How court erred in NSSF case – Business Daily
The National Social Security Fund (NSSF) house on September 12, 2012. PHOTO | SALATON NJAU | NMG
If you lose faith in politicians, you can change them. If you lose faith in judges, you will have to live with them. One of the signs of the times we live in is the eagerness with which we are willing to thrust upon judges tasks of deciding for us complex public policy questions and choices even on issues where they may not be qualified by both training and experience to decide.
Judicial reviews have steadily expanded in scope so that almost all areas of government activity and economic policy choices are now subject to intervention by courts. We are shifting the responsibility of making difficult economic policy choices to courts especially when we are faced with choices where the government is either too weak, too timid, too confused, or has failed to marshal the political will and guts to decide for the country. Important and profound economic policy decisions and choices are now mostly litigation-driven.
I make these remarks as an entry point to a discussion on the recent decision by the High Court to declare the NSSF Act of 2013 unconstitutional.
We are about to throw away our best opportunity and chance at putting into place functional pensions and social security systems for the citizen of this country. The truth is that the pensions and social system we have right now are woefully dysfunctional. When you retire, the lump sum you get from the mandatory scheme, the NSSF- is a measly amount. The contributions you make while still in employment are capped by law at Sh200 per month and another Sh200 from the employer.
According to actuaries, and contributions, the benefit is less than 1 per cent of the earnings of the average Kenyan. Eighty-five percent or 17 million Kenyans are excluded from social security and face the grim prospects of poverty in old age. We have a thriving private sector pensions industry. But these alternative schemes cover less than 50 per cent of the formal sector.
In 2010, we introduced article 43 in our constitution which stipulates that every citizen in this republic is entitled to a pension and social security. It was this constitutional requirement that made the NSSF Act 2013 a national imperative. I am surprised that some public interest litigation activist has not filed a class action suit on behalf of citizens who don’t have a pension plan.
The Act which the High Court has now dismissed as unconstitutional is what was going to give effect to Article 43 of the constitution. It was the means to address the blatant inadequacies in both coverage and benefits that a citizen gets under the current arrangement. We badly needed to change the framework to introduce a more reasonable and meaningful level of savings.
A great deal of fresh thinking and actuarial research was done in designing the new system. Basically, and at the risk of oversimplification, the design of the new system is as follows: First, a new pension fund to provide for mandatory contributions at a reasonable rate for formal sector salaried workers in Kenya.
The contributions rate was set at 12 percent: 6 percent employer and 6 per cent employee. And, this new contribution rate was not arrived at arbitrarily. Under the ILO convention number 102 to which Kenya is a signatory, the minimum floor benefit stipulated is 40 per cent of earnings. When you calculate, the 12 per cent contribution rate was set in the Act to bring the citizen to the level of benefits prescribed by the ILO convention.
Secondly, the new framework is designed to introduce a new voluntary provident fund to provide for voluntary savings by the informal sector and self-employed.
The third plank: the government would remain responsible for the vulnerable and socially excluded who are unable to save for themselves as provided for in Article 43(2) of the constitution through social protection programs such as the INUA Jamii program. Finally, the current provident fund was to be closed and ring-fenced.
I don’t agree with the court’s view that the new arrangement introduces a monopoly and stifles free choice. The truth is that the new system has opt-out options. Are the new contribution levels too high? Much lower than the mandatory contribution in Uganda and Tanzania.
The courts missed the bigger policy questions and choices because the dispute before the court was reduced to a zero-sum contest and debate between parties so blinded by short-term and vested interests.
The writer is the former managing editor of The EastAfrican newspaper.
