Extending Social Security to the excluded: A Personal Tour of Duty

7/27/2019 Extending Social Security to the excluded: A Personal Tour of Duty

1/11

Extending Social Security to the excluded: A Personal Tour of Duty

Zitto Kabwe, MP.

(This article is extracted from the authors paper Achieving a systemic change by

Extending Social Security to the excluded in Tanzania: Case of the smallholder

farmers in Kigoma Rural. Unpublished)

Introduction

As the chairperson of the then Parliamentary Committee on Public Investments

Accounts (popularly known as POAC), I had a privileged position to conduct oversight

on the operations of social security schemes in Tanzania (Pension Funds). There are

five such schemes in Tanzania, including NSSF, PPF, PSPF, GEPF and LAPF. The

schemes have enormous benefits including promoting a savings culture, vital

investments and extending social security coverage to members. Members of social

security funds obtain a range of benefits including health insurance, education support,

maternity support, accident/injury and retirement benefits as well as life-long pensions.

In addition, members have access to credits through the schemes savings and credit

societies (SACCOS) as part of short term benefits. Thus, the schemes collect

contributions from members, invest them profitably, and pay back the benefits to

members. Members contributions could fund vast infrastructure projects of the

government and bring about positive development in communities; funds get good

returns and improve benefits to members. It is a classical relationship between savings

and investments (s=i) as is taught in most university first year macroeconomic module.

In light of that, social security schemes are central to national development. Regardless

1


2/11

of these benefits, however, only 1.1 million Tanzanians, around 6% of workforce are

members of the existing five social security schemes. Members of social security are

limited to the so- called formal employees in private companies, Parastatals and civil

servants working in government ministries, departments and agencies. Self employed,

artists, sports personalities and even farmers (small holders and peasants), pastoralists

and fishermen are all excluded on the basis that they are informal. This may be

caused by both, funds concentrating in their comfort zones of formal employment and

people not understanding the concept of social security due to lack of awareness or

simply low level of saving culture.

Furthermore, the public has been pushing for withdrawal of members from funds

through what used to be called withdrawal benefits whereby members draw down their

savings and stay out of social security system. There have also been governance

challenges in management of these funds/schemes including political influence on their

investments decisions, which POAC vehemently fought against in order to ensure

sustainability of funds.

Over a period of time, I developed a huge and irresistible interest in extending social

security to the informal sector mentioned above. I even proposed an explicit

constitutional provision in the new constitution that social security is a fundamental right

and duty, and that State authorities shall legislate to provide ways through which each

citizen will be responsible to ensure that he/she has social protection.

In this brief article, I explain the phases that I passed in pushing for social security

coverage to every Tanzanian and suggest some minimal reforms in the existing social

2


3/11

security schemes. It is a personal tour, transformational and with huge potential, fuelled

by the desire to end rural poverty in my country.

Charity begins at home: Family

As is appreciated in an African family context, the whole family handles social problems.

The highest social stress is health services. As the family income earner, assistance to

access health services is a frequent request from family members. At times, even those

family members with a steady flow of income fall sick when they have no money (lack of

savings). In 2010, soon after my second term election, I encouraged members of my

extended family to register with National Social Security Fund (NSSF). I made sure that

they enrol to the fund even with the minimum contribution level or in accordance with

their income level.

The decision to enrol in NSSF instead of other schemes was due to its health related

coverage known as Social Health Insurance Benefit (SHIB). SHIB is unique to NSSF

and no other scheme offers such a product to its members. The government has

National Health Insurance Fund (NHIF); however contributions to NHIF are on

consumption basis while those of SHIB are on saving basis. Beyond my family, I made

it mandatory to all people working with me to be registered with social security. My

personal assistant, my driver and my domestic worker are all members of NSSF. My

driver is so converted into social security that he contributes to two schemes- NSSF and

PPF.

PPF has its unique products too. Education benefit; whereby children of a member get

scholarship up to advanced level of secondary education if the income earner dies. It is

3


4/11

education insurance for sure. As part of my five years of interaction with PPF, I

encouraged them to conduct an actuarial study to find out if and how they can extend

education benefits up to advanced level (A-Level). Previously, this education insurance

covered up to Ordinary Level of Secondary Education only (O-Level). The results of the

actuarial results led to the expansion of this cover to Advanced Level of Secondary

Education. I am proud to have engineered this and seen it through to its actualisation.

Taking a step of faith: Beyond my family

Anytime that I have an opportunity to meet people who are working in the informal

sector or undeclared personnel, I try to convince them to register for social security. I

must admit that this has not been easy. It is hard to sell the idea due to reports on

mismanagement of funds. However, having first hand information about the affairs of

the funds and their liquidity I keep on encouraging people to enrol. I have a memorable

case of a lady called Salima who sells cassava on the streets of Dar es Salaam. I spoke

to her about the benefits of joining a scheme. She then did join NSSF. Each month,

Salima faithfully contributes TZS 30,000 to NSSF. She is a single mother to a son. She

has no more worries of health costs to her and her son. Read

http://zittokabwe.wordpress.com/2013/07/08/who-is-the-middle-class-who-is-the-middle-

class-in-tanzania/ for Salima Abdallahs case.

Dancing for the future: Leka Dutigite

Leka Dutigite is a company created by music artists from Kigoma region (Kigoma All

Stars). The artists created this company after producing one of the most popular songs

in Tanzania called leka dutigite meaning lets dance. As I was working with these

4
http://zittokabwe.wordpress.com/2013/07/08/who-is-the-middle-class-who-is-the-middle-class-in-tanzania/http://zittokabwe.wordpress.com/2013/07/08/who-is-the-middle-class-who-is-the-middle-class-in-tanzania/http://zittokabwe.wordpress.com/2013/07/08/who-is-the-middle-class-who-is-the-middle-class-in-tanzania/http://zittokabwe.wordpress.com/2013/07/08/who-is-the-middle-class-who-is-the-middle-class-in-tanzania/


5/11

artists in the production of the song, I learnt that they do not benefit much from their

talents. On another incident, one Bongoflava stakeholder, Ruge Mutahaba, enlisted me

to sing in order to fundraise for the late Bongo Movie artist Sajuki, for his treatment. I

got curious. Being me, I asked Dont artists have health insurance? NO. I wasnt

satisfied with the answer and so I enquired more. I was told that the reason was that

they dont earn enough money to save. I didnt agree with that and embarked on a very

challenging campaign against entrenched vested interests in the Bongoflava industry.

As I was working towards reforming the entertainment industry by ensuring copyright

issues to artists in general and Ring Back Tones (RBT) revenues in particular, I took the

chance to educate artists about social security benefits. All 15 artists of Leka Dutigite

group joined NSSF and all have health insurance. Through their newly formed

SACCOS, they will be able to access credit to facilitate their work including recording,

videos, promotions and procurement of musical instruments. The government

announced, in Parliament during 13th session, a minimum payment of 10% of the gross

revenue operators obtain from RBT to artists. With this major and sustainable revenue

stream, artists can contribute more to the schemes and secure their life even after

retiring from the music industry. I heard other artists are joining NSSF en mass since

the fund decided to use Leka Dutigite group to promote the fund and its benefits.

National Football Team (Taifa Stars) captain Juma Kaseja and a striker Amri Kiemba

have recently joined NSSF. This is opening doors for sportsmen and women to secure

their future and ensure health insurance for themselves and their dependants.

These small steps are a big change in the social security history of Tanzania. Artists,

footballers and other unconventional workers who, despite their economic contribution,

5


6/11

were still not a target for social security schemes are now increasingly becoming so.

Recently, my friend January Makamba, legislator from the Bumbuli Constituency in

Tanga region and Deputy Minister for Communications, met an association of hair-

dressers in Sinza (a densely populated settlement in Dar es Salaam) and encouraged

them to join social security schemes for their own benefits. I was thrilled. My idea of

extending social security to informal workers is apparently making its way in the

narrative of the national leadership.

My focus has now shifted to cooperatives (farmers) and associations rather than

individuals. Through the groups, members of social security funds benefit more

especially by accessing affordable credit provided by schemes to SACCOS that are

formed by members. Access to credit is a major stumbling block towards ending the

vicious circle of poverty trapping small-scale farmers and many youths in Tanzania.

Social security funds have a solution to this, albeit unknown to many.

Step change: RUMAKO Co-operative Society

At the end of 2012, the RUMAKO Co-operative Society in Kigoma approached me with

regards to a few issues. The first issue was high rates charged by private banks when

they contracted credit to collect coffee seeds from its members. Banks did not

understand the seasonal nature of their work and charged the same 15% interest rate

whether the loan was paid within 3 months (just after the first reaping) or one year

(credit to extend the business). The second problem was the agricultural inputs that

were delivered later than required, if they were delivered at all. The third issue was the

poverty trap. With the high banking rates, the need to buy agricultural inputs that should

6


7/11

be subsidised, there was very little left to cover domestic expenses like food, education,

health, housing, energy and other basic services.

I immediately saw the opportunity for RUMAKO to enrol in a social security scheme. I

explained the idea to them. They were positive. With my constant push towards the

schemes to extend social security to as many people as possible, I asked NSSF to

meet with RUMAKO and inform them about benefits of having social security as

smallholder farmers. While I was at the National Service (JKT) in March, NSSF

conducted seminars to all farmers in all three villages that RUMAKO covers. The results

were overwhelming. 750 smallholder farmers joined the fund and paid their

contributions six months in advance. During coffee beans collection season, NSSF has

extended credit to their Co-operative with interest rates paid based on the number of

months they have stayed with the loan (normally they take a loan in September and pay

it back during January, so they will pay only a 1/4 th of the interest rate and collectively

save hundreds of millions of shillings compared to previous loan arrangements).

Through their SACCOS (in farming fraternity called AMCOS), they will have access to

affordable micro loans to prepare farms, buy inputs and even engage in off farm

economic activities like value addition to products and transport services. RUMAKO is in

discussion with renewable energy companies to extend to its members solar power

energy solutions and realise a kerosene free constituency hence raise their living

standards. RUMAKO and NSSF borrowed my slogan called energy is social security.

With their contributions (savings) to NSSF, peasants in villages of Mkabogo, Rusaba

and Matyazo, in Kigoma, have access to health insurance. For the first time in their

lives, they have no stress about costs of health services as the nearby health centre run

7


8/11

by Anglican Church is an NSSF appointed agent and villagers just present their NSSF

cards for services. Although only 750 joined NSSF, health coverage is for a member,

spouse and four children, that means approximately 4500 individuals. Encouraged by

the RUMAKO cooperative, I am going for a wider coverage reinforcing jobs, income and

social security to rural dwellers with the aim of uplifting 100,000 people to middle

income status in a period of five years.

Systemic change: The FELISA Oil Palm project

Tanzania is a net importer of crude palm oil, importing around 300,000 metric tons a

year with a resulting import bill of USD 240 millions. Kigoma District (now divided into

Uvinza District and Kigoma District) cultivates palm in a traditional manner. It is

documented that the leading oil palm exporter in the world, Malaysia, took seedlings

from Kigoma. The FELISA project is a large-scale project aimed to produce enough

palm oil to cover Tanzanian imports. In most countries with large-scale palm plantation

projects, the local population works as labourers and the landholders are the ones

reaping most of benefits.

The originality of this project is that FELISA (a private company) distributes improved

palm tree seeds to the local population of Kigoma (20,000 seedlings per annum for 5

years) and empowers them in the production of palm oil. The approach is different from

Malaysia and Indonesia whereby private companies are given large tracks of land for

plantations. This is an out growers scheme with FELISA company planting just 1000ha

of Palm trees at a nucleus farm. The idea is to have 100,000 farmers each with a

hectare of planted palm trees (equivalent to 125 trees), with extension services

8


9/11

throughout. Small-holder farmers will be represented in the arrangement with their own

cooperative and RUMAKO/NSSF model of social security adopted. Local government

authorities will ensure that traditional food production is not affected by limiting the size

of land each farmer allocates to Palm trees.

In five years time, NSSF will have 100,000 members each contributing a minimum wage

rate (TZS 20,000/month). This will bring to NSSF contributions totalling TZS 24 billion

annually, which will be almost 10% of current membership to social security schemes,

largest single contributor to any fund and completely new territory for social security

schemes in Tanzania. Oil Palm trees start producing during the third year and continue

to produce for a period of 25 years.

If the project takes off, this will be an unprecedented recruitment of 100,000 members in

5 years for any social fund in Tanzania. There will be more members through direct

employment at FELISA farm and in processing factories as well as other multiplier effect

like transportation, administration, education facilities and other activities in the value

chain. Each out grower will have the potential to make between USD 4000 and 6000

per annum from sale of bunches of Palm to FELISA and uplifting 100,000 peasants to

above middle-income status (middle income is defined in this case as USD 3700/year).

If NSSF, FELISA, the government and the people succeed, there is no doubt that other

social security schemes will identify and fund other projects in the agricultural or other

informal sectors bringing about a systemic change. Already the opportunity is available

in cash crops producing districts like Tandahimba for cashew nuts, Urambo for tobacco

and Bariadi for cotton.

9


10/11

The new Co-operatives Act has been enacted by Parliament in 2013 addressing

governance challenges by Co-operatives and making them a real stakeholder in

extending social security to peasants. Mr. Clement Kwayu, a guru in Co-operatives,

once explained to me that politicians and people who exploited and extracted from

farmers through Co-operatives entertained the myth a peasant has no insurance

neither pension. The stabilisation funds established, that would have been used as

social security funds to farmers were misused under the name of development projects

that were not seen. Let us think beyond the box. Improved governance in Co-operatives

and proper management of social security funds can contribute immensely in ending

poverty to rural dwellers. After all Tanzanian poverty has been a predominantly rural

phenomenon; confronting it head on through smallholder farmers will have a huge

positive impact to the whole economy. It is a transformation never imagined.

The Dream, A Duty

My dream is to facilitate the extension of social security benefits to the excluded and

ultimately to all workers (formal and informal), fulfilling the fundamental right and duty of

every Tanzanian to access social security through a wide range of choices presented by

both public and private social security schemes. In order for this to happen there are

prerequisites to be met. The system as it exists now does not cater for the informal

sector, especially small holder farmers, to be included in the social security scheme.

The public, the government and social security schemes need to adopt the objective

and the approach of this concept in order for the change to happen. One area for critical

review is the benefits provided as current benefits are designed for traditional members

of funds employees of companies etc. Products like price stabilisation would be more

10


11/11

valuable to small holder farmers so that they cover themselves from vagaries of

commodity price fluctuations. Funds may review and introduce special kind of benefits

for agricultural sector in order to make social security meaningful to farmers. Funds

shall, as well, invest in improving agricultural productivity and link their investments to

increasing number of members hence broaden the base and raise more revenues in

terms of contributions and returns on investments.

However, as we extend social security to the excluded, governance of funds must be

improved. Some of the reforms needed are transparency in investments decisions by

fund managers and strengthening systems of accountability. Through Capital Markets

and Securities regulations, funds may be required to subject themselves to disclosure

rules. With transparency, accountability will be inbuilt and trust by members increased.

The latter must be a duty.

11

Documents

Extending Social Security to the excluded: A Personal Tour of Duty