UNIVERSAL TIME

Tanzania 2015 | FINANCE | INTERVIEW

TBY talks to Irene C. Isaka, Director General of the Social Security Regulatory Authority (SSRA), on extending pensions out to the informal sector, and the need for further regulatory reform.

Irene C. Isaka
BIOGRAPHY
Irene C. Isaka holds a Master’s degree in Economics from the University of Dar es Salaam, specializing in Econometrics and Monetary Economics. She holds a Bachelor’s degree in Economics, specializing in industrial economics, a graduate Diploma in Pension Fund investments, and a diploma in Risk Management for Investment of Pension Funds and Housing Finance. She had 15 years of work experience at numerous organizations, including the National Social Security Fund, the Parastatal Pensions Fund, Stanbic, and the International Development Group, before being appointed the Director General of the SSRA.

How has the participation in social security grown in Tanzania since last year?

Since 2013 it has grown to encompass 8% of the working population. The main driver for this growth is that pension funds have started implementing section 30 of the Social Security Regulatory Act No. 8 of 2008, which opens it up for everybody. Even the informal sector now is allowed to join social security, which is different from in the past when you had to be formally employed in order to access social security services. Mandatory pension funds have established supplementary schemes that accommodate the informal sector. They came out with products and services that suit them. For example, for collection you do not have to go the offices; you can send through M-Pesa, Airtel Money, or Tigo Pesa. You can use mobile money to send contributions, and they are also flexible in terms of frequencies; they can contribute on a daily, weekly, or monthly basis, which is different from the traditional scheme in which you had to contribute monthly. They are also taking contributions in the form of commodities for supplementary schemes. For example, through collection centers farmers can contribute in terms of kilograms of tea, liters of milk, or trays of eggs, for example. This flexibility has encouraged other people to join social security schemes.

How is the Social Security Regulatory Authority (SSRA) working toward a universal pension fund?

The universal pension fund is something we are still working on, and we are presently working with the Ministry of Labor and Employment in reviewing the previous policy because it was developed in 2003, and some areas are already outdated. We have carried out study visits and established a task force to deal with it. When this is complete, the framework will be established for a universal pension. We only want to be sure that the scheme is affordable and sustainable. As you can see in Article 11 of the Constitution, social security is a constitutional right, but there is no obligation to contribute. We have sent our recommendation that places social security contributions as the obligation of every Tanzanian. If everybody with an income contributes a certain amount for an old age pension, this will ensure the sustainability of the universal scheme.

What other regulatory changes are priorities for the social security sector?

We are currently working on the harmonization of benefits. This is the current top priority. We have a common contribution rate, which is 20%, but the benefit packages differ significantly across the schemes, so we want to harmonize, and make benefits adequate and the system more sustainable. The beauty of the Tanzanian social security system is that the sector is dominated by (defined benefits) pension funds with generous replacement rates. This guarantees a certain degree of adequacy. Further, the schemes are guaranteed by the government, while most of the countries in East Africa have defined contributions schemes. Looking at portability issues with a government-guaranteed pension fund, it is important to have a well-structured system in order to avoid the unnecessary burden that may result from labor movements across the region. Alternatively, we have recommended coordination to accommodate this. So if you have someone from Burundi, Kenya, Uganda, or Rwanda working in Tanzania, they can contribute in Tanzanian schemes and when they go back it can be arranged for them to be paid in their home countries.

What are the SSRA's targets for 2015?

The target is to increase coverage through awareness, harmonized benefits, and innovation. We have developed a communication strategy, as one of the main challenges we face is the fact that public awareness of social security is remarkably low. The communications strategy has identified the penetration rates in different forms of media that will be used in building awareness. As we speak, we have started an awareness campaign. As well, we are working closely with the Ministry of Labor and Employment on the harmonization of benefits and the universal pension system. By the end of 2015, we are looking at having another round of reviews for our legal regulatory framework as well. We are aiming to create a unified law to cover all social security schemes. Currently, we have five different pieces of legislation covering these schemes. By 2015, we expect between a 10% and 12% participation rate. Currently, formal employees are about 80% covered, and we are planning to reach 100% coverage.

Can you elaborate on your social security awareness campaign?

We have a number of interventions, and hold specific seminars for workers through trade unions, employers associations, members of parliament, and policy makers at the governmental level, and we also run “social security week" where we engage with the public. In other areas, as the government employees' provident fund has changed to a pension fund, we need to educate its members and the public to eliminate misconceptions, specifically because we have been receiving a lot of requests for awareness. We also have 55 colleges of social development that need awareness seminars, as well as 12 higher learning institutions. This is a massive campaign carried out at the regional level in collaboration with the Ministry of Labor and Employment, trade unions, and employers associations. Another way that we are doing this is through publications and electronic media. We also have TV programs, and conduct different debates and dialogues with stakeholders.