Regional social security services facing challenges

Bank of Uganda headquarters in Kampala. The reduction in commercial bank holding of government securities signals a deepening of the financial markets. FILE PHOTO 

By Musinguzi Bamuturaki

The East African governments are facing fresh pressures to boost social security for citizens with revelations that thousands of retirees are increasingly dying poor, as countries dither on instituting regulatory reforms and creating investment opportunities for the existing schemes.

New figures on the state of EAC’s social security indicate that Uganda, Tanzania, Rwanda and Burundi cover less than 10 per cent of their populations while Kenya’s coverage is relatively higher at 15 per cent.

A new survey by Kituo Cha Katiba (KCK) - the Eastern Africa Centre for Constitutional Development (KCK), shows only two countries Tanzania and Rwanda have formal national social security policies although all EAC countries have in recent times been giving thought to social security and social protection issues and have either put on the table some policy options or bills for debate.

To address this low levels of social security coverage KCK is recommending that a legal framework is needed to ensure coverage initially of all employees in the formal sector (public and private) and eventually the whole population if social security is to become a right rather than a mere component of social welfare programmes of governments.

Even the formal sector that is covered is only partially covered and the depth of social protection is very shallow, KCK observes, adding: “This is because the 5 – 10 per cent coverage excludes most employees in the public service and formal private sector on the one hand and on the other, the risks covered are limited. The public service pension schemes usually provide for an old age or survivors/dependent’s pension but other elements such as medical care, housing, unemployment, education or maternity benefits are not covered.”

The informal (rural and urban) sector being where the majority of the population works and lives needs special attention. Some aspects could be mandatory (like minimum contributions for health schemes, with some-exceptions) while others would be voluntary and tailor-made products could be designed and incentives could be introduced to attract informal sector workers, including tax incentives, KCK recommends.

“It is easier to target the formal sector, but we need to cover for informal sector as well because they will one time retire,” the National Social Security Fund (NSSF) managing director in Uganda, Mr. Richard Byarugaba concurs with KCK, adding: “For Uganda there is a lot to be done. The existing schemes should be well developed first before we look at complicated products.”

KCK advices the five EAC countries to adopt mandatory schemes, supplementary schemes, and social assistance programmes from their existing constitutional, policy and legal frameworks, adding that the mandatory schemes ought to be strictly regulated as they would cover the main elements of a social security system.

Employers, financial institutions, professional associations, insurance companies and social security institutions themselves ought to be enabled to establish supplementary schemes to provide social security benefits over and above those provided by mandatory and social assistance programmes, KCK adds in its wide ranging recommendations in a book titled, “Social Security and Social Protection in the East African Community.”

According to the Uganda Capital Markets Authority CEO, Mr Japheth Katto, what is on the table now concerns mandatory and voluntary retirement benefits arrangements for those in formal and informal employment. “It is a development worth noting,” he notes.

In Kenya, with the blessing of the regulator an arrangement involving a bank, mobile money company and an employees association has been put in place to cover the informal sector employees. Byarugaba says the schemes cannot grow because of limited investment avenues. The whole industry has to be supported holistically in order to register growth. In terms of portability, KCK proposes that, “There should be mechanisms to enable portability of benefits from one scheme to another and from one EAC country.”

“You cannot have real free movement of labour without portability of benefits. It is important to note that under the EAC, there is a committee on Capital Markets Insurance and Pensions which is handling issues of harmonisation,” Katto concurs with KCK.

According to KCK, NSSF Provident funds ought to be abolished as provident funds and transformed into pension schemes that are all contributory for the public sector and the formal private sector. Byarugaba argues that: “Members should be given an option either to enter a pension or provident fund. With a pension scheme they can receive a monthly payment while with a provident fund they can get their lump sum savings and put them in a single investment.”

The book aims at conducting a relatively comprehensive and comparative review of the status of social security and social protection, broadly conceived, for the people in the EAC countries. The EAC is set up by the Treaty for the establishment of the EAC 1999. In Article 120 of the treaty, social security and social protection are visualised as social welfare rather than as rights.

When the EAC Protocol on the Common Market (2010) was drafted, it also did not envision social security as a right. The protocol recognises the need for Partner states to “coordinate and harmonise their social policies to promote and protect decent work and improve the living conditions of the citizens…for the development of the Common Market (Article 39 (1).