Retirement Insecurity in Africa
Retirement insecurity in Africa presents a significant challenge, not just due to the current lack of social protection for the elderly but also because of the expected rapid growth of their population in the coming years.
Demographic research forecasts a sharp increase in the number of people over 60 years in sub-Saharan Africa, despite the misconception of a predominantly youthful population, projections show the number of elderly individuals in sub-Saharan Africa will double by 2030. This demographic shift poses a challenge as the labor market is predominantly informal nature exacerbates the situation, leaving many without formal pension systems.
In 2018, informal work, including agriculture, laboring and street vending, accounted for 89.2% of employment, signaling a future of financial insecurity for a vast number of African workers. Additionally, changing household structures, from multi-generational to skipped-generation or one-generation homes, further diminish social support for the elderly, contributing to this financial insecurity.
Improved Social Protection in Africa
A working paper on Pension Funds in Africa, published in August 2022, raises significant concerns about retirement security. It reveals that despite the contributory nature of pension funds, only 8.9% of the Sub-Saharan African labor force contributes to a pension scheme, a stark contrast to the global average of 53.7%. Consequently, just 22.7% of those aged 60 years or over receive any form of pension, whether contributory or non-contributory, compared to 68% worldwide. The report points to low earnings and a critical lack of access to contributory schemes during individuals’ working lives as key issues, underscoring the urgent need for enhanced social protection mechanisms.
This systemic gap leaves the majority of workers without financial assistance or security upon retirement. Shifts in family structures significantly impact Sub-Saharan Africa, where limited job opportunities for the elderly and scarce pension availability increase dependency on family support systems, which are becoming unsustainable. The report also highlights the disproportionate effect of this systemic gap on elderly women, who, often excluded from formal, higher-paying jobs, work in the informal sector without access to the pension schemes available to some of their male counterparts. The prevalence of informal work, coupled with the changing family structure, exacerbates retirement insecurity among older individuals in Africa.
Pension Protection in Africa
The 4th Annual African Supervisors Pension Association (ASPA) found that “600 million of the 778 million working-age population in Africa are excluded from formal pension and social protection arrangements”. This extreme lack of support for those retiring could lead to disaster, as the aging population may face extreme poverty. When discussing these problems, they propose their solution: The African Supervisors Pension Association.
The Role and Impact of ASPA
ASPA was established in 2019 and hosts a platform for supervisors and pension industry regulators to network and facilitate the development of pensions in Africa. Its founding member countries are Nigeria, South Africa, Kenya, Uganda, Zambia, and Rwanda, and the current membership is made up of regulators from 15 countries. ASPA aims to create a secure and dignified retirement future for all Africans, and its impact is notable. It is responsible for over 86% of pension assets in Africa, holding US$350 billion.
Its current structure ignores the largely important ‘informal’ sector workers, preventing them from gaining a real sustainable wage. It suggests numerous solutions, including increasing financial literacy and building trust among those saving for retirement. It also highlights the relative successes of micro pension schemes individual countries like Uganda have undertaken.
In Uganda, the Ugandan Retirement Benefits Regulatory Authority (URBRA) supervises, regulates, and manages retirement schemes and aims to promote a “stable and effective” retirement benefits sector. It notes that retirement benefit coverage now covers 18% of people in Uganda. ASPA aims to emulate and build on URBRA’s success, paving the way for more sustainable futures for African people.
Looking Ahead
By establishing an expansive network of African delegates and global experts, the conferences can potentially foster innovative and creative solutions, like stakeholder collaborations, significantly impacting retirement insecurity in Africa.
– Beth Keith
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