Analysis: BENEDICT TEMBO
THE National Pension Scheme Authority (NAPSA) has embarked on an ambitious task of bringing on board the informal sector.
Under the informal sector programme, NAPSA hopes to capture maids, minibus and taxi drivers, marketeers and vendors.
NAPSA is not alone in this quest. Social security firms around the globe are reaching out to the informal sector with a view to cushioning them.
NAPSA director-general Yollard Kachinda said every country has specific characteristics and Zambia is responding to its unique challenge of having a huge informal sector.
In coming up with a package for the informal sector, N2 had the opportunity of interacting with the International Labour Organisation (ILO), which provided technical support into the programme of capturing the informal sector.
“ILO were very helpful, very supportive,” Mr Kachinda said.
NAPSA has since hit the ground running with a high-profile sensitisation campaign.
Some of the advertisements are featuring artistes like Aubrey Luo and Moses Bwali who are mimicking minibus drivers.
During their discussions, the bus drivers are talking about cashing and then one of them brings in the issue of contributing to NAPSA.
It is a very innovative way of reaching out to the informal sector although more needs to be done to reach out to the millions out there.
Copperbelt University lecturer in marketing and entrepreneurship Moffat Chawala described NAPSA’s gesture as a good move because all citizens need social security whether in the formal or informal sector.
“This move is inevitable especially that people in the informal sector don’t even earn a lot,” Mr Chawala said, citing maids who get an average of K1,000 minibus drivers who earn about K1,500 monthly.
“How can one save/ invest for a rainy day or life after retirement with such meagre earnings? It’s impossible to save for them and compelling them and their employers to make a contribution towards their social security is a step in the right direction,” Mr Chawala said.
Economist Chibamba Kanyama says a lot is required on the part of NAPSA to convince the informal sector that social security is necessary for the employers and employees alike.
Social security is generally a mandatory savings scheme whose purpose is to:
1. Secure a decent livelihood for individuals in advanced age
2. Relieve Government of the burden of supporting individuals when they are most vulnerable
3. Support the economy through mandatory savings; a win-win platform for both the employee through interest earning saving opportunities and investors who convert savings into profitable investments.
However, Mr Kanyama foresees a real battle for NAPSA to convince the informal sector about the value of social security.
Reasons are many:
1. The informal sector has no structured business processes and systems through which it can properly manage monthly contributions. By its name, it is informal and any such efforts will be taken as an extension of the broadening tax base initiative by the Zambia Revenue Authority (ZRA).
2. The informal sector faces cash flow problems. The informal sector is hand-to-mouth with priorities focused on initiatives that will instantly keep the business afloat.
“Contributions for social security scheme are considered future investments with uncertain returns and it is on this account that NAPSA will have to do more than just introduce a scheme. The institution has to invest in education for informal sector players and, where possible, capacitate the entrepreneurs with financial skills,” Mr Kanyama says.
He says this will be an opportunity for the informal sector to fully comply with the 2017 Companies Act that places emphasis on financial management and governance.
“All in all, this is a great initiative that will for the first time compel the informal sector to take responsibility of the future of their employees, increase productivity among employees through such an empowering scheme and also be contributors to various investments extended through NAPSA,” he says.
While spreading out social security cover to the wider populace, NAPSA is indirectly broadening its revenue base.
But NAPSA has work to do because social security contributions currently have no incentives.
Having contributed to NAPSA for over 20 years on the trot, I expected to have the benefit of accessing part of my money to invest, just like our colleagues with the Public Service Pension Fund (PSPF).
PSPF contributors are entitled to access part of their money for projects such as building.
Long-time contributors to NAPSA should also be allowed to use their social security contributions as collateral when procuring loans from banks.
For now, it is boring and scaring to wait to turn 55 years to get my pension from NAPSA.
As NAPSA reaches out to the informal sector, it should make the social security savings more attractive by introducing incentives to contributors.
The author is editorials editor at the Zambia Daily Mail.