Good news for Tanzania’s seniors as returns on pension reach record high

Pensioners wait to receive their monthly stipend at the Nakuru Post Office in Kenya in December 2013. Kenya and Uganda run social safety net programmes for the elderly. Photo/FILE 

 

By ADAM IHUCHA Special Correspondent

In Summary

• According to the country’s Social Security Regulatory Authority (SSRA), six pension funds made a record overall return on assets of Tsh6.4 trillion ($4 billion) in the year ended June 2013, up from Tsh5.6 trillion ($3.5 billion) last year.

Tanzanian pensioners are looking forward to better days after social security funds in the country recorded high returns, signalling good retirement packages.

According to the country’s Social Security Regulatory Authority (SSRA), six pension funds made a record overall return on assets of Tsh6.4 trillion ($4 billion) in the year ended June 2013, up from Tsh5.6 trillion ($3.5 billion) last year.

The director general of SSRA, Irene Kisaka, said the funds’ investments rose from Tsh4.2 trillion ($2.6 billion) a year ago to Tsh4.9 trillion ($3.06 billion) this year.

The funds’ investment portfolio has been moving towards fixed income assets, and smaller amounts in equities and properties. Economists say this can be attributed to limited investment options due to low development of the financial market.

Contributions have grown from Tsh1.4 trillion ($875 million) in 2012, to Tsh1.6 trillion ($1 billion) this year, according to Ms Kisaka. The growth is accredited to a membership increase from 1.7 million in 2012, to the current 1.8 million members.

“As a result overall membership benefits payments have also improved from Tsh724 billion ($453 million) in 2012 to Tsh1.06 trillion ($663 million), the highest amount ever been paid,” Ms Kisaka said.

The number of pensioners has increased from 72,000 in 2012 to 78,000 this year, and the challenge now is to ensure that members access some of the benefits while they are still working.

In October, SSRA asked employers to give equal opportunity to all funds and allow new employees to join a social security fund of their choice.

Early this month, the SSRA said that all recommendations made on benefit harmonisation of pension funds are now at the Cabinet level.

“If approved, the harmonisation process will take place before 2015, where there will be free movement of members from one fund to another with the same benefit rights,” the authority’s director of Compliance and Registration, Lightness Mauki, said.

Abdallah Saqware, a senior social security and risk management lecturer at the Institute of Finance Management in Dar es Salaam said the growth was a sign of improved funds management.

“The new statistics show that the fund’s management is good, meaning that the social security watchdog has done its homework perfectly,” Dr Saqware said.

ALSO READ: Computerisation, quarterly payment for retirees in Dar pension reform

The SSRA must now ensure the fund’s growth translates into benefits for pensioners, he added.

“SSRA should now tell us how this growth has improved the package for pensioners, otherwise the growth will be meaningless,” Dr Saqware told The EastAfrican.

Social security schemes’ products, such as mortgage facilities, loans for education and business are currently on the increase.

Some funds have already started issuing loans through saccos.

The National Social Security Fund (NSSF), Provident Pension Fund (PPF), and Local Authorities Pension Fund (LAPF) are putting up housing facilities for their members.

The NSSF is also venturing into new areas of infrastructure and agriculture, suggesting a shift in the fund’s investment attitude.

The country’s largest state-run-pension fund has traditionally been skewed towards government securities, bank deposits, equities, corporate bonds and real estate.

Now the Fund plans to invest $75 million in these new forays. Establishment of a $40 million Inland Container Depot (ICD) in Kisarawe area, nearly 85km away from Dar es Salaam Port, and a $35 million cashew nut processing plant in Mtwara are also on NSSF’s investment list.

The NSSF director for planning, investments and projects, Yacoub Kidula said plans were underway to acquire 100 acres of land to set up the ICD. “The construction of the ICD will commence in July 2014, and will handle a 1,000 twenty-foot equivalent unit (TEU) to decongest the Dar port,” he said.

READ: Dar NSSF to diversify into agriculture

The long-term plan is to expand the ICD to a capacity of 3,000 TEU, he added.

The NSSF director general Ramadhan Dau said the fund would venture into cashew nut processing, not just for profit, but also to create employment.

Traditionally, Tanzania has been exporting raw cashew nuts at low prices.

The world market price for raw cashew nut is less than $1 per kg, but processed nuts sell at $7.