curb the financial crisis and
other difficulties over 70 years of its existence. In His brief history of Social
Security in the U.S a giant country, various reformations and changes were made
to the current Scheme yet are not complete. Barbone and Luis, (1999) revealed
reasons for failure of reformation on social security in Sub Sahara Africa as being
participation of minor formal sector leaving the vast majority who are the upper and
lower class within the country uncovered. They further noted un-improved
governance and poor social security policies to hinder reformation.
Premature membership withdraws have the following effects;
Reduce or nullify completely old age pension benefit package. Withdraw payments is amount without earned interest since the money is
drawn soon before invested. It also affects investment plans of the respective Schemes following drawn
of money already assigned to a certain project.
It is advised that members maintain their membership status even after laid off
from works. For contractual employees should stay in while seeking another
employment and still enjoy some short term benefits, in case of total failure to
secure any of the employment they should engage themselves in other economical
activities that will allow them earn some income and continue contributing as
voluntary members. This will let them accumulate their credits to qualify for
pension benefit at old age.
3434
2.4. Adequacy of Social Security in Tanzania and destines of pre-mature
membership withdrawers;
Social security schemes are vastly used as a means and strategy to poverty
alleviation; if well monitored, it is the road to sustainable development. WDI, (2001)
depicted that, 46.4% of the population in sub Sahara Africa are living in severe
poverty with no proper social protection planned to rescue them. According to
REPOA, (2005) income of a common Tanzanian in rural area where Social
protection is not provided at all is characterised of a sharp poverty increase as
compared to ones in the urban with Social protection. The report further revealed
a tendency of increasing inequality and vulnerability when one is talking of issues
associated with social security. One role of Social security scheme is redistribution
of income, so when there is an increasingly trend of income inequality it means
social security has not worked adequately in that area. A well designed Social
Security Program should assign the money contributed by rich to offer protection to
the poor. The program could be a mandatory one otherwise it should work in a
form of tax where by a certain tax is imposed to the rich or to the luxurious goods
which in turn the collected money is used to offer protection to the poor.
Poor coverage of Social security in the country, is well explained by Watson et al ,
(2005) who identified that only 3% of the Tanzanian labour force is covered leaving
out 97% of the population. This poor coverage is not in Tanzania alone; Graph
No.2 signifies that all of the Sub Sahara African countries are facing this problem.
3535
With exception of Mauritius whose 35% of its population is covered. World Bank,
(2012), other African countries has less than 19.5% of their working population
coverage.
Graph No. 2 Percentage Coverage of Social security in Sub-Sahara Africa
Source: World Bank, (2012), compiled by researcher.
Low coverage of Social Security in Developing countries is mainly due to poor
financial capabilities and lack of good co-ordinations of the Schemes. In his
findings Baruti (2008), revealed that social security istitutions are able to aleviate
poverty only if there are good policy and well monitored investments of these
institutions.
Due to limited coverage of social security in the country, some people have joined
effort and formed their own groups of social assistance amongst. Example of
some of them are; Christian group at Mabibo Dar es salaam launched a program
known as Development Entrepreneurship for Community Initiative (DECI) this,
aimed at offering assistance among members but was terminated by the
government following lack of financial procedure. Village Community Banking,
(VIKOBA) is another example of social protection, it was formed within women
employed in the informal sector where by members are loaned money for small
business establishment and offered assistances of other social needs at times.
There is also another group very familiar in Tanzania which loans members at a
time in a system known as “Money-go-round” group known as UPATU in Kiswahili.
There is also (Umoja wa Matibabu sekta Isiyo rasmi Dar-es-Salaam) UMASIDA
3636
offering health assistance to members and the last is umbrella society for small
businesses (VIBINDO). baso.blogspot, (June 12, 2012)
Income Security Recommendation No. 67, (1944) insists on compulsory
national social insurance schemes, which cover all service servants self-employed
that should be included in the social assistance. In Tanzania this recommendation
has not been practiced perfectly since ILFS, (2007) noted that there is 1,362,559
employees in the formal sector but only 900,000 are members of social security
schemes. Furthermore, ILO and the UN asserted that every human being has the
right to social security. In this case the country is off track. In the Declaration of
Philadelphia, (1944), Income Security Recommendation No. 67, (1944)
recognized major task of social security ahead being extension of protection to all.
Paragraph 17 requires that “social insurance should offer protection, of
contingencies facing all employed and self-employed persons, including their
dependants.
Universal Declaration of Human Rights, 1948, in its part requested everyone as a
member of society to have the right of social security (article 22). This refers to the
right of health care and basic social services needs in the event of sickness,
disability, widowhood, old age and unemployment, and to special care and
assistance for motherhood and childhood (article 25). International Covenant on
Economic, Social and Cultural Rights, 1966, identifies “the right of all people to
social protection, with social insurance, (article 9).
3737
These international organizations had in mind that there is a need of provision of
social protection to all since it is too difficult for individuals to fight for contingencies
alone. For social security members seeking withdrawals today, there is a danger of
becoming beggars at their old age. NSSF has to extend social security to all
according to ILO, (2010) nevertheless, more members are lodging pre-mature
withdrawal and the government has failed to expel. These are two challenging
issues with NSSF, there should be means to retain members and discourage them
from withdrawal otherwise ILO effort of reaching all will be a nightmare.
When Mboghaina and Osberg, (2010) worked on the welfares of the elderly in
Tanzania they revealed that in 2010 number of the elders over 60 years of age
were 2.95 million but estimation confirmed that the number will triple to 8.39
between 2020 and 2050. With the current poor mechanism of elderly protection in
the country the situation will be worse in the future unless measures are taken this
early.
Picture No. 2; Elders caring extended family in Tanzania;
Source: Help age International, (2004)
3838
Picture No.2 is a common family size of many Tanzanian that retirees do take care
of. When this is taken as an example there are 10 persons to be cared by one
elder while it was supposed to be vice versa.
Table No 4. Trends of NSSF Membership size and Benefit payments.
Year Total Employer Total MembersBenefit paid(tshs.mill)
2001/02 15,535 351,975 13,433.202002/03 15,097 327,609 20,735.602003/04 15,970 353,835 23,416.002004/05 14,817 356,070 29,775.272005/06 14,465 380,693 40,183.89
Source: NSSF Annual report, (2005/06) compiled by researcher.
Table No.4 shows huge amount of money paid to members departing the scheme
as compared to the contributions received. There is a slightly increase of members
joining which is only 5% each year while amount paid to members leaving the
scheme increased by 25% each year. This is a challenge to the Funds income
which means amount paid to members leaving the Scheme will soon deplete the
available funds for investments and other Fund’s activities. The scheme will be in
crisis unless stern measures are taken.
Dimoso P at el, (2011) in their Global journal of Human science, identified
increasing trends of demographic beggary in the Urban of Tanzania that the
situation is alarming and calls for immediate redress. In their recommendations the
solution is to increase social security coverage. With the government allowed pre
mature withdrawal this situation calls for actions and government reversal of the
decision for the benefit of people. Dimoso P at el (2011) says that begging is
humiliating, harsh and demeaning to themselves, the media, leaders and visitors of
the country.
3939
Increasing trends of withdrawals in NSSF if not blocked will lead to increased
poverty amongst society since there will be more unprotected elders who had
opportunity to be protected but left to decide otherwise. This will be a shame to the
government when these elders begin to beg in the streets.
CHAPTER THREE Review of Social Security Policies
3.1. Introduction;
Social security policies in international and countrywide levels are herby reviewd in
this Chapter. NSSF Corporate plan and annual reports are scrutinized with the
aim of identifying loopholes leading to increasing membership withdrawal. At the
Ageing National Policy will also be reviewed and illustrate elders destine following
increasing trends of pre-mature membership withdrawals from Pension Schemes.
The chapter presents findings of the entire study which is the basis for drawing
conclusions in the fifth Chapter.
3.1 Review of Global Social protection floor policy;
This is a global agreement on percentage spent from the country’s GDP for social
protection. The protection is supposed to cover basic health care, elder’s income
4040
security and disables, child benefits and unemployment income together with
protection of the working poor. The program was launched on April 2009 as among
the 9 initiative crisis of UN Chief Executive Board, ILO, (2011),
Graph No.5; Stages of social protections in a society;
Source: ILO, (2011)
This program focuses on social security for all, fighting poverty and reduces
inequality in any given society. During global economic crisis it worked as
economic stabilizer. It is used by UDHR, International covenants on economic,
cultural and social rights together with ILO conventions as a tool and basis for their
foundation.
Diagram No 1; How Social protection Invests in Human Infrastructure;
4141
Source: Bachelet, (2011)
ILO,(2008) identified that in low income countries social security expenditure as
percentage of GDP to cover basic needs for the poor was projected at 2.2% to
5,7%. ILO introduced two ways to the approach; horizontal one to implement social
protection floors for provision of basic needs. The second is vertical dimension to
cover higher level of social security as per ILO convention, 1952 No 102 for higher
level contributory members as compared to provision of basic needs.
Setups of this policy are projected on achievable strategies however they lack
legal actions for countries failing to implement the expenditure floor set. Again,
setting of these floors may not be within individual countries prioritized goals. Also
all of the institutions set to oversee this program are from developed countries who
might be setting none achievable objectives to the poor countries. It would be good
if developing countries would have institutions from their countries vested with
implementation of the program since it would be easier for them to initiate
strategies within their local and known environment.
4242
Another challenge is the high number of unprotected poor people in developing
countries. Poor economic performance of government of developing countries
hinders them to allocate enough amounts from the main budget to take care of the
vulnerable poor in these countries.
3.2 Review of Tanzania social security policy (2003);
This is a government document issued to address social, economic and political
changes occurring in the country. It accounts in extending social security to benefit
the citizens and ensure harmonized activities. The policy began in 2001 and
adopted in 2003.
This policy has some shortfalls to be addressed so as to help in boosting social
security institutes in the country. First of all the policy does not recognize tax
financed social security schemes, while one of the functions of social security
schemes is redistribution of income. The best means to do this is by tax system.
There should be scheme based on tax that will take care of the old aged people
who could not be able to be covered at their working period or for one reason have
happened to fall in problems like one of collapsed East African Community and its
employee who are now suffering in streets with no help.
This policy, though mentioning some informal social security groups do not say
how and when they will be recognized and given priorities by the government as it
is for the formal schemes. These are initiatives by peoples in the informal sector
4343
thus if given government shield would not face challenges like the formal schemes
that many takes them like a burden and extra costs to them. There should be a
policy clearly mentioning how these groups will be helped. Some of them are
UPATU, VIBINDO and UMASIDA elaborated in detail in page 30 of this study.
Investment portfolio of social security schemes are commercial loans, government
bonds and real estate. The policy does not guide clearly how these portfolios
should be organized and it should restrict government loan like that of building
Bunge house and University of Dodoma in Dodoma which are non performing
projects. This is pensioners’ money which must be invested in viable projects only
which will yield good profit to cover protection of retired and not used in pompous
investments.
3.3 Review of Tanzania National Ageing Policy;
Tanzania is the second country in Africa to prepare the National Ageing Policy after
Mauritius. Aged people are those in 60years and above. According to Help Age
International, (2011), this group was 2million by 2010 in Tanzania and is
expanding very fast despite the fact that is more vulnerable in terms of income
security, diseases and general health.
4444
ILFS, (2011) revealed that due to lack of social protections to old people in
Tanzania, majority are forced to continue working at that age mostly in the poor
agricultural works. This group also takes a major role of caring orphans for HIV
and Labour migration victims, see picture No.2. It is estimated that 53% of
Tanzanian orphans are under care of the old people. Help Age International,
(2011), presented that only 6.5% of old people are covered by formal social
security scheme and that 82% of them are living in the rural. It is learned that if a
universal social security is extended to this group, it will result into decrease of
national poverty by 12%. It is difficult for the government to offer social protection
to this group at a go due to poor economic capabilities of the country, however all
things starts by daring so it can be employed slowly and as time goes on will be
improved.
The National Ageing Policy was implemented in the country since 2003 by the
government after identifying existing gap in old age social protection. The policy
has various shortfalls like presence of too general provisions that are difficult to
implement. It also lacks legal bindings that majority contempt it. One provision
requires provision of social coverage to elders but at the same time the
government has allowed pre-mature withdrawals from these schemes.
The policy does not state clearly what are the provisions to be made to elders and
by what means. It would be easier to make means of identifying them by opening
4545
office or individual bank accounts before making other means to help. The policy in
sec. 3.12 of this policy, warns insists that there is a tendency of the majority to
enter old age unprepared and become a burden to the community. This is contrary
since allowing pre-mature membership withdrawal is the main source of
unprepared for old age. Sec. 3.12 (iii) said Ageing will be taught in schools as
Civics subject, unfortunately since 2003 8years passed without implementation.
3.4 Overall Challenges facing Social security sector in Tanzania;
Overall management and administration of social security funds are vested to the
board of trustees and the Director General all appointed by the government
through the responsible ministry. Due to this there is excessive government control
over the schemes in issues relating to investment decisions and expenditures
NSSF Act No.28 1997. Grandiose investments made by this sector in favour of
government interest can be seen in University of Dodoma, Machinga complex in
DSM, Police and Military Houses all are none performing projects as revealed by
CAG Report, (2012)
Actuarial evaluation made by ILO(2004) in respect of NSSF for the year 2002
depicted very high administrative expenditure 22% of the Fund’s income whereby
required amount is less than 15%. This problem could be arrested by merging
some of NSSF Departments with similar functions, reducing number of offices at
district level and investing heavily on computerization to enhance efficiency and
increase control. This will strengthen services delivery and attract more members
4646
that would increase Funds financial position and arrest the problem of poor record
keeping that causes dalliance on benefit provision which discourage members.
There is lack another problem of interactions between schemes. Members cannot
shift from one scheme to another. This is really a problem since there are
members like non pension government employee who are members of NSSF
cannot shift their money and credits to PSPF when qualified for registration with
PSPF.
The last identified challenge is that of pension schemes in Tanzania saving only
the working elite leaving the majority in the informal sector uncovered. There are
no strategies for substantial public campaign on understanding importance of
Social Security and formalization of informal sector so that could be easily taken in
the Scheme. These if taken inn are the majority and could flourish the Scheme.
Researcher identified that there is a need of NSSF to maintain future financial
sustainability of the schemes. In doing this it is mandatory to increase retirement
age, increase contribution amount, put inn aggressive means to register informal
sector and invest only on viable projects with high yield but of short terms to cover
short terms liquidities and priories given to members who are the primary focus.
CHAPTER FOUR Impact and Challenge of Withdrawal Benefit to NSSF
4747
4.0 Introduction;
This Chapter reveals the extent and consequences of withdrawal benefit to NSSF.
The benefit contradicts with the role of NSSF of offering members protection
during and after work as per NSSF Motto “NSSF BUILDS YOUR FUTURE”
4.1 Roles and Functions of NSSF;
NSSF is the leading Social Security provider in the country, Table No 3 and 5
indicates its position on total members comparing with other schemes in the
country. In term of financial capabilities it holds 51% market shares of Social
security Economic Survey, (2011) shares. In benefit provisions it is the only
scheme paying seven benefits. In table No 6 it the leading pension provider as
compared to other schemes. However due to increasing number of withdrawals it
is facing a challenge of improving benefits to attract members’ adherence.
Table No 5. Position of NSSF among other schemes in Tanzania at 2008
Scheme Coverage Number of MembersNSSF Private & some Government employees 310,000PPF Parastatal employees 65,000
PSPF Central Government employees 200,000LAPF Local Government Employees 45,000NHIF Central Government employees 200,000GEPF Civil servants 22,000PSRB Politicians n/a
Source: ILO/DFID Tanzania, (2008.
Although NSSF is giant in members coverage yet the figure is so little; 310,000 out
of 45million population of the country!
Table No 6. Number of members and amount of pensions by each scheme;
4848
Source: TASAF (2004) presented by Watson et al, (2005
Table No. 7 NSSF Financial Position at 2008;
2008 (Tshs.Millions)
2007 (Tshs.Millions)
Total Investments 670,280.03 532,605.28
Total Assets 783,658.45 626,189.89
Liabilities 37,209.07 28,615.52
Source: NSSF Annual report 2008
According to NSSF Report, 2008/09 the Fund collected contributions totalling
Tshs. 255,715.7 million in 2008 with annual growth rate of 26.76%, collection from
investment amounted to 848,808.8 million representing annual growth rate of
25.4% from the last financial year. This amount is not enough and could be raised
by extending coverage and discourage withdrawals.
4.2 Adequacy of Benefits paid by NSSF;
NSSF offers seven benefits of which three are long term benefits while the other
four are short terms.
Long term/ Pension benefits;
• Retirement benefit• Invalidity Pension
4949
• Survivors’ Pension
Short term benefits are;
• Funeral grants• Maternity benefit• Employment injury benefit• Health insurance benefit.
Although there are benefits adjustments reviewed periodically by the
Board of the National Social Security Fund, the Fund has only
managed to pay seven benefits leaving two more (un-employment and
family care) as stipulated in UDHR 1942 not yet implemented. The
seven benefits are tuned according to the current economic situation
and actuarial valuation of the fund. They also adjusted according to
changes in the legal minimum wage set by the government. The
current minimum pension of NSSF today, is 80% of the legal minimum
wage which is about (43US.$) to (230USD). Baruti(2010).
Unemployment benefit is almost not there in all African countries it is
only Maurit ius that managed to launch it in 2008.
Graph No. 3; World Un-employment benefits payments.
5050
Source: ILO, (2010)
ISSA,(2011) identif ied that Benefit paid by social Security schemes in
all Developing countries are vastly inadequate but also majority are
not stipulated in the ILO convention. Johnson and Williamson,
(2008) presented issues l ike prevalence of HIV and extreme poverty
to be taken care by social security sector since adversely has impacts
on benefit paid to members . NSSF is not alone in paying inadequate
benefits, ILO, (2011) on its World Social Security Report 2010/11 presented that
only 78 countries out of 184 countries studied which is only 42% of them are the
ones paying unemployment benefit. Data are declining sharply in developing
countries where no country has been able to pay this type of benefits which is the
one expected to curb pre mature withdrawal in developing countries like Tanzania.
The report went further indicating that nowhere in the World Social security
expenditure on benefit has exceeded 5% of GDP, in the European Union it was
5151
detected to be 3%. Globally, the figure rises to19.4% of the global GDP
expenditure but only when it includes of public health and other allowances.
Graph No 4; World Social security expenditure
Source: ILO, (2011) This Graph shows average social expenditure in percentage of GDP worldwide
which has an increasing trend from 4.1% in 2008, 7.0% in 2009 and 19.4% in 2010
which to the Researchers’ view is a good increase.
Apart from low benefit package, there are also delays in computation and paying
benefits which Baruti, (2008) noted to be too long and cumbersome. At the same
time Business times, (04 May 2012) Cartooned a Pensioner awaiting his pension
computation in one of the Social security office who came with a casket hopping
that he might die during the long time of waiting for the payments of his pension.
(Picture No 1). This means that time is too long for one to wait benefit payment in
Social Security Schemes. It indicates presence of delays in preparing benefit that
NSSF should think of solving it so as to increase efficiency and win members’
5252
confident.
Picture No. 1;
Retiree awaiting
pension
computation.
Source: Business times, (04 May 2012).NSSF Corporate Plan 2010/11-2012;13, projected benefit processing period to be
2 working days but the actual is 21 days presenting performance of 9.5%.
Table No.8 Benefit Processing Period Performance;
2010/11 2011/12 1012/13Targeted Days 2 2 1
Actual 21 16 16NSSF Corporate Plan 2010/11
4.3 Review of NSSF corporate plan 2009/10- 2012/13;
The Fund has a system of preparing corporate plan which saves as a guideline to
the fund operations during the mentioned period. Until today, there are three plans
already prepared and covered, the last in use is ending this year 2013. The first
and second plan was of five years period while the third is of three.
The current corporate plan 2009/10 – 2012/13 is ending December 2013, the plan
had achieved the following from its objectives;
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Table No. 12; Corporate plan 2009/10 – 2010/12 performance summary.
Category 2009/10 2010/11 2011/12 2012/13Membership size 506,218 521,629 543,685 666,641*
Contributioncollection
Tshs(000,000)300,089.54 348,504.64 404,415.787 594,055.25*
Total Investments.Tshs.(000,000)
1,029,206.18 1,216,624.641,452,085.5
72,085,426.44
*Total Benefit
payments Tshs.(000,000)
110,135.31 136,596.51 174,616.16 134,006.05*
Withdraw benefitpayments Tshs.
(000,000)89,814.59 106,221.07 136,309.60 107,690.01*
* projected. Source: NSSF Corporate plan 2009/10-2012/13 compiled by Researcher
The Fund had objective of increasing membership size to attain 15% from 6.8% of
the previous corporate plan 2004/5 – 2009/10. Table No.12 indicates increasing
trend of an average of 3.6% meaning that this objective had failed to be achieved.
The possible reason for this failure could be lack of aggressive means to attract
new members as well as high rate of withdrawals.
The Fund should employ a comprehensive strategy to register members from
informal sector, fisheries and agricultural sectors. ILFS, (2011) identified that
among the 1,362,559 people employed in the country by 2011 1,096,360
employed in the formal sector. This sector is not covered by any of social security
scheme available in the country. If there were comprehensive strategy and
attractive packages to social security schemes, this group could join one of the
5454
schemes voluntarily. There is as well 12,485,516 people employed in agriculture
sector ILFS, (2007) but none of these are registered with any of the schemes.
There are also government projects implemented already while others are on final
preparation to start. To mention a few, there is 3960 trunk road and 14 bridges in
Dar es Salaam under progress, there is 100kms Dar es salaam-Chalinze
expressway all of them to be completed by June 2017, none of the Schemes have
shown efforts to register casual labours in these projects.
The second objective was increasing contribution collection from 25.5% to 30%.
Result from table No.12 indicates an average increase trend of 26.3% which is
less than the projected 30%. The main reason for this failure is lack of identified
potential areas to tap new members. Operation department dealing with
registration of new members should be strengthen and equipped with modern
tools. There should be a means of indentifying new employers from registrar of
company and investment centre. The team should be knowledgeable with
customer care and able to convince customers on their products.
The third plan was increasing investment income from 19.9% growth rate from last
corporate plan to 30%. This grew from Tshs.1,029,206,180,000 in 2009/10 to
1,582,337,000,000 at 2012/13. Which is an averaged of 15.8% the target could not
be achieve. In reviewing this failure Researcher noted some shortfalls like non
performing government projects, CAG Report, (2012). There is also a problem of
economic recession during the 2009s that affected this area. The Fund should
5555
diversify its investment so that in time of economic difficulties like that of 2009s the
impact could be minimized.
The Fund could meet members’ expectation and set free complains and reasons
for increasing tendency of withdrawal had the entire corporate plan achieved at
least up to 75%. It is believed that increasing withdrawal is to some extent
engineered by members’ dissatisfactions on service and benefits offered. There
must be efforts of improving benefits issuance and quality service. Benefit
indexation should be done on a regular basis.
4.4. NSSF and the Challenge of withdrawal benefit;
NSSF corporate plan 2009 revealed number of withdrawals increasing by 150% in
2009 only. This benefit is not common within social security schemes in any of the
African country neither in Developed advocating as such, Dau, (2012) warned that
this practice is to escort members into poverty. Failure of government to expel this
benefit has a negative impact to members in a very near future when Social
Security Schemes will no longer be there to take care of members withdrawn
earlier who are now old and have no income security. But it also affect the Scheme
by failing to offer better services to present members following huge payments to
withdrawal seekers. The country will also have bigger number of elders without
proper protections. This will be a burden to the government and indirect to those
working on those days by paying tax to take care of the vulnerable elders
withdrawn voluntarily today.
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NSSF Annual report, (2008/09) revealed 54,647 members lodged withdrawal
benefit in year 2008/09 only, whereby Tshs 71,021,142,000 was paid out. The
amount paid for withdrawal was very high and the trend is increasing according to
Table No 10. Following this huge number of withdrawals, the Fund is facing a
challenge of instituting a new benefit to curb withdrawal. This is nothing else than
unemployment benefit, a benefit that has been noted to have difficult in
administering even in the developing countries. ISSA, (2010) identified that
worldwide, it is only 28 countries out of 82 studied which offers unemployment
benefits following its difficult in administration. It is further analysed that this kind of
benefit if not well managed, can lead to member rigidity in looking for new
employment due to opportunity of earning income during retrenched.
Employment Promotion and Protection against unemployment Convention, 1952
No 168 requires social security to pay unemployment allowances to members who
lost their employment. In the country, The Guardian, (4 Nov 2012) presented
irritated Bunda MP Stephen Wasira requesting social security schemes to
introduce unemployment benefit to arrest the woe of retrenched members of social
security while looking for other means of earning a living. Opposition parties report
on the Parliament, (2012) proposed full salary for six month to members who lost
employment following by half salary for the next six months.
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Some members are increasingly lodging withdrawals due to worries that after the
first attempt to expel withdrawal failed, social security schemes and the
government might come with a new bill that members will not be able to oppose.
This has created a negative public image of Social Security that new members
joining schemes are very few while those already registered are looking for any
loophole to lodge withdraw. Mwakyusa, ( 2012).
The major area of NSSF investment is government security as indicated in Table
No.7. This is because the Fund has huge amount of cash money collected as
members’ contribution and should be immediately invested.
Table No. 9; NSSF investment portfolio trends
Source: NSSF Annual report 2007/08ILO, (2001) actuarial evaluation indicated that NSSF investment as at 30 th Jun
2001 hold 53% engaged on government securities. Table No.9. Fund should not
rely in this area of investment because there are some countries fallen in to
economic hardship due to such trends as indicated in Table No.11.
Table No 10; Government loans from Pension Schemes. (Tsh.bn)
Year Jun 2001 Jun 2000 Jun 1999 Jun 1998 Jun 1997Amount 157.5 95.5 79.2 68.2 53.9Source: Ministry of Finance Tanzania, (2012).
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Trend of social security money invested in government bond has been increasing
tremendously (Table No.9 and 10). What worries more is that there is poor
servicing of these loans as Opposition parties report to the parliament 2012 said.
CAG Report 2010/2011 advised the government to service its loan with Social
Security at the same time decrease lending from them. At the same time in the
2012 budget on July 2012 the government National Debt was Tshs 14 trillion in
July 2012 but six months after it rose up to 21 trillion. Ministry of Finance
Tanzania, (2012). This debt has a sharp increasing trends from 2007 when it was
USD 6.1, 10.2bilion in June 2010 and 10.8 in Oct 2010.The Citizen, (26 January
2011).
Table No 11; Countries with huge National Debt led to economic hardship.
s/n COUNTRY NATIONAL DEBT% OF GDP YEAR
1 Japan 229.8 2011
2 Greece 163.3 2011
3 Jamaica 139.0 2011
Source: Economics Help Revision, (2012)
Failure to confine pre-mature withdrawal gives a real challenge to NSSF, since the
money used to pay pre-mature withdrawers is from government bond which
matures very fast but is now doubted following poor government servicing trends
and increasing National Debt.
Money collected from members of NSSF is invested and what is paid to benefits is
accrued income from investment. When members happen to lodge withdrawal
before attainment of retirement age, this money is drawn from investments already
5959
in progress, this posses a great challenge and loss to the Fund but also to
members who received only what they contributed without accrued interest.
Withdrawal is the loss to the members as well as the Fund but also a burden to the
government during the attainment of old age stage. Barya (2011). The government
will be responsible to take care of these people at their old age while they could be
receiving pension had they not lodged pre mature withdrawal at this early stage.
4.5 Trends in withdrawal benefits in NSSF;
This section is of data presentations of the study facts. It scrutinize trends in
withdrawal benefits in NSSF, looking on what members say about barred
withdrawal benefit and identify government dilemma in confining this benefit. It
further answers the question why members prefers withdrawal and traces the
adequacy of benefits so far paid by the Fund.
4.6 High membership withdraws;
Table No. 13; Total benefits paid by NSSF 2002 to 2009;
YearTotal benefit paid(Tshs
Million)
Amount ofwithdrawals(Tshs
million)
Trends (% of TotalBenefits)
2009
79,480.1
2008
81,818.2 70,778.69 86.5
2007
50,522.7 42,238 84.4
2006
41,899.64 32,011 76.4
2005
29,775.27 22,716 76.2
2004
23,416.00 17,486 74.6
2003
20,735.60 20,052 96.7
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2002
13,433.20
NSSF Annual reports
Graph No. 6
Source: NSSF Annual reports 2002-2009.Table No13 and Graph No 6 presents increasing trends of benefit payments each
year. While graph No.6 shows a sharp increase from year 2006/07 to 2007/08
which threatens development of NSSF, Table No.13 gives amount in figures and
percentage increase from previous years.. If projected in the coming five years the
amount will double from 50,000million to 100,000million which as indicate in the
corporate plan 2009/10-2012/13, it is only 25% of 2012 total contribution. This
amount is huge and really threatens growth of the Fund that government
intervention to stop withdrawals is mandatory.
4.7 Members’ complaints on barred withdrawal benefit;
Confining withdrawal benefit could not be accepted by majority of members of
social security schemes all over the county, particularly those in private sector. The
Citizen 26 July 2012 reports from Mwanza that over 600 employees from seven
6161
major gold mines in the Lake Zone have resigned following amended law to
confine withdraw from Social Security. Other 4,000 have submitted resignation
letters to their employers, appalled by the newly imposed pensioners’ law, as
revealed by The Citizen 26 July 2012.
Some social security members were of the opinion that the policy change would
disrupt their life plans in that once they get out of job, they expect to use their
money from social security schemes to support their families. They complain that
what they get from employment is hand to mouth and they have nothing left for
savings other than contributions made to social security schemes. Also they do not
expect to get jobs anywhere else after being laid off from the current job they have
and are planning to run minor business as a means to earn a living. This is why
they received the announcement with anger. The Citizens 28 July 2012.
Other actors than members of social security schemes intervened to discourage
the Government from implementing this policy. Trade Union Congress of Tanzania
(TUCTA) told its members that although they have no power to reverse the law
suspending withdrawal of benefits in Social Security Schemes before a member
attains age of 55 years as voluntary and of 60 as compulsory they will help placing
plea in court for restriction of its operational. THE GUARDIAN 24th July 2012.
The woe was also captured by LHRC, TAMWA and Scholars. Mtanzania, (Julai
26, 2012).
6262
The government has already committed itself to liberalize social security sector,
which for years covered only people in formal employment. Today, schemes are
obliged to let member freely decide on which scheme to join and in matters like
when one want to withdraw and or to obtain loans. The liberalization is expected to
bring in private players who will also venture into modes of Schemes operations.
Daily News, (21 September 2010).
Some members wrote in magazines whether SSRA acted in workers’ interest or on
government, according to them quashing withdrawal benefits brings in higher risk
of increasing poverty within the society since Tanzania does not have any other
formal safety net program for persons who are jobs less. They confess that most of
Tanzanians and especially those in non-government sector are on contractual
terms of short periods like six months or even less and after completion of their
contracts they wish to establish their own business from saving they made at
social security schemes and quit employments permanently. The Citizens, 05
August 2012
The Citizen, (30 July 2012). Wrote that opposition parties Civic United Front
(CUF) and Chama Cha Kijamii (CCK) have been noticed mocking jointly against
the recent changes to the social security funds law as being oppressive and non
considerate to workers. The two parties called on the government to immediately
prepare a Bill and table it in Parliament for reinstatement of the law and reverts to
the original state of free membership withdraw. They complained that many
6363
workers would be affected if blocked from accessing their social security
contributions. “The government should not play with people’s money. The law
should be changed immediately but if the government refuses to amend the law,
the parties would go to court to seek redress.
Again on an analysis of retirement age from Department of Economic and Social
Affairs of the UN, (2011) summarized ten key national socio-economic issues in
Tanzania which revealed the following indicators;
Map No.1; Tanzania Social security survey
Source: United Nations Population Division, (2011)
The summary reveals that life expectance of a normal Tanzanian is averaged at
59.25 years which means for a pensioner to enjoy his/her benefits will never enjoy
retirement benefit if retired on compulsory basis and less than 5 years if requested
for early pension. The situation is really worrisome and there should be a way of
making members enjoys their benefits at large while at work, this could be in a
form of loan. It is believed that benefit paid currently are inadequate that is what
mandating member to lodge withdraw at retirement age is like losing their savings.
At the same time dependency ratio is very high, (91.8%)! From this Schemes must
consider introduction of unemployment benefit which should take care of members
6464
to some extent before they secure another job, this amount be deducted from the
lump sum withdraw in case member decide to quite the Scheme.
Following complaints and members outcry on news, twitter, face-book, magazines
and brochures, subsequently the government in i ts 9 t h Parliament session
of November 2012 get rid of the amendment on confined pre mature
withdraw benefit in al l social security schemes. The matter has been
accepted with joys by most social security members, however! This
joy poses question as whether members of social security schemes
are aware of the roles of social security schemes, are they really
focusing for saving on retirement or considers the Scheme as a Bank?
Will these schemes be able to accommodate all withdraws as are now
legally al lowed? Researcher wil l answer these questions and pose
recommendations on what wil l be a better way of handling the
dispute. Strikamkali blog, (August 6, 2012).
4.8 Why members prefer withdraw benefit;
Tanzanian does not have a habit of saving for their old age protection. The main
reason for this is said to be poor earnings capabilities prevailing that set individual
savings to be very difficult as such, schemes like NSSF are the only solutions to
organize savings. For that matter people should be encouraged to join and stay in
Social Security Schemes until retirement age. Failure to this, government will be
6565
responsible for elders’ protection which could be arrested at earlier stage by letting
people join and stay in Social Security Schemes.
Social security policy, (2003) allowed members of Pension Schemes to withdraw
25% of their retirement savings while they are in employment, this could arrest pre
mature withdrawal but unfortunately the practice is only done at PSPF, with other
schemes issuing total withdrawal. Business Times, (28 September 2012).
It has been learned that members of social security restrain to maintain their
memberships due to reason that with nuclear families form of social life (Picture
No.2), employment income becomes inadequate. Zacher, (1988) revealed that
family wage earner cannot engage in any other income earning activities rather
than that of fulltime work, this compels him to seek all what he saved in case of
loss of work which is nothing else than savings from social security fund. This is
true, and Social Security Schemes have responsibility of issuing regular training to
their members on ways of saving and establishing entrepreneurship while at work
that incase of retrenchment they will still be having stable income.
The Citizen, (05 December 2011) reiterated survey made by NSSF in Arusha
which demonstrated that 70% of people interviewed on voluntary joining social
security scheme in the country are not dedicated. The reason given being that
schemes are of little benefit to their day-to-day lives. This is a challenge to social
security sector in the country and should be looked at all angles to tackle the
6666
problem. The schemes should have a provision of loans issued to this group that
will attract them to join but at the same time protect them in old age.
4.9 Provision of insufficient benefits to members;
ILO’s 101st Session in Myanmar from 30th May to 14th June 2012 adopted
Recommendation No. 202 which lay new standards on social protection. It requires
member countries to provide social security protection to all in the country. There
should be provision of basic income security at a certain defined national level.
The coverage should include ones who are unable to secure employment. This is
another challenge facing NSSF following freely allowed membership withdrawal, it
is believed that there will be a huge number of members qualifying for
unemployment benefit which the Fund will be obliged to take care of.
The Citizen, (5 August 2012). Observed that amount and quality of benefits paid
by current social security schemes in Tanzania are little and no social protection for
unemployed persons in Tanzania and those who loses jobs falls in to big poverty.
From this reality it is believed that repelling withdrawal benefits as introduced by
SSRA and Government attracts workers and their families tracked into deeper
poverty.
Trends of social security expenditures in relation to GDP for years
2004, 2005, 2006 and 2007 were 2.8, 3.9, 4.6 and 5.1respectively.
This is too l i tt le that signifies in-adequate coverage. Percentage of
population aged 60 years and above covered by Pension Schemes in
6767
the country is 0.8, 1.0 and 1.1 from 2005, 2006 and 2007 years
respectively.
Table No. 14; Social security coverage in Tanzania
Source: ILO (2010).
4.10 Provision of regular training to Employees and members;
Table No.15; Amount spent on employee training;
YearAmount Spent on
Employee Training(Tshs. Millions)
Total AdministrationExpenditure
(Tshs. Millions)
% of Employeetraining/Adimin Exp
2005 673.6 17,025 3.95
2006 750.8 22,892.9 3.27
2007 983.2 23,141.7 4.24
2008 1,302.4 33,143.17 3.92
2009 1,400.7 36,994.9 3.78
Source: NSSF Annual Reports 2005-2009 Compiled by Researcher.The average amount spent on employee training compared to total administrative
cost is 3.83% every year which is very small. This means that NSSF has a poor
habit of issuing training to its staff.
Table No. 16; Amount spent on Public Education vs corporate social responsibility;
YearAmount Spent onPublic education(Tshs.Million)
Total spent on socialresponsibility(Tshs.Million)
% expenditure ofpubliceducation/Totalsocial resp.
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2007 45.3 211.9 21.372008 42.9 203.4 21.092009 61.3 216.5 28.31Source: NSSF Annual Report 2009. Table No.16 presents amount spent on public education which is only 20% of the
amount allocated for total social responsibilities. This means there is deficit on
public awareness of social security that need be increased. When this is done
properly will discourage withdrawals and attract more members to join.
4.11 Sufficient system of collecting members’ complaints;
NAOT, (2012) in his 2010/11 Audit report of Public Authorities and Other Bodies for
the financial year 2010/2011 revealed T.shs 181billion that the government owes
social security institutes the money canalled to a range of government projects in
way of non performance loan. Although this reports was presented to the president
of the URT, no action have been taken to recover that huge amount of poor
workers’ money. This is among the complaints that members claim on their
misappropriation of Funds that could be used to pay them healthy benefits.
A brief visit to three NSSF paying centres offices at Ilala, Kinondoni and Temeke
revealed no suggestion box fitted within the offices to collect members’ complaints.
Some members are not willing to pay a direct visit to the management for
complaints so this box is important.
4.12 Whether there is dilemma in confining withdrawal;
6969
The Guardian, (4th November 2012) Presented a discussion from MPs regarding
withdrawal of benefits saga as follow; Bunda MP Stephen Wassira wanted a
decision from MPs to allows withdrawals of their benefits. Rev. Peter Msigwa,
(Iringa Urban – Chadema) complained that MPs have been driven by what is
popular instead of what is right. He wanted them to decide in favour of the social
security’s members. The two are advocating in favour of social security members
but are not elaborating on how members lodging withdrawal today are going to be
protected for the rest of their lives. It is true that members are desperate during the
time of loss of employment and due to lack of saving habits the only money they
think of is one from the social security funds, but it is the duty of MPs to educate
their people on the meaning and benefits of social security schemes and the
danger of lack of protection especially at old age.
Nzega MP (CCM), Dr Hamisi Kigwangala wanted the social security funds to
begin paying new benefits which would make members devoted to the funds and
will complement with short term needs arising from lack of saving habit.
Researcher agrees with what MP Kigwangala proposes, but members should as
well be encouraged to develop a saving habit that apart from the new benefit to be
introduced, they will have a side income to take them through the difficult times like
this. The same is advocated by Kigoma North MP Zitto Kabwe (Chadema) who
wanted MPs to encourage people from savings and let the jobless to benefit from
social security schemes. Nyamagana MP, Ezekia Wenje (Chadema) proposed a
provision of members’ contributions to serve as collateral which will enable them
7070
access capital in the financial institutions for investment that can help them during
unemployment. This is good although, there are some regulations prohibiting
members contributions to save as collateral for a fear that in case of failure to pay
the principal, members contribution will be taken and the concept of protection be
lost. It is advised to have a portion of the collateral that if taken will not badly
affects the members’ protection. (TUCTA), Hezbron Kaaya wanted introduction of
benefit which will allow the retrenched to have something for living to complement
withdrawal. The Guardian, (4th November 2012).
MPs are contributing towards confining withdrawal but to be complemented with
another benefit. In reality this is what should be done and schemes should buy
these ideas and earn government support to expel withdrawal that members are
destine at the old age is protected. SSRA and Social Security Schemes should join
efforts in elaborating to MPs that pre-mature withdrawal should not be practice if
the aim is to protect the welfare of people and of the funds
Furthermore, Researcher learned that pre mature withdrawal benefit in social
security schemes is not practised anywhere in the world thus it should not be in
Tanzania. Pre-mature membership withdrawal affects members at retirement when
will have lost their earning capacity. Schemes should take in informal sector to
widen coverage and choose good investments to build financial capacity that will
allow introduction of unemployment benefit as an alternative to withdrawal.
CHAPTER FIVE; Conclusions
7171
Following poor economic capabili ty of the Tanzania government,
issuance of free protection for al l has not been possible. Social
Security has been of contributory scheme and mandatory for
employed but voluntary for un-employed. As such the scheme has
been the right of the lucky employed in the formal sector only which
cause Schemes to have narrow coverage and deprived financial
capabil i ty.
Following presence of loopholes in Social Security Policies, poor handling of
members and lack of savings habits has been a tendency fuelling increasingly
trend of pre-mature membership withdrawals. It has been the reason for members
to have appalling life and causes of begging elders in the city. Government
intervention on laws enacted has also failing Social Securities’ strategies like that
of widen coverage and indexing of benefits to become complicated.
It has been noted that if un-employment benefit introduced to take care of the
retrenched it would arrest withdraw to a large extent. At the same time Social
security should take in the informal sector and agricultural employee who are the
majority in the country so as to have sustainable coverage and strengthen
Schemes financially. Grandiose projects must be abandoned.
7272
Some schemes must be merged to join efforts and issue uniform benefits. NSSF
and PPF could be one scheme and extend coverage to employee in private and
Parastatal sectors. GEPF, PSPF and LAPF could also be merged into one
covering government and public sectors. NHIF and ZSSF functions could be
dissolved into other schemes. Swapping from one to another Scheme should be
free under special arrangements. Members to be encouraged to have an
alternative savings and not treat their contributions like a Bank deposits to be
withdrawn at a time of needy.
5.1 Recommendations for further research;
The researcher recommends further study on how Social Security Schemes could
implement pension schemes to all the elders in Tanzania including those who were
not employed during their teenage.
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