By Joseph Mwamunyange and Wilfred Edwin
Posted Monday, May 18 2009 at 00:00
Posted Monday, May 18 2009 at 00:00
Having come under fierce criticism for years, Tanzania is moving to reform its pension schemes to curb misuse of workers’ savings.
A new regulator will be set up to monitor and guide the activities of the social security funds in the country, to make them more responsive to the socio-economic changes taking place there.
The government was by the end of last week recruiting staff and drafting regulations to make the Pension Funds Regulatory Authority effective.
The regulatory body will be created under the Social Security Regulatory Authority Act, 2008, assented to by President Jakaya Kikwete in June last year. It will help pension funds operate more efficiently and ensure their members are the main beneficiaries of respective schemes.
The government expects that the number of employees joining the social security schemes will increase when their operations are regulated by the end of the year.
The Minister for Finance and Economic Affairs, Mustafa Mkullo, told The EastAfrican that the government was putting together the required institutions to effect the new law.
While Controller and Auditor General Ludovick Utuoh’s annual report released two weeks ago criticised some pension funds for mismanaging public funds, accusations have long been rife that certain social security funds are being influenced by key public figures to sink members’ funds in dubious investments and give large, unsecured loans to politically connected individuals and companies.
Analysts see the coming of a regulator as a positive move, as the new law requires that managers and custodians invest pensions according to laid down criteria. The Bank of Tanzania will, in collaboration with the authority, issue the investment guidelines.
The central bank, which will have powers to regulate and supervise the schemes’ finances, will also monitor and ensure compliance to the guidelines by the managers and custodians.
Also, every scheme must maintain a reserve account into which accumulated revenues not needed to meet short-term costs are to be deposited for investment.
The CAG’s report cites a loan of $535,000 granted to GK Hotels & Resorts by LAPF (Local Authorities Pension Fund) in the 2003/04 financial year, whose balance as at June 30, 2008 was $722,000 while the firm’s outstanding rent was $1.127 million.
Moreover, LAPF and the National Social Security Fund were among six public authorities censured by the CAG through a “certificate of unqualified opinion with emphasis of matter” in 2007/08.
NSSF was taken to task for paying bonuses to staff who registered members of the fund since the staff were only doing their job. Also, some defaulters of investment loans totalling $58.7 million had not complied with the terms and conditions of the loans granted to them.
Mr Utuoh said that despite the management’s follow-up efforts, some of the loans were doubtful of recovery, which implies overstatement of the loans portfolio by the impaired balances of $40 million.
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