Few East Africa workers in pension schemes

Pensioners wait to receive their monthly stipend at the Nakuru Post Office in Kenya in December 2013. Kenya and Uganda run social safety net programmes for the elderly. Photo/FILE 

By JEFF OTIENO, The EastAfrican

In Summary

• 33.2 per cent of Kenya’s working population is actively contributing to a pension scheme, making it the country with the highest number in the region.
• In Burundi, only 5.6 per cent of the working population actively contributes, Rwanda (4.5 per cent), Tanzania (3.6 per cent) and Uganda (2.6 per cent).
• Scenario changes when only employees, mainly in the formal sector are considered, with active contributors rising to 80.9 per cent in both Kenya and Burundi. In Rwanda, the figure rises to 35.7 per cent, Tanzania, 37.1 per cent and Uganda 13.2 per cent.

Less than half of the East African working population is actively contributing to a pension scheme.

According to the latest World Employment and Social Work report published by the International
Labour Organisation (ILO), 33.2 per cent of Kenya’s working population is actively contributing to a pension scheme, making it the country with the highest number in the region. In Burundi, only 5.6 per cent of the working population actively contributes, Rwanda (4.5 per cent), Tanzania (3.6 per cent) and Uganda (2.6 per cent).

The low figures reveal the region’s weak economies are unable to create enough jobs for its young population, and the poor labour market structures incapable of providing adequate social protection for workers.

READ: EA push for pension reforms to adequately cover retirees

However, the scenario changes when only employees, mainly in the formal sector are considered, with active contributors rising to 80.9 per cent in both Kenya and Burundi. In Rwanda, the figure rises to 35.7 per cent, Tanzania, 37.1 per cent and Uganda 13.2 per cent.

Uganda’s low figure can partly be explained by the fact that unlike other EA countries, it features prominently in the list of states with the highest number of workers without a permanent contract. According to ILO, at least 90 per cent of workers in Uganda do not have a permanent contract.

One of the main reasons for low pension coverage, mainly in the developing world, is the poor labour structure.

“Among countries with available data (covering 84 per cent of the global workforce), three quarters of workers are employed on temporary or short-term contracts in informal jobs often without any contract, under own-account arrangements or in unpaid family jobs,” says the labour organisation.

In other words, over 60 per cent of all workers lack any kind of employment contract, with most of them engaged in own-account or contributing to unpaid family work in the developing world.

However, ILO says, even among wage and salaried workers, less than half (42 per cent) are working on a permanent contract.

The high number of employees, mainly in the formal sector, that are active contributors to a pension scheme in Kenya, for example, is as a result of laws which make it mandatory for employees to contribute to the National Social Security Fund (NSSF), a pension fund established by government.

However, this is not always the case in many countries, ILO data shows that 45 per cent of permanent employees and less than 18 per cent of temporary employees are contributing to a future pension.

READ: Rwanda pension body struggles to raise funds

In fact, the coverage of employment-related workers’ pensions is lowest in African countries and the majority of countries also lack non-contributory protection.

Non-contributory schemes normally do not require direct contribution from beneficiaries or their employers as a condition of entitlement. They are usually financed through taxes or other state revenues.

As a result of the discrepancies in many African countries, the UN agency says, income security for people in old age relies on work, family, community or other non-governmental support.

In general, according to the ILO, compulsory contributory mechanisms (contributions made by the protected persons and/or by their employers) have proved to be more effective in reaching the intended target groups.