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

2. ebba/lau-eu/11 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

3. 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.

4. 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

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

6. A Model of Social Security Industry in Tanzania

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

8. 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.

9. ebba/lau-eu/11 9 2.0THE 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.

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

11. 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

12. ebba/lau-eu/11 12 2.1Definitions 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.

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

14. 14 2.2The 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.

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

16. ebba/lau-eu/11 16 2.4The 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).

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

18. ebba/lau-eu/11 18 3.1The 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

19. 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

20. ebba/lau-eu/11 20 3.3The 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.

21. ebba/lau-eu/11 21 3.4The 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.

22. ebba/lau-eu/11 22 4.0C HALLENGES 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

23. ebba/lau-eu/11 23 5.0Conclusion 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).

24. ebba/lau-eu/11 24 5.0Conclusion 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

25. ebba/lau-eu/11 25 6.0Recommendations 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

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 26 ebba/lau-eu/11

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