Panic, disbelief and anger now engulf some employees following a shocking statement made by Minister for Finance and Economic Affairs Mustafa Mkullo in Arusha on Friday, that some public pension funds are financially unstable.
Shortly thereafter, several individuals who declined to reveal their names made phone calls to The Guardian on Sunday’s news desk, the common thread of their sentiments being that “the government is grossly irresponsible”.
Opening the annual Parastatal Pension Fund (PPF) conference for members and stakeholders, the minister was quoted to have mentioned PSPF and LAPF as social security funds that were experiencing financial problems to the level that may force the Government to bail them out.
One of the callers was a fuming, high profile bank official who said by making the statement, the minister showed how irresponsible he was when it comes to serious matters directly touching people’s lives.
“We have been contributing money to the social security funds hoping to relieve our lives’ hardships upon retirement. Now, what message does the minister communicate to us when he says the pension funds have started experiencing liquidity problems? ”
She angrily added: “The minister should tell us about the whereabouts of our money, considering the fact that some of us are about to retire from service.”
She furthermore said that poor performance by the social security schemes emanated from haphazard investment decisions combined with poor record keeping, as well as lack of accountability by officials running them. Most of the callers said they no longer trusted the pension funds unless the government assured them that their post-retirement dues were secure.
However, in what appeared to be a dramatic U-turn, Minister Mkullo strongly denied having said some pension funds were financially unstable to an extent of needing bailout, blaming the media for misquoting him.
“I never said that some pension funds have started experiencing liquidity problems in my speech in Arusha. There is nowhere in my speech where I made such remarks,” said Mkullo in a brief telephone interview, adding that a section of the media exaggerated the matter.
He added: “ I would like to assure the public that no pension fund is financially unstable as it was reported, and that therefore a bailout plan is immaterial.”
According to Mkullo, some lecturers who attended the conference demanded that the PPF Act be reviewed so that payment systems can be the same as those used by others, such as the National Social Security Fund (NSSF).
According to Mkullo, lecturers from higher learning institutions complained of receiving little pension compared to low ranking personnel served by other pension funds upon retirement.
“ Having lodged the complaints, I told them that the law governing PPF operations was very specific and different from the laws governing the activities of other pension funds,’ he said. However, contributing to the subject an economist from the University of Dar es Salaam, Dr Semboja Haji, said such poor performance of the pension schemes in question may have resulted from lack of expertise on the side of officials on how to run them.
He added that what has befallen the pension funds may be no different from the fate that befell the National Insurance Corporation (NIC). He cited lack of accountability, conducive legal framework and failure of trusted executives to adhere to the leadership ethics as among the factors that might have caused the negative state of affairs.
The local economist also said running pension schemes requires high discipline that is supported by certain internationally accepted regulations. He said if anyone tempered with those regulations, the consequences would be horrendous. However, he could not get into the details about the regulations.
Prof Ibrahim Lipumba, the Civic United Front( CUF) national chairman who is also an economist supported Dr Haji’s arguments, saying failure to stick to the leadership ethics by the executives is a central factor accounting for poor performance of some pension funds .
Giving an example, Prof Lipumba said at one time some pension schemes were blamed for lending money to some businessmen who invested in projects whose returns were doubtful.
“If a pension schemes decides to invest in any project then such area of investment must be very safe or else at the end of the day it may fail to pay its members their benefits. As far as I am concerned, I think this is an aspect that creates problems when it comes to the operations of these pension schemes,” he said.
Prof Lipumba said he was not certain if there was any auditing of the assets belonging to the pension funds to establish their actual value compared to the cost incurred in setting them up.
“There has been a tendency of inflating the cost when these pension funds are setting up certain investments and very unfortunately there has never been any auditing to establish the truth. Billions of cash get swindled by leaders trusted to run these schemes through those investments,’ he said.