BY FIDELITY MHLANGA
THE National Social Security Authority (Nssa) faces a daunting task to convince informal sector players to make pension contributions, economic analysts said this week.
Nssa deputy director for social security, Tambudzai Jongwe told reporters recently that Nssa was worried about high levels of social security exclusion, and their implication on future generations after 1,8 million workers fell out of the (Nssa) pension scheme in the past few years.
He said Nssa was now working with the International Labour Organisation (ILO) to track down the estimated 5,7 million people in the informal sector to encourage them to sign up for the pension scheme.
Jongwe said under the plan, those willing can be covered by the first quarter of 2022.
At its peak the State-run compulsory pension scheme managed 3,2 million active accounts but the number has dwindled to 1,4 million.
While many have entered the fast expanding informal sector now estimated to be controlling 60% of Zimbabwe’s economy, millions more have been hounded out of the country by the blazing economic crisis.
Economist Takudzwa Chisango said the new move was a non-event as informal sector players have the tendency of avoiding direct taxes.
“The move is a non-event; we have seen, for long, informal sector players avoiding direct taxes such as presumptive tax. What will make them embrace making pension contributions to Nssa? Given the behavioural nature of most informal players there is very little success, if not outright failure, to convince the grey economic players to make these contributions,” Chisango said.
“I believe that one fundamental issue that might entirely stultify these efforts is lack of confidence in Zimbabwe’s pension industry as it is marred with many irregularities as established by the Justice Smith commission of inquiry, for example, its failure to index pension benefits with the inflationary movements.”
A commission of inquiry, led by Retired judge Justice George Smith, was set up in 2015 to probe the process used in converting pensions and insurance benefits during the hyperinflation period of 2007 and 2008 following the dollarisation of the economy.
Compensation of policyholders and pensioners for the loss of value suffered due to the hyperinflationary period is yet to be finalised. Another economist, Victor Bhoroma said the move was ideal, however more needed to be done to educate the common man to contribute towards the schemes.
“It’s a good initiative because that is their mandate and they ought to have the maximum number of pension contributions possible,” Bhoroma said.
“However, it will take more than just market visits or sign-up forms to get consistent contributors from the SMEs and informal sector. Nssa has lost significant identity due to corruption scandals, low pension payouts and corporate governance ills. It will require a significant brand promotion and education drive to the common man as to the benefits of contributing. Additionally, the informal sector tries to evade as much taxes and compliance licences as possible to limit costs and stay afloat. So uptake will be very low or poor unless sufficient incentives are thrown to the informal sector.”
Nssa, whose investment portfolio is valued at ZW$30,48 billion (US$367 million) has a diverse property portfolio comprising industrial, commercial, residential, medical facilities and land banks earmarked for future development.
The authority is currently paying out pensions to 230 000 beneficiaries under the Pension and Other Benefits Scheme and the Accident Prevention and Workers Compensation Scheme. The beneficiaries are getting US$30 and US$45 per month at the prevailing official exchange rate.
According to Jongwe, while workers are supposed to contribute to the fund for 40 years, the bulk of its contributors have been paying for between 10 and 15 years.