Pensions and social security in Sub-Saharan Africa : issues and options

Abstract

The paper presents an overview of social security reform issues in Africa, based on the examination of a number of case studies for both Francophone, and Anglophone Africa. A number of conclusions drawn from the analysis of case studies suggest that: 1) with the exceptions of Mauritius, and Botswana, and to a certain extent South Africa, formal social security institutions have not been successful in fulfilling broad-based coverage of the population, and, it is unlikely that pensions, and disability coverage will be extended, within the next generation, to the informal sector (representing the vast majority of employed population in Africa). This has implications for the strategy of reform, and, in particular, for claims of public resources that can be made by existing institutions; 2) improving governance remains a priority for formal social security institutions, which due to mismanagement of assets, have failed to deliver. Within the context of strong regulatory framework, the relationship between objectives, responsibilities, and incentives may be fine-tuned to improve governance; 3) over the long term, formal social security institutions need increased membership to thrive; thus, compulsory contributions seems appropriate to finance minimum benefit standards; 4) pension systems need to be fully funded, because of reduced fiscal risk, and improved savings; and, 5) transition to new designs requires rigorous technical work, improved administrative performance, and clear institutional objectives.

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