“It’s getting more difficult for me to continue working, but what will happen if I stop?” questions 66-year-old Ruvimbo Mudarikwa.
“Sometimes he (her only son) does support me with groceries, he has his own family, things are tough, and I don’t want to be a burden.”
Ubuntu philosophy follows that as parents get older and are no longer able to provide or care for themselves, that responsibility is passed to the children.
So in the African context, at least, children tend to be viewed as the greatest form of insurance against the vagaries of old age. But things don’t always go according to plan…so much so, that even the principle of ubuntu (which literary translates to ‘humanity) itself is now being questioned.
The term ‘black tax’ has been coined and is trending on social media platforms.
‘Black tax’ basically refers to a situation where young African professionals are often expected to support their families financially, even if sometimes they cannot afford it.
Now with emerging generations increasingly questioning their responsibility to extended families and the elderly, extending formal pensions systems in Africa has become ever more critical.
But the problem with existing formal pension systems is that they are already extremely limited.
The numbers are not thrilling. It is estimated that in Zimbabwe less than 10 percent of people of pensionable age receive any pension, while 75 percent of men and 65 percent of women aged 65 or over are still active in the labour force.
A January 2018 International Monetary Fund (IMF) paper placed Zimbabwe’s informal sector, or as they call it “the shadow economy” at 60,6 percent, which means a significant segment of the working population lacks social security as they head towards retirement age.
Insofar as this is the case, micro-pensions can help address these limitations. But that means shifting in a significant way from conventional pension systems to meet the needs of Zimbabwe’s growing informal economy.
“Micro-pensions are not downscaled versions of the conventional pension systems,” said Tafadzwa Zinyoro, a lecturer in the department of insurance and actuarial science at the National University of Science and Technology (NUST).
“We need pension schemes that respond to the needs and characteristics of the informal sector.”
According to Mr Zinyoro, some of the key characteristics of the informal sector, as relates to the development of micro-pensions, include the fact that they are highly heterogeneous and diverse, vulnerable to short-term shocks, irregular incomes and savings, difficult to access and generally unorganised.
But there are other nuances.
According to actuaries Gandy Gandidzanwa and Itai Mukadira:
“As with the rest of the world, our old age population is women-heavy. What makes our situation different though is that in our case these elderly women, even in their old age, still have big families to cater and fend for – mostly being grandchildren left orphaned after their parents succumbed to the scourge of HIV and AIDS.
“This just makes the need for us to act speedily the only responsible, and right, thing to do. With only under 10 percent of our working population in the formal sector belonging to a pension fund of one form or another our situation is a lot more precarious and warrants an even more accelerated intervention.
“It becomes even a much bigger crisis when one reminds themselves that this working population is only 10 percent of the total number of those that are economically active – our unofficial unemployment rate is north of 80 percent while the National Statistics agency reports a reading of only 16,93 percent as of 2019. The huge discrepancy is certainly in the technical definition of “unemployment” with those in the informal sector and not actively seeking alternative employment not being considered unemployed by the national statistician. That just underscores the importance that the informal sector is playing in the economy.”
Zimbabwe’s drive to establish a micro-pension system should be boosted by the fact that varying models have already been developed with the region and globally. In respect of the former, some examples include the Mbao Pension Plan in Kenya, the Micro-Pension Plan in Nigeria, and the Ejo Heza Long-Term Saving Scheme (or Informal Sector Pension Scheme) in Rwanda. On a positive note, Zimbabwe’s efforts in this regard will be boosted by ongoing financial inclusion work by its monetary authorities as well as the significant adoption of mobile money in the country.
It is estimated that 90 percent of adult Zimbabweans use Ecocash (one of the more popular mobile money platforms in the country.)
The actuaries believe that those developing micro-pensions products should lean into this advantage.
“Mobile payments technology providers have an all-critical role to play in crafting the most cost-effective systems and channels for payment of contributions and receipt of benefits,” said Gandidzanwa and Mukadira.
“Mobile network providers would strategically be responsible for raising awareness, facilitation of the application and registration process, customer servicing, ongoing communication and two-way engagements between members and providers. The viability of this initiative requires scale to successfully keep the costs low.”
What this serves to highlight is that the development of an effective micro pensions system is a multi-stakeholder approach.
And another key stakeholder is the regulator — the Insurance and Pensions Commission (IPEC) — which has confirmed that it is in the process of developing a micro-pensions regulatory framework.
“Designing products has traditionally been left to insurance companies, but due to the strategic nature of what’s at stake, there are numerous stakeholders, for example, Government, that want to see an effective micro-pensions system. IPEC is seized with this matter,” said the regulator’s director of pensions Cuthbert Munjoma.
But ultimately, if any micro-pensions system in Zimbabwe is to work, both Government and players need to ensure restoration of trust and confidence in the financial system, which had been eroded by instances of value loss.
Said Zimbabwe Pensions and Insurance Rights Trust managing director Martin Tarusenga:
“Economic agents always want to save for a rainy day such as old age. So, saving at all levels of income is something that is possible, as long as there is some disposable income. However, savers or investors have to be confident that they will get their money back as promised.
This requires that instruments and institutions are available to get the money back in the event of rogue market players.
“In Zimbabwe, we are facing insurance companies and pension funds that are openly refusing to honour pension benefits to investors or pensioners that saved for many years. Who will throw money to insurance companies that will not own up?”