Tanzania Mainland's social security sub-sector demonstrated robust performance in 2024, maintaining stability, soundness, and resilience despite facing evolving financial landscapes and operational adjustments. The sector saw significant asset growth and improved liquidity, though efficiency faced some headwinds.

According to Bank of Tanzania’s (BoT) financial stability report for 2024 total assets within the sub-sector surged by 13.4 percent to reach 21,353bn/- in 2024, up from 18,834bn/- in 2023. 

This impressive growth was primarily attributed to strong contributions from members and healthy income generated from strategic investments. 

Highlighting its critical role in the national economy, these holdings constituted 7.6 percent of Tanzania's Gross Domestic Product (GDP), underscoring the sub-sector's importance to the domestic financial system. Its sustained viability remains crucial for overall financial sector stability.

The sub-sector’s funding position remained robust, consistently complying with regulatory thresholds. 

While the pension funds' funding ratio saw a slight dip to 66.0 percent in December 2024 from 69.1 percent in the preceding year, it comfortably stayed above the minimum regulatory threshold of 40.0 percent. 

Similarly, the non-pension fund funding ratio decreased to 4.1 times in December 2024 from 6.4 times in December 2023, yet it also remained well above its regulatory threshold of 1.0 time. 

Officials noted that the decline in funding ratios was largely influenced by the implementation of monthly pension reforms, which led to increased liabilities, alongside a rise in paid and anticipated non-pension fund claims.

A significant positive development was the improved liquidity coverage ratio, which jumped to 4.2 times in December 2024 from 2.6 times in December 2023. This enhancement was largely driven by increased allocations to short-term investments, cash and cash equivalents, and marketable securities. 

The bolstered liquidity position enabled Social Security Funds to promptly meet benefit obligations, thereby reinforcing public confidence in the sub-sector and contributing to broader financial stability.

However, the sub-sector's efficiency experienced a slight decline, primarily due to increased operational costs. This was reflected in the rise of the administrative expense ratio to 9.8 percent in December 2024, up from 6.4 percent in December 2023. 

While this increase approached the regulatory ceiling, it remained within the stipulated thresholds. The upward trend in costs is attributed to the expanded efforts in enrolling new members from the informal sector and the establishment of new employment injury scheme branches aimed at enhancing service delivery. 

Authorities believe this does not pose an immediate threat to the sub-sector’s short to medium-term viability, but they acknowledge it could impact liquidity if future expenditures outpace income. The regulator remains committed to ensuring the sub-sector's cost-effectiveness to safeguard members' benefits.

Encouragingly, the sub-sector’s ability to utilize contributions for paying benefits showed improvement, signaling enhanced fund sustainability. 

As of December 2024, contributions collected were sufficient to cover benefits 1.7 times, an increase from 1.6 times in the previous year. This positive shift is credited to the continuous enrollment of new members and a reduction in voluntary member exits.

Despite these improvements, the sub-sector still contends with default risks from employers, which contributes to lower contribution density among members. This, in turn, directly affects the calculation of retirement benefits, potentially leading to reduced payouts.

In the short to medium term, the social security sub-sector is expected to maintain its stable trajectory. A key long-term concern, however, revolves around the limited creation of new employment opportunities, a critical factor driving membership growth and contributions.

Nonetheless, the sub-sector's capacity to meet its obligations without compromising long-term viability, as determined by the dependency ratio, recorded positive growth. 

As of December 2024, there were nine active contributing members for every retiree, significantly exceeding the threshold of four active members per retiree. 

This favorable trend provides reassurance to both current and future retirees, indicating that significant reforms, such as increasing the retirement age or reducing pensions, are not anticipated in the near future, thus maintaining confidence in the Fund's financial stability.

The sub-sector's exposure to government securities increased, driven by a preference for low-risk assets and the limited depth of the domestic equity market. Allocations to real estate remained stable at 17 percent, indicating sustained confidence in property investments. 

Conversely, equity holdings declined slightly to 8 percent from 10 percent in 2023, driven by a reduction in private equity exposure to comply with investment portfolio regulatory requirements.

Total assets within social security sub-sector reached 21,353bn/- in 2024, up from 18,834bn/- in 2023.