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Bank Seeking Reforms in Tanzania's Pension Funds
By J. Mwamunyange, Allafrica.com
Tanzania
July 4, 2005
With a total of six mandatory pension schemes covering only 16 million people, or 5.4 per cent of the labour force, the Tanzanian pensions sector is increasingly facing pressure to liberalize and to invest pensioners' money more transparently.
In an interview with The East African, a senior economist with the World Bank, Philip
Mpango, said there was a strong case to change the laws governing the institutions.
"Pension funds can't change significantly in the way they invest because of the legal instruments that are currently in place," he said.
Mr. Mpango said the country should learn from experiences of other countries and adopt arrangements where the management of the funds is more accountable to members and where workers' savings are not put into risky ventures.
"It's time pension funds diversified their investment," Mr. Mpango adding that arrangements needed to be introduced where members can use their savings as collateral for loans.
Under a financial sector adjustment credit from the World Bank, Tanzania plans to reform its financial institutions, including the pensions sector.
Two of the largest pension funds - the National Social Security Fund (NSSF) and the Parastatal Pension Fund
(PPF) - have been criticized for engaging in risk concentration, putting too much of the workers' money in real estate and office accommodation. Worse still, there have been occasions where some pension funds have been lending billions of shillings to well-connected businessmen.
A few years ago, there was a public outcry when it emerged that some pension funds had advanced unsecured loans to political parties and senior politicians.
Tanzania has six pension funds - the NSSF, the Public Service Pension Fund
(PSPF), the Parastatal Pension Fund (PPF), the Government Employees Pension Fund
(GEPF), the Local Authorities Provident Fund (LAPF) and the Zanzibar Social Security Fund
(ZSSF).
Unlike Kenya, which has a Retirement Benefits Authority, Tanzania has no regulatory system for pension funds.
Compounding the problem is the fact that all the pension funds report to different ministries, with the
PSPF, PPF, GEPF, and ZSSF accountable to the Ministry of Finance, LAPF being under the Ministry of Local Government and the NSSF falling under the Ministry of
Labour.
Decision-making on issues such as investments projects go through several levels, including the parent ministry, the board of trustees of each fund, the CEO, and employees.
Like NSSF, PPF is also involved in undertaking multibillion shilling housing projects in Dar es Salaam,
Arusha, Dodoma and Mwanza City.
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