Social Protection in Africa: Sharing experience on the informal economy 10-11 March 2011

1. Social Protection in Africa: Sharing experience on the informal economy 10-11 March 2011 THE EXTENSION OF SOCIAL SECURITY COVERAGE TO THE INFORMAL SECTOR EMPLOYEES IN TANZANIANAIROBI 10th – 11th MARCH, 2011

2. AGENDA • Introduction (Background). • The Informal Sector (IS) in Tanzania • Extension 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 Coverage • Conclusion and recommendations ebba/lau-eu/11

3. 1.0 Introduction An 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. ebba/lau-eu/11

4. 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 ebba/lau-eu/11

5. Table 1: The Social Security Coverage in East Africa: ebba/lau-eu/11

6. A Model of Social Security Industry in Tanzania

7. Table 2: The Social Security Coverage in East Africa: ebba/lau-eu/11

8. 1.0 Introduction Cont’d • The 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. ebba/lau-eu/11

9. 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. ebba/lau-eu/11

10. 2.0 THE INFORMAL SECTOR WORLDWIDE ebba/lau-eu/11

11. 2.0 Informal Sector Cont’d 2.1 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 ebba/lau-eu/11

12. 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 (BodaBoda) • hair dressing salon, • handicrafts, • petty trading (small shop keeping and hawking), • Informal Construction Workers; and • food and fruit processing. ebba/lau-eu/11

13. Fig.1: Namanga Group (ICWs)– Aggregate crushers- DSM ebba/lau-eu/11

14. 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. ebba/lau-eu/11

15. 2.3 The Priority Social Security needs for ISEs The priority social security needs for ISEs are Credit facility, training, access to market, loans and working tools. ebba/lau-eu/11

16. 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). ebba/lau-eu/11

17. 3.0 The Extension of Social Security Coverage to ISE 3.1 The Rationale for Extension of Social Security Coverage 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 ebba/lau-eu/11

18. 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 economy • Promotes Flexicurity (covering of other groups such as Musicians, artists, self employed, house servants etc ebba/lau-eu/11

19. 3.2The 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 ebba/lau-eu/11

20. 3.3 The Strategies for extension social security 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. ebba/lau-eu/11

21. 3.4 The Roles of Stakeholders in facilitating extension 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. ebba/lau-eu/11

22. 4.0Challenges on informal sector coverage Coverage 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 ebba/lau-eu/11

23. 5.0 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 (BodaBoda). ebba/lau-eu/11

24. 5.0 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 ebba/lau-eu/11

25. 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 ebba/lau-eu/11

26. 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 ebba/lau-eu/11

27. ...Informal Sector provides great opportunities .But we need to act very fast ……. SOCIAL PROTECTION IS OUR PRIDE LET’S GET IT RIGHT Thank You ebba/lau-eu/11