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THE EXTENSION OF SOCIAL SECURITY COVERAGE TO THE INFORMAL SECTOR EMPLOYEES IN TANZANIA
NAIROBI 10th – 11th MARCH, 2011
Social Protection in Africa: Sharing experience on the informal economy
10-11 March 2011
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AGENDAAGENDAIntroduction (Background).The Informal Sector (IS) in TanzaniaExtension of social security coverage
- Rationale for Extension of Social Security- Strategies for Extension of SS.- Role of Stakeholders in facilitating extension of social security
Challenges of Extending SS CoverageConclusion and recommendations
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1.0 IntroductionAn overview of Social Security System:The Social Security System in Tanzania has been
in existence for more than 60yrs.
The System is fragmented i.e., there are seven Social Security Institutions (SSIs); each covering a defined category of people.
The existing SSIs covers only less than a million people out 41.89 million Tanzanians i.e., The covered population represent 6% of the effective labour force estimated at 20.94 million people.
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1.0 Introduction Cont’d
Similarly Social Security System in EA is fragmented.
The social security coverage is estimated at an average of 8% of the total estimated active labour force of 60.1 million people.
The coverage also represents an average of 3.7% of the estimated total population of 132.3 million people
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Table 1: Table 1: The Social Security Coverage in East The Social Security Coverage in East Africa:Africa:
SNo. Country Estimated Population
Covered members
%age of Total Population
1.
Tanzania
41,892,895 1,256,787
3
2.
Kenya
38,610,097
2,509,656
6.5
3.
Uganda
31,800,000
636,000
2
4.
Rwanda
10,400,000
301,600
2.9
5.
Burundi
9,612,000
278,748
2.9
Total
132,314,992
4,982,791
A Model of Social Security Industry in Tanzania
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Table 2: Table 2: The Social Security Coverage in East The Social Security Coverage in East Africa:Africa:
SNo. Country Estimated Active Labour force
Covered members
Percentage of Labour force (%)
1.
Tanzania
20,946,448
1,256,787
6
2.
Kenya
16,731,042
2,509,656
15
3.
Uganda
10,600,000
636,000
6
4.
Rwanda
5,800,000
301,600
5.2
5.
Burundi
6,059,739
278,748
4.6
Total
60,137,229
4,982,791
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1.0 Introduction Cont’dThe majority continue to be left out of the coverage
of formal social security.
The uncovered population include the self employed and Informal sector employees (ISEs).
The risks facing ISEs include lack of permanent business premises, seasonality of income.
This paper focus on the feasible approaches that can be adopted to extend social security coverage in TZ.
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2.0 THE INFORMAL SECTOR IN TANZANIA
The informal Sector (IS) in Tanzania:
Contributes about 20% of the country’s GDP
Provides employment to 30% of the total active labour force.
Despite this significant contribution, ISEs continue to be excluded from the formal social security coverage.
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2.0 THE INFORMAL SECTOR WORLDWIDETable: Contribution of informal sector to GDP in various regions.
Informal sector (including
agriculture) in % of total GDP
Informal sector (excluding
agriculture) in % of non agricultural
GDP
Informal sector (excluding
agriculture) in % of total GDP
Sub-Saharan Africa 54,7% (60.6) 37,7% (41.1) 23,7% (25.6) North Africa 37,7% 30,4% 26,3%
Asia 23.9% 26,8% 21,5% Latin America 30.6% 25,9% 23,4%
Caribbean 22,2% 21,2% 19,7% Transition economies 21,7% 13,9% 11,8%
Sources: Table based on regional tables in Jacques Charmes’ paper: IRD (2006)
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2.0 Informal Sector Cont’d2.1 Definitions of Informal Sector:
Is economic activity that is neither taxed nor monitored by gov’t
Economic units involved in production of goods and services in order to create jobs and incomes on a small scale, with low level of production and organization
Non-structured sector that has emerged in the urban centers as a result of incapacity of the modern sector to absorb new entrants
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2.1 Definitions Cont’d
Most of the ISEs are mainly engaged in economic activities such as:
cloth making (embroidery, tailoring, tie and dye),
Motor bike and cyclists (Boda Boda)hair dressing salon, handicrafts, petty trading (small shop keeping and
hawking),Informal Construction Workers; and food and fruit processing.
Fig.1: Namanga Group (ICWs)– Aggregate crushers- DSM
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2.2 The Vulnerability of ISE
The IS is characterized by:
Seasonality in earning income i.e., irregularity in generating income,
Lack of permanent business premises,
low productivity,
Low incomes.
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2.32.3 The Priority Social Security needs for The Priority Social Security needs for ISEsISEs
The priority social security needs for ISEs are Credit facility, training, access to market, loans and working tools.Table 1: The priority social security needs for the ISE in SMME Type of benefits No. of respondents Percentage (%) Loan/Credit facility 109 49.0 Sponsorship for vocational training 2 0.9 Basic education for children 14 6.3 Reliable market for their products 5 2.3 Housing Loans 5 2.3 Working tools 4 1.8 Same benefits as NSSF 83 37.4 Total 222 100.0
Source: NSSF (2001) “Study Report on the extension of social security”.
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2.4 The Institutions providing social security to ISE
There are two main categories namely; formal and Traditional SSIs.
The Formal SSIs include: GEPF, LAPF, NHIF, NSSF, PPF, PSPF and ZSSF,
The non-formal (including Traditional) SSIs are SACCOS, ROSCAS and ABSs
Others (NGOs, Religious bodies, Micro credit Institutions etc).
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3.03.0 The Extension of Social Security The Extension of Social Security Coverage to ISECoverage to ISE
3.13.1 The Rationale for Extension of Social The Rationale for Extension of Social Security Security Coverage to ISECoverage to ISE
The Social Security Schemes in the developed countries have coverage of over 80%,
The developing countries cover an average of less than 10% of the active population,
The coverage in Tanzania is estimated at 6% of the active population. The majority have limited or lack coverage
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3.1 The Rationale of Covering ISEs Cont’d
Reduces poverty faster through creation of job opportunities
Accelerates growth rates through consolidated savings a source of investment
promotes peace, stability and social cohesion It is an indispensable part of the institutional
framework for an efficient market economyPromotes Flexicurity (covering of other
groups such as Musicians, artists, self employed, house servants etc
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3.2 The Approaches for extension of social security to ISE
There are many approaches but the commonly used are:
universal extension Extension of statutory schemes Special schemes
The approach to be used is largely determined
by national socio-economic realities e.g.,
Rwanda opted for statutory scheme with
government subsidies
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3.33.3 The Strategies for extension social The Strategies for extension social security to ISEsecurity to ISE
The strategies are: Establishment of Partnership between
MCIs/SACCOS, Service providers and SSIs. Promote establishment of SACCOS and
Organized groups (ICWs). Then targeting with SS package.
Establishment of a specific Unit or department within each of the existing SSIs to cater for ISEs; and
Establishment of a specific scheme with a defined regulatory framework to cater for ISEs e.g., Ghana.
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3.43.4 The Roles of Stakeholders in facilitating The Roles of Stakeholders in facilitating extension social security to ISEextension social security to ISE
The Government (TZ- Vision 2025, NSGRP, PBFP)
LGAs & Licensing Authorities (Data base of ISEs and Motor cyclists)
SSIs (Introduce benefits packages that reflect priority social security needs of ISE; and
MCIs/SACCOS – Capacity building, improved micro credit package to include social security component.
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4.0 CHALLENGES ON INFORMAL SECTOR
COVERAGECoverage in general is a problem mostly in
African countries due to the two main issues:
Complex concept where different scholars define it differently
lack of political will and appropriate policies
Perceived associated higher Administrative costs
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5.05.0 Conclusion Conclusion
Tanzania has several social security arrangements, however the majority continue to remain without formal social security protection;
The coverage of 6% out of 20.94million Effective labour force for sure calls for a need to adopt new coverage strategies/approaches,
Promote flexicurity: Targeting already organized groups e.g., Taxi Drivers’ Association, Motor bike riders’ Association (Boda Boda).
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5.05.0 Conclusion Conclusion
The proposal to extend coverage has significant bearing on poverty reduction and socio-economic progress
However, it is not an easy task as it requires strong government commitment
Other key success factors include:
Proper planning
Incentives
Compliance enforcement
strategies
Sensitization
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6.0 Recommendations
For extension of SS to ISEs in Tanzania, it is recommended that:
The SSIs should aim at improving their benefit packages to be responsive to ISEs social security needs;
TZ should emulate the Rwandan experience by targeting organized groups e.g., SACCOS and Motorbike riders and Taxi Drivers’ Associations;
Stakeholders should play an active role in facilitating extension as it leads to poverty reduction and source of revenue
It Can Be Done: Remember that Not Long Ago
There were children working in England’s mines and factories…
……Spanish low class emigrants going to Latin America in search of any job……
… poverty was widespread in the US or South Korea…
……and in South Africa’s apartheid
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...Informal Sector provides ...Informal Sector provides great opportunities .great opportunities .But we need to act very fast But we need to act very fast …….…….
Thank You
SOCIAL PROTECTION IS OUR PRIDELET’S GET IT
RIGHT
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