Aboutfive years from the genocide against the Tutsi in 1994, there was acute labour shortage, and low economic activity. The Pension scheme had no funds, and the social security fund even lacked money to give benefits to genocide survivor widows and children. The future of the pension looked uncertain and bleak. “There was total insecurity, and as a result, there were no financial activities. The scheme gets funds from workers and employers’ contributions, yet in 1994, 1995, and 1996, there was no employment, “said Oswald Munyandekwe, Director of Pension and Pre-retirement Benefits Department at Rwanda Social Security Board (RSSB). Munyandekwe started working at RSSB just after the genocide against the Tutsi in 1994. “It is clear that there could not be any incentives [for job creation], then, and there were no contributions being made. We even lacked money to pay many genocide survivors after the genocide,” he said. But, what was done for the pension sector to be able amass asserts worth over Rwf660 billion as of June 2017 – about 24 years after the crisis – and easily pay due benefits to retirees or other beneficiaries? In this article, Munyandekwe elaborates on how RSSB aced to make the scheme get resources to cater for the welfare of the retirees, and be sustainable. Sale of Telecom House secured the pension scheme’s future As there were no funds, Munyandekwe said, pension scheme activities came to a standstill. He pointed out that most of the then social security fund’s savings, which was in Bank of Kigali, and the former Commercial Bank of Rwanda (Current I&M Bank), was stolen by the people in power by the time the genocide was being committed. To be able to cope with the crisis, Munyandekwe said that, the Pension Board sold Telecom House building for about Rwf2 billion. The building located in Gasabo District, Kacyiru Sector, was erected in 1983/1984. “It’s the sales of that building that enabled us to work again as the social security fund, and we got means to provide pension to children and widows who survived the genocide,” he said. The sales from the building also helped the social security fund to invest in mortgages – the Kacyiru Executive Apartments – which he said were a success. “After those houses were completed in 2003/2004, they had occupation rate of 100% because they were trendy in Kigali then. They brought in huge money,” he said adding that popular people including King Muswati [III] of Kingdom of eSwatini, commonly known as Swaziland, stayed there. From 2000, security was restored in the country. When there is security in the country, incentives to call either Rwandan or foreign investors, private sector activity, active public sector, opening of many public agencies resulted in significant economic activities. “When there are economic activities across the country, RSSB gets many contributions, resulting exponential increase in contribution rate,” Munyandekwe explained. The scheme got economic recovery, and gained momentum from 2008 until now, according to Munyandekwe. RSSB has also embraced use of technology whereby ICT is used in registration of contributing employees, and remittance, whereby automation has made pension scheme operations efficient. Effectively managing small contributions The contribution to the pension scheme in Rwanda consists of 6% of the employee’s gross salary which is equally covered by the employee and employer, with each contributing 3%. For the occupation hazards contribution, it is 2% of the gross salary paid by the employee. In total, the contribution to the scheme amounts to 8% of the employee’s gross salary. Munyandekwe said that the 6% contribution which was set in 1974, is very small compared to neighbouring countries and beyond. He cited East African countries where contribution ranges from 14% to 27%. “What matters is the number of contributors to the scheme. When the 8% is given by many people, that can work,” he said explaining that the size of the number matters than the size of the premium in any insurance scheme. Overall, the scheme gets about Rwf75 billion in contributions from people in the workforce annually, from which it spends Rwf20 billion on retirees’ benefits, meaning that there is some Rwf55 billion that remains in the scheme every year. “It is that difference (Rwf55 billion) that we channel to investment which generates more revenues which complement the contributions, hence making the scheme successful using the small 6% contribution,” he said pointing out that good management of workers’ contributions is key to such good performance of the scheme. “It means the institution should struggle to manage the 6% contribution, for the scheme to continue to exist and be sustainable in the long term. This plan requires effective, visionary management and board [of directors],” he said. “It involves enforcement for registration so that all the people who should pay contributions do it, and we manage well such money once we have received it. Proper management does not mean keeping the money out of economic circuit, rather channeling it to investments that pay dividends,” he said. He observed that it is the reason that RSSB engaged in investing in mortgages because they do not depreciate, rather increase in value. “As pension is a long-term based scheme, it is a good idea to venture into long-term projects for long-term returns,” he observed. Better pension scheme performance results in benefits increment To reflect the scheme’s performance in the welfare of pensioners, Munyandekwe said a study carried out in 2016 showed that based on the economic performance of the country, and the living conditions of the pensioners, a decision was taken to raise pension to improve livelihoods of the retirees. The latest pension rise was made in April 2018, after a presidential order determining the move. It was about 15 years after the previous pension increase which came into force in 2003. The Presidential Order increasing pension and occupational hazards benefits granted by Rwanda Social Security Board which was published in official gazette of April 16, 2018, states that pension and occupational hazard benefits granted to the insured person cannot be less than thirteen thousand Rwf13,000 per month, from Rwf5,000, which means that the minimum social security more than doubled to help the pensioner meet the cost of living. The development saw pension given to retirees increase by Rwf430 million in the same month the Presidential order was gazetted. On average, RSSB was spending about Rwf1.7 billion on pensioners’ benefits per month, but, thanks to the move, they rose to Rwf2.2 billion per month in April, 2018. The move means that benefits that RSSB provides to retirees will go up by between Rwf5 billion and Rwf6 billion per year, which RSSB says is a good step forward in promoting the welfare of pensioners. “RSSB has listened to our voices calling for benefits increase to improve livelihoods of retirees,” said Modest Munyuzangabo, the President of Rwanda Pensioners’ Association (ARR), who told The New Times that there should be timely actuarial studies to assess the performance of the pension fund and match benefits with the growing prices at market. Currently, there are about 600,000 employees contributing to pension scheme. There are 36,000 pensioners, and 4,000 occupational hazards beneficiaries, as of now; and they all got their benefits, according to RSSB.
