Felix Osike
31 August 2008
analysis
Kampala — The Inspector General of Government (IGG), Justice Faith Mwondha, has submitted a report to President Yoweri Museveni, calling for the overhaul of the National Social Security Fund (NSSF).
According to documents seen by the New Vision, the Cabinet has also recommended that NSSF be reformed to increase the members' benefits.
A 67-page report on the study into the management of the members' funds, says there is general dissatisfaction with service delivery.
The report dated July 18, 2008, follows persistent complaints on the mismanagement of members' savings.
Mwondha said mismanagement, poor leadership and corruption had affected the NSSF performance.
The report proposes, among other things, that NSSF members should access their savings through loans and when one loses a job.
"Stakeholders and members have lost confidence in NSSF as an institution that can provide social security to its members," the report states.
It adds that the NSSF had failed to maintain accurate accounts and failed to issue regular statements to members.
Member's benefits
The study established that the benefits listed in the NSSF Act are outdated and cannot meet the social security needs of members.
The 1985 NSSF Act limits the benefits to be paid to members in five categories namely age, withdrawal, invalidity, immigration and survivor's benefits.
Both the IGG and the Cabinet now want the benefits to include medical insurance, unemployment, maternity, funeral, member development finance and HIV product benefits.
Most of the stakeholders interviewed stated that members need to access loans from their savings.
According to the findings, some members proposed that a member who is out of employment should be advanced part of his or her savings.
Rigid accessibility
Various stakeholders raised the issue of rigid accessibility criteria to benefits and called for a reduction of the accessibility age of 55 years.
"The criterion is so rigid that it renders the benefits meaningless to members by denying them the social protection the NSSF is intended to provide," the report says.
"If the NSSF can diversify the range of benefits it offers members to include accessibility to members' savings through loans and unemployment benefits, there will be no need to reduce the age from 55."
The Cabinet also recommended that the age limit be maintained at 55 years although it may be increased in future to match the underlying demographic conditions.
Pension sector liberalisation and NSSF privatisation.
The liberalisation of the sector and privatisation of NSSF was also examined. Some groups backed liberalisation and privatisation of NSSF.
The IGG proposed that a thorough study be done on the benefits and risks involved. "In the absence of such a study, the Inspectorate of Government concurs with the Minister of Finance that workers' funds should not be open to speculators," the report states.
NSSF management
The main concerns of the contributing members and other stakeholders were issues of lack of transparency and corruption.
"The fears of members are not unfounded. There is evidence of grand corruption going on at NSSF that threatens to drive the fund into extinction. The Alcon/Workers House case alone in which billions of money has been lost is a big risk to the fund," notes the report. Alcon is suing for compensation after NSSF terminated its contract to build Workers house.
It states further that if Alcon wins the case in court, NSSF/workers will pay over sh17b plus interest in compensation, "all for corruption abated by managers who were employed to protect the fund."
The report says the trend of grand corruption as evidenced by the Alcon case, the halted Nsimbe housing estate project, among others, must be reversed for the survival of NSSF.
The Board
The IGG found out that the board of directors are not fully accountable and are subjected to external control. The report says the NSSF Act takes away the autonomy of the board by mandating the minister to have a final decision regarding investments and declaration of interest on members accounts."
The report adds that the present composition of the board does not reflect the stakes each category possesses in the control and influence of the NSSF.
"The members who own 100% of the assets and liabilities of the fund should have a majority representation on the board," recommends the report.
The Cabinet had advised that the finance minister approves NSSF budgets and related expenses, investments and declares annual interest rates. But the IGG wants the minister's role limited to policy and regulatory issues.
Investments
The report says NSSF is not operating optimally in investing savings for maximum returns.
It attributes this to poor leadership and mismanagement, poor investment portfolio and lack of professional investment managers.
The IGG calls for employment of competent and professional managers and feasibility studies before taking on projects. The report says on average NSSF is losing sh8.4b per year to corruption.
Members' statements
According to the report, NSSF is not issuing up-to date members' statements. When they are issued, they are inaccurate.
NSSF management attributed the problem to the Integrated Management Information System which was installed in 2003 at a cost of $1.8m (sh3.8b) to improve the management of the statements.
"After one year of operation, the system failed to generate member's statements. It generates its own data, replicates and deletes data on its own. It is on-and-off."
"It is ridiculous that NSSF cannot even issue an account statement to its members. Non-issuance of up-to-date accounts statements to members further makes members more suspicious of NSSF," the IGG noted.
Delay in processing benefits
The report also noted that there was a lot of delay in processing and payment of benefit claims to members. Claimants spend a lot of money and time moving to and from NSSF offices to follow up claims.
In some cases, the report states that the money spent on transport far exceeds the claim. NSSF management acknowledged the problems but said the processes were being improved to ensure quick settlement of claims.
NSSF explained that the delays were due to verification process especially the survivors benefits where NSSF has to carry out investigations to establish authentic beneficiaries.
NSSF also claimed that due to poverty and the rigid accessibility criteria to benefits, some claimants feign death and obtain false death certificates. NSSF has to verify the death up to the graveyard of the deceased member, thus causing a delay.
High operational expenses
It was noted that the current NSSF operational expenses are still very high and putting a strain on the workers savings and income. Control of operational expenses and optimum investment mix are some of the policies that the IGG proposed can lead to desired returns to members.
Under-declaration by employers
It was established from NSSF that some employers intentionally under-declare the number of employees and their salaries to reduce the mandatory monthly contributions to the NSSF.
Some employers deduct the full contribution of 15% from the employees, including the 10% supposed to be paid by the employer, but do not remit the money.
Small-scale private companies, schools, hotels and some Non-Governmental Organisations are the biggest defaulters.
There are also a number of unregistered members whose contributions are remitted to NSSF but because they do not have registration numbers, their contributions are posted into a suspense account which now has over sh30b.
Be the first to Write a Comment!
Copyright © 2008 New Vision. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
