Micropensions lifeline for majority
THE informal sector is generally a puzzle.
It is a sector respected for its constituents and entrepreneurs, whose aggregate contribution to an economy can be immense, but whose future is uncertain.
Zimbabwe’s informal economy has grown rapidly over the past couple of decades as the expansion of formal employment has faced significant obstacles.
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. With present social protection policies catering for the formal sector, it means the majority of Zimbabweans are vulnerable.
Social protection consists of policies and programmes structured to reduce poverty and vulnerability by promoting efficient labour markets, diminishing people’s exposure to risks and enhancing their capacity to protect themselves against interruption or loss of income.
Because of this, the Insurance and Pensions Commission (IPEC) is currently working on a micropensions framework, which is part of broader Government initiatives to enhance financial inclusion in the country.
“We are in the process of developing a micropensions framework to make sure that we have people in the informal sector who have access to pensions,” said IPEC public relations manager Mr Lloyd Gumbo during an IPEC-NSSA mentorship programme last week.
“We have about 1,3 million Zimbabweans of the working age population who are saving for retirement, and the balance of 6,7 million are not saving for it, mainly because they are in the informal sector. We are a highly informalised economy, which means we need to cater for the informal sector.
“There is need for products for people with low and/or irregular incomes. If that doesn’t happen, it could become a burden on the Government, in terms of social services, when these people retire.”
According to the Pension and Development Network, micropensions are intended to generate capital growth by enabling poor people to invest in diverse assets.
They elaborate: “A micropension scheme can be described as a fixed system of contributions, where participants save voluntarily over a long period. The built-up savings are invested by a professional asset manager, and at a pre-determined age, often around 58 to 60 years. The built-up assets can be collected as a lump sum, in phases or on a yearly basis. Often, a combination of these methods is used.”
Micropensions can extend the current scope of social security policies in Zimbabwe.
The International Labour Organisation (ILO) Social Security (Minimum Standards) Convention 1952 (No. 102), outlines the nine principal branches of social security, namely medical care, sickness, unemployment, old age, employment injury, family, maternity, invalidity and survivors’ benefits.
In Zimbabwe, the National Social Security Authority (NSSA) constituted and established in terms of the NSSA Act of 1989, Chapter 17: 04, is the statutory body tasked by the Government to provide social security.
But mostly or almost exclusively, the body caters for the formal sector, although it has been developing a framework for the informal sector.
Social protection schemes for the informal sector workers are not new, with examples such as Kenya’s Mbao Pension Scheme.