17 December 2012

Tanzania: State Owes Social Security Body Sh1 Trillion

THE Social Security Regulatory Authority (SSRA) is currently conducting an assessment on total debts that the government owes social security funds, it has been learned.

This comes in the wake of concerns that huge debts that the government owes the schemes could in the long run paralyze operations of the pension funds. Unconfirmed reports indicate that the debts amount to 1trl/-.

"We do not yet know the total amount of money that the funds have loaned to the government and we are thus reconciling with the Ministry of Finance to establish the actual debts," the Director General of SSRA, Ms Irene Isaka, said in an exclusive interview with 'Daily News'.

While indicating that the government had started servicing some of the debts, the SSRA boss said a recent study by actuarial experts confirmed that social security funds in the country could survive the next 50 years with their current assets. The SSRA boss admitted also that should the government fail to repay the money, the funds will be heavily affected and fall short to run their operations effectively.

She mentioned the Mabibo Hostel of the University of Dar es Salaam which was constructed through a loan from the National Social Security Fund (NSSF) as among projects which the government has repaid the debts. "Repayment for the parliament building in Dodoma which was implemented by a consortium of social security funds is also undergoing," the DG explained.

Other projects that the government has implemented using loans from the funds include the magnificent University of Dodoma (UDOM), the National Mandela Institute of Technology in Arusha and the Machinga Complex in Dar es Salaam, among others.

"Regarding UDOM, there were some issues which had not been resolved. I am however told that the issues have been settled and the repayment will start soon," she told 'Daily News' in her office. She described the UDOM loan as 'good cake' for the funds which issued the loans, since it would carry an interest rate of 15 per cent compared to the rate of 12 per cent for treasury bills and bonds at the time the loans were issued.

According to new investment guidelines to the social security funds issued by SSRA and the Bank of Tanzania (BoT) that came into effect in May, this year, the schemes are allowed to extend loans to the government not exceeding 10 per cent of their total assets.

The new guidelines also allow the schemes to invest in treasury bills and bonds by between 20 and 70 per cent of their total assets. On the other hand, Ms Isaka said a majority of employees in the private sector and most international non-governmental organizations are not covered by social security funds.

"Unlike other countries, only 70 per cent of the working population is covered by social security schemes and this is because some employers in the private sector deliberately shun the schemes," she said. Only 6.5 per cent of the working population is covered by the schemes in the country while only 3.5 per cent of the total population is covered.

The SSRA's Head of Public Relations and Promotion, Ms Sarah Kibonde Msika, was optimistic that 20 per cent of the working population will be covered in five years to come, at a growth rate of 5 per cent per annum.

"This will however be possible after massive public awareness campaign and formalization of informal business to enable this untapped and vast category to join social security," she said. The 20 per cent coverage will also be realized if funds come up with products to cover the informal sector, she said.

Copyright © 2012 Tanzania Daily News. 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 publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.