SSNIT heading for danger - Union Official warns

A steady decline in number of contributors is putting the Social Security and National Insurance Trust (SSNIT) fund, in danger, says TUC?s head of International Department, David Dorkenoo.

?Contribution to SSNIT has declined persistently from 10.7 per cent of the economically active population in 1997 to 9.3 per cent in 2001,? Dorkenoo said at a forum on social security and the poor organized by Network for Women?s Right (Netright) in Accra on Tuesday.

?If the present mediocre performance of the economy continues with an annual average real GDP growth rate of about 4 per cent then contributions to SSNIT Fund are at a peril with disastrous consequences for social protection,? he warned.

He said an increasing number of people now work in the informal sector due to the implementation of various economic policies over the years which has resulted in many workers losing their job in the formal sector. These policies, including privatization and retrenchment, have also seen many self-employed.

The SSNIT law, which requires that employers deduct workers contribution at source and hand over to SSNIT by a certain time, however, has not been reviewed to reflect current realities, leaving an increasingly large number of people without any form of social protection.

Dorkenoo warned that even the inadequate benefits under the current scheme could not be guaranteed after 20 years.

The current minimum benefit received by pensioners is ?100,000 per month. ?It is lamentable that the pension provided by SSNIT to a large number of beneficiaries is only ?100,000 (in 2004) per month?.

The TUC and recently the International Monetary Fund (IMF) have raised concern about the viability of the scheme beyond 20 years as government is set to divert one-seventh of workers? contribution to the National Health Insurance Fund. The recent IMF staff report on Ghana dated December 2003 posted on their website noted that the financial viability of the SSNIT is threatened by government?s proposal to divert a portion of the contributions into the health insurance programme, ?which would further undermine SSNIT?s already weak financial condition. It also noted that SSNIT?s ?weak financial performance has been a drag on economic growth and a threat to the future welfare of retirees.?

The International Labour Organisation (ILO) defines social security in terms of public measures to address the need for medical care, the loss or substantial reduction in earnings ? due to sickness, maternity, employment injury, old age, invalidity, death of a breadwinner or unemployment ? and unemployment, Dorkenoo said.

He said though the PNDC Government, in an attempt to redress some of the major defects of the Provident Fund Scheme, repealed the 1972 Social Security Decree, NRCD 127 and replaced it with PNDC Laws 247 in 1991, there are still problems. ?Indeed, many of the shortcoming and weaknesses of SSNIT derive from the structure of the law establishing it, PNDC Law 247, and how the law is implemented? he noted.

Only 10 per cent of those who work in the country contribute to the scheme, meaning about 90 per cent of the population have no form of social security to fall on in old age. The implications for the country in terms of people falling or living in poverty are grave.

SSNIT needs wide ranging reforms, Dorkenoo said, re-echoing the TUC?s position made public as far back as 1999, when following several media allegations of corruption against the management of SSNIT, the union petitioned Parliament to set up a public inquiry into the matter.

The TUC has been in the forefront of pushing for a reform of the current SSNIT Law. This is not surprising given that its members account for the majority of contributors to the scheme. A Friedrich Ebert funded study into the operations of SSNIT at the instance of TUC, conducted by Professor Kofi Kumado, of the Faculty of Law and Dr. Augustine Fritz Gockel of the Department of Economics, both at the University of Ghana, Legon recommended a review of the objectives of the Trust to make it ?concise and unambiguous?.

TUC?s major concerns have been government interference in the SSNIT Fund, as well as, reports of mismanagement, which have resulted in bad investments. Indeed, IMF recent staff report No. 03 on Ghana dated December 2003 and entitled: ?Ghana: Financial System Stability Assessment Update? had this to say about the Trust: ?As for SSNIT, weak governance arrangements have plagued its investment performance in the past, and continued government interference in its funding arrangements and investment decisions could further undermine its weak financial position.?

It is not only organized labour and IMF who have raised concern about SSNIT. former chairman of the NPP and Senior Fellow of the Institute of Economic Affairs, B.J. da Rocha in 1999 caused a stir when he slammed SSNIT for lack of transparency and accountability to its contributors, making indiscriminate investment in projects and being under the thumb of government to the detriment of contributors.

The IMF agrees with the TUC that the SSNIT law needs reform. ?Further action needs to be taken to place SSNIT on a sound footing and address the weak governance arrangements that have plagued its performance in the past,? the IMF staff report stated.

The two, however, disagree on the way forward. The TUC believes less government interference is the way forward. Dorkenoo called for a reduction in the number of government representatives on the SSNIT board. ?The over-bearing presence of government must be removed from its operations,? he declared. SSNIT?s 14-member Board has seven government representatives.

For the IMF, the way forward is one word as always: Privatisation. ?Over the medium term, the authorities could consider allowing contributors to divert a portion of their SSNIT contributions to private fund managers, and instituting a pension fund regulatory body.?

The Fund?s position has been described as not too prudent as workers contributions would be up for grabs by the greedy. This is a possibility the Fund staff admit. ?It would be important to ensure from the outset that private pension schemes and their investment managers are well-regulated,? they caution. SSNIT certainly needs reforms but the question is which is the best way forward. The SSNIT Fund should respond to the needs of contributors who are the owners and they must have a greater say in its management. Leaving that to private managers is risky business, Union officials say.

...all is well, says SSNIT

The Social Security and National Insurance Trust says that the use of 2.5 per cent, representing one-seventh of workers social security contribution to fund the National Health Insurance Scheme (NHIS) would not affect pensions to be paid to contributors.

It said according to law, the pension benefits are ?based on a prescribed formula and, therefore, the benefits accruing to participants will not be affected by the proposed diversion to the health fund.

The assurance, which was contained in a letter to the Maritime and Dockworkers Union (MDWU) of the Trades Union Congress (TUC), was in response to the Union?s attempt to seek clearance on the issue of the 2.5 per cent and call in the increase of workers representation on the SSNIT Board.

The letter signed by K. Osei Bimpong, Head of the Public Affairs of the SSNIT, said, ?the only scenario under which the benefit entitlements will suffer a reduction will be if the current proposal were to also mandate a change in the benefit formula. This is not the case in respect of the proposal under consideration.