Tables piled up with mountains of delicious food, countless bottles of champagne and fun dancing till one drops – the retirement celebrations for the well-respected Mr Théo Kodjo Locoh was no doubt a memorable weekend. Mr Locoh is undoubtedly an extremely knowledgeable man, both professional and highly dedicated to the insurance industry of West Africa. I was given the lucky opportunity of working and learning from this great visionary director and moreover experiencing his well-deserved retirement celebrations. After two great night of party in the top-hotels of Lomé organised by the insurance industry and the leading African insurer, I was also invited to enjoy a family and friends celebration at Mr Locoh’s magnificent chateau. Such occasions not only highlighted the honour and appreciation paid to Mr Locoh’s respectable career, but also sees him off to his retired life in a fun and positive way. Yet, this is certainly not the typical retirement in West Africa.
“A reward to hard work” or “a right to leisure” is often the current concept associated with retirement in developed nations. Yet in the majority of Africa, retirement is almost non-existent and one is expected to work until they die. A case in point is the age-correction assumption we apply for our West African pension funds. It is assumed that formal sector workers have on average recorded their age to be 7 years younger than reality. This is common practise amongst African workers as they cannot financially support themselves and their dependants after compulsory retirement at age 60 or 65. As a result, formal sector workers will in general be substantially older than their nominal age in order to remain in workforce for a longer period of time.
In recent years, a number of African countries have embarked on pension reforms in order to increase coverage and address the limitations of their existing pension schemes. This includes Nigeria, Cape Verde, Ghana, Sierra Leone, and Zambia where they have created pension schemes to cover all formal sector workers. The existing occupational pension schemes generally cover only civil servants and corporate private sector. Whilst social pensions are popular in southern regions of Africa, social security coverage only exists in approximately 5%-10% of the working population in sub-Saharan Africa. Furthermore, the of these social security scheme often remain a concern for governments.
Whist one may argue that pension is not the most pressing financial issue for Africa, no doubt social protection programs – including old-age pension – have an immediate and direct impact on chronic poverty. The aim of a public pension scheme (also known as Pillar 1) is to provide a minimum benefit to avoid subsistence, and thus reduce poverty among older people. It is increasingly clear that pensions also can mitigate the negative impact of financial shocks on the elderly and their families, thus preventing them from falling into poverty.
Provision for the non-working, retired population is a challenge in any country.In Africa, where up to 85 percent of total employment remains in the informal sector, it is important to extend pension coverage to the informal sector. This is particularly challenging as formal payroll systems and tax collection for this population are almost non-existent. Such expansion in coverage will require innovations in product design and mode of delivery such as providing pensions products through voluntary micro-savings or cash transfer programs. In combatting old-age poverty through social security policies, I certainly hope that in the near future income security and social inclusion amongst African elders will not be few and far between.