Why Tanzania's social security plan needs reforms

 

By The Citizen Reporter

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Dar es Salaam. An expert has recommended reforms in the country’s social security protection for it to flourish and provide stability in Tanzania, warning that, otherwise, any news related to financial difficulties would cause people to lose confidence in the

whole system.

Mr Ibrahim Muhanna, managing director of Muhanna & Co (Actuaries and Consultants), told The Citizen in an exclusive interview that not only the system would suffer but also people would lose hope.

“Reform is crucial to ensure social protection system’s success. The current one is partially funded, with pool risks and resources across, based on the principle of social solidarity which are normally financed by contributions from workers and employers,” he said.

Said he, “a need for reforms is usually captured either through periodical actuarial valuations or labour market pressures. And that the longer it takes to respond to the said needs (reforms), the more difficult it will be, which in turn causes intergenerational inequality.”

Mr Muhanna noted: “with current regulations, a lump sum payment is calculated based on the average of the highest three-year salaries towards retirement. For me, it should not work like that, there shouldn’t be a lump sum payment at all.” “In the private sector, the monthly contribution needs to be less than the current 20 percent of an employee’s salary. 10 to 15 percent would be advisable and should be contributed by both the employee and the employer, each contributing 50 percent.”

His argument is based on the fact that no employer runs business on charitable basis. Therefore, an employer shouldn’t be given a huge burden as some workers may leave and look for green pastures elsewhere.”