PENSION FUND INVESTMENTS VITAL FOR INDUSTRIALISATION

TURNING to social security as financing option for industrialisation will boost prospects for Tanzania to become a semi-industrial economy as envisaged in the Vision 2025, a university don says.

Prof Humphrey Moshi of the University of Dar es Salaam says in a recent paper that by securing pension funds investments for industries given limited funding from the budget, capital market and private equities, the government was setting trend in guiding economic development using public resources.

In the paper he presented at the 26th PPF Members’ Conference in Arusha recently, Prof Moshi said it was vital for social security funds to play a pro-active role in the industrialization process given the weakness of the private sector.

Social security was a viable financing option for industrialization given inadequate government funding, capital market infancy, limited private equity and illiquidity challenges, he says in the paper.

According to Social Security Regulatory Authority (SSRA) figures, investments from social security schemes reached 9.3tri/- from 2,234,236 members in 2015/16 financial year.

Tanzania has five mandatory Social Security Schemes - GEPF Retirement Benefit Fund ( GEPF), LAPF Pensions Fund (LAPF), National Social Security Fund (NSSF), PPF Pensions Fund (PPF) and Public Service Pensions Fund (PSPF).

Prof Moshi says the role to be shouldered by such organisations range from leading the private sector in implementing the industrialisation policy, complementing private sector activities, to being platforms of competition with the private sector as a way of enhancing productivity and efficiency.

He says the success of the four Asian Tigers - Hong Kong, Singapore, South Korea and Tai wan - which underwent rapid industrialisation and maintained exceptionally high growth rates in excess of 7 per cent a year between the 1960s and 1990s indicates that governments have played a critical role in reducing poverty and accelerating growth through policy-making, investing and showing the way.

“Indeed, evidence from the East Asian countries, which have been able to attain sustainable and inclusive development, the story is about governments and businesses coordinating to secure high investment, high saving and re-investment and rapid growth of competitive exports in a joint strategy of national growth,” he says.

However, according to NSSF Director General Prof Godius Kahyarara, pension funds support for industrialisation is dated back in the 1990’s whereby loans for the expansion of Aluminium Africa, Kwanza Bottlers Limited (1995), and Mbeya Cement (1998) were given by the defunct National Provident Fund.

He said social security institutions continued to invest in companies listed under the Dar es Salaam Stock Exchange. As of September 2016 a total of 339.44bn/- was invested by NSSF, PPF, LAPF and GEPF to Tanzania Breweries Limited, Tanzania Cigarette Company, Tanzania Portland Cement, Tanzania Oxygen Limited and Tanga Cement.

Investments of social security schemes have grown to 9.3tri/- in 2015/16 from 7.8tri/- in 2014/15. This was equivalent to 19 per cent annual growth. Membership to pension funds has also increased to 2,234,236 in 2015/16 from 2,142,350 in 2014/15.

This modest increase was due to pre-mature withdrawals. The total social security coverage stood at 12.3 per cent of the productive labour force.

However, according to SSRA figures, their total contribution have declined from 2.27tri/- in 2015 to 2.15tri/- in 2016, indicating a decline of 5.5 per cent. The main cause of decline was a delay in receiving contributions.