A recent book: “Scoping For Zimbabwe’s Affordability of Ageing in Dignity Through a Universal Social Pension” written by Henry Nyararai Chikova and Nicola Yon has provoked deep thoughts about how the country can effectively cater for the elderly.
The book highlights issues of income support to the elderly in Zimbabwe by attempting to answer two questions:
Why should Zimbabwe look after its elderly? and, Can the country afford it?
The objectives of the book are two-fold; to help the Government to choose the eligibility age for a social pension, and second, to help it to decide on the level of pension it could afford.
The authors posit that the decision to implement a social pension should not only be informed by budgetary constraints but, more importantly, by the intended policy outcomes.
Zimbabwe is not an exception, as a number of countries in the SADC region, with fewer resources than it, have provided income support to their elderly with unambiguous success.
While almost all elderly people, aged 65 years and above, in Europe and about nine out of 10 in the Americas are in receipt of a pension, in Africa and Zimbabwe, a mere three out of 10 receive a pension.
Sources of pensions in Zimbabwe include the compulsory national social security scheme, occupational schemes – including the government pension scheme – and personal pension plans.
In Zimbabwe, only once formally employed elderly in stable jobs, receive a pension.
This leaves out those who are in rural areas and those employed informally.
The writers say Zimbabwe, therefore, should consider implementing an inclusive pension policy, in the form of a social pension, to ensure that no elderly person is left behind.
Social pensions are non-contributory cash transfer programmes for the elderly.
For one to qualify two variables are considered: age and citizenship/residency.
Social pensions can be universal (paid to all citizens and/or residents from a certain age) or resource-tested (conditional on other sources of income).
Countries are increasingly adopting social pensions as an alternative policy to offer comprehensive social protection in old age.
The SADC countries that have successfully implemented social pensions demonstrate that implementing a social pension should not be a residual decision, but a proactive one supported by a strong political will.
Implementing a social pension is one effective way of protecting the elderly from falling into poverty because contributory schemes fail to expand protection beyond a small segment of the elderly.
Implementing a social pension scheme, on a universal basis, according to Chikova and Yon, contributes to meeting human rights obligations on social protection and forms a significant step towards achieving objectives of Vision 2030.
Literature supports the axiomatic view that the elderly are typically poor, which justifies why governments should embark on some form of redistribution to protect them from the risk of falling into poverty.
Zimbabwe’s elderly population is facing numerous challenges, which contribute to the high poverty levels.
Because of the HIV and AIDS pandemic, they are caring for grandchildren, yet they do not have adequate resources to look after themselves.
The once reliant traditional family support system is fast disintegrating, depriving them of the first line of safety nets.
Climate change has forced young men and women in rural areas to migrate, leaving the elderly to assume productive roles, which has condemned them to poverty, as the majority of them are no longer able-bodied.
It is in light of this unique situation that the elderly in Zimbabwe find themselves in that Chikova and Yon propose the introduction of a universal social pension.
The book addresses the following issues:
Private insurance always presents people with options to buy pension products from the market. However, private insurance is inadequate to cover social risks.
Chikova and Yon note that private insurance is viable where risks are idiosyncratic, yet most social risks are covariate.
Private insurance does not cover risks that are certain, which creates the problem of missing or incomplete markets.
It also suffers from the problems of asymmetric information, adverse selection and moral hazard.
In addition, saving and pension products offered by private markets are complex for ordinary people to comprehend, making it difficult for them to make informed choices.
Social pensions can be an answer because they have simplified enrolment rules, for example, they enrol everyone who is eligible.
What is the context of social pensions?
Social pensions form part of the social protection instruments of a country and are implemented within the nexus of the broader social protection system.
Governments provide social pensions as social security based on the law, individual entitlement, predictable and regular payments.
The World Bank and the International Labour Organisation (ILO) have conceptualised pensions into pillars and agree that social pensions are located in what they call the first pillar, which is non-contributory and financed from taxes.
Other writers place social pensions in the public pillar, connoting public financing. It is, therefore, invariably the responsibility of government to organise and raise funding for social pensions.
Should the Government of Zimbabwe offer social pensions as a right?
The ILO’s Social Protection Floors Initiative supports the rights-based approach, and specifically seeks to guarantee basic income security in old age.
The writers note that without specifying the right to social pensions in the Constitution of a country, it becomes difficult to offer social pensions on a universal basis.
While the Constitution of Zimbabwe recognises the need to provide social protection to the elderly, it does not provide it as a right, but leaves it to the caprices of Government, subject to availability of resources.
Although the National Social Security Authority Act (Chapter 17:04) compels all companies in the formal sector to register and contribute for the pension of their employees, it leaves out people in rural areas, mostly in subsistence agriculture, and those working in the informal economy.
The Older Persons Act (17:11) offer means-tested social assistance to the elderly, which means the elderly do not automatically qualify for support.
There are also occupational pension schemes, which are contributory and cover a very small segment of the population, again, in the formal sector.
While international legal frameworks and guidelines promote the delivery of pensions to the elderly as a right, Zimbabwe’s domestic laws do not support that approach.
As a result, it leaves out the majority of the elderly without old age income support.
Are old age social security schemes in Zimbabwe adequate?
Chikova and Yon note that before the colonial period, the traditional set up in Zimbabwe afforded the elderly some form of social protection built around familial kinship.
However, these social protection systems were largely informal and failed to withstand covariate risks.
Old age schemes introduced during the colonial period were largely on racial and gender lines, which left out the majority of the elderly.
Zimbabwe’s current contributory pension schemes cover the same population, who are in paid formal employment, leaving out those in the informal economy and in rural areas.
Zimbabwe’s non-contributory programmes are means-tested.
The current old age social protection programmes, therefore, have a yawning coverage gap and are grossly inadequate to offer comprehensive pensions coverage in old age.
It is only a social pension scheme that can fill this gap because it de-links benefits from contributions.
What is the socio-economic situation of the elderly in Zimbabwe?
Zimbabwe’s elderly are poorer than the rest of the population and their poverty levels increase with age. Most of them lack income support in old age because social security systems cover just a fraction of them.
Besides lack of income, old age poverty expresses itself in other forms: food shortages; lack of clothing; lack of or poor accommodation and; ill health. The elderly have poor access to health and other social services, and their majority resides in rural areas where poverty is deeper compared to urban areas.
Regardless of their advanced age, they are expected to walk long distances to nearest health facilities.
Chikova and Yon say Zimbabwe has institutionalised some of the elderly, as an alternative way of cushioning them from poverty. However, just a few, mostly former labour migrants, are institutionalised.
Countries where social pension programmes have been implemented have managed to lower poverty among the elderly, they note.
Do social pensions have a positive impact on the lives of the elderly?
Literature has demonstrated the unambiguous ability of social pensions to lift the elderly out of poverty.
The writers say social pensions have opened new pathways for the elderly’s social development.
Social pensions reduce social exclusions among the elderly and instil a sense of self-respect, enabling them to participate in social and economic life of their communities.
Besides, social pensions have generated positive impact on the health of older persons; also, improving their psychosocial well-being.
The multiplier effect of social pensions stimulates local economies by creating demand for goods and services in remote localities.
In addition, social pensions do not only benefit the elderly, but other household members, especially children, whose growth and development, and opportunities to remain in school have been enhanced.
Because of their ability to reduce poverty and to positively impact on other economic areas of the elderly, social pensions remain the most powerful tool at the disposal of governments to lift the elderly out of poverty.
How can governments finance social pensions?
Chikova and Yon say governments have an array of sources they can choose from to finance a social pension programme.
Governments have used general taxes, earmarked taxes on resources, debt restructuring and relief, and overseas development assistance to finance social pensions.
Other jurisdictions have successfully reallocated expenditures to raise money for social pensions.
Instruments like debt restructuring and overseas development aid are important in kick-starting the programme, but may not be sustainable for long-term financing.
The Government is encouraged in the book to look for sustainable domestic financing for social pensions.
In financing social pensions, the Government should be careful to avoid overburdening the already overtaxed citizens, but could focus on cost cutting measures, reallocation of the budget and on sweating its natural resources.
Will it be financially sustainable for Zimbabwe to implement a social pension scheme?
Among other options, the authors simulate that if Government pays all elderly persons aged 70 years and above a monthly social pension of US$31 (the 2017 food poverty line), it would require 0.8 percent of annual GDP.
This amount of pension is about the same level as Botswana, Eswatini and Nigeria pay.
The proportion of social pensions to GDP will be far much lower than that of Lesotho and Nigeria. This is despite that Lesotho and Nigeria’s social pension systems are less generous, since they are pension-tested.
Overall, comparison between Zimbabwe and other regional countries shows that Zimbabwe’s social pension budget, as a percentage of GDP will be much lower than what these countries have recorded.
The simulated reductions in poverty headcount for Zimbabwe of 10 percentage points – from 69 percent to 59 percent – are much higher than reductions recorded in other countries (for example Brazil – 4.3 percentage points and South Africa – 1.8 percentage points).
How can the Government implement the social pension scheme?
The Government can ride on already existing national programmes to reduce the turnaround times of implementation. These programmes can help with registration, enrolment and payment of benefits.