Milton Nyamadzawo
Correspondent
In Zimbabwe, the informal sector has become a means through which citizens pursue sustainable livelihoods.
The informal sector is pervasive and plays an important role for the growth of the economy. However, the informal sector does not have a retirement funding option. This funding is a critical social security issue in Zimbabwe.
For informal sector employees saving for a distant and uncertain retirement often competes with the pressures and demands of day-to-day survival, which are perceived as more imminent than an uncertain future.
The rapid growth of the informal sector relative to the formal sector is evident in the country.
Although in some instances the growth of the informal sector has been linked to overall economic growth, the insurmountable task inherent in the notion of bringing the sector into the formal sector; the breakdown of traditional forms of social security due to migration and increased job mobility over the past decades, have initiated debate.
The debate relates to the need for informal sector employees to contribute towards their social insurance in the form of retirement funds to alleviate chronic poverty during old age.
Retirement funding and its regulation never enjoyed much prominence in Zimbabwe. Voluntary participation towards retirement funding was mainly through privately managed occupational retirement funds.
It should be mentioned that retirement funding schemes in the country are not mandatory, hence, many employees formally employed do not have access to retirement funds as well.
It is estimated that the informal sector accounts for about 60 percent of the labour force in Zimbabwe (IMF Study). Regardless of this statistic, progressive legislative reforms still relegate persons engaged in the informal sector to the periphery, thereby depriving them of the protection afforded by the Pension and Provident Fund Act.
It is worthwhile to consider how countries such as Ghana and Kenya have established informal sector pension schemes for the purpose of enabling employees in the sector to save for their retirement.In 2008, Ghana enacted the National Pensions Act. This legislation broadened the scope of its beneficiaries to incorporate those in the informal sector as well as self-employed persons, who make up the majority of Ghana’s active workforce.The Social Security and National Insurance Trust manages and administers retirement benefits for employees in the formal sector. The National Pension Regulatory Authority exercises regulatory and supervisory oversight over SSNIT and all licensed pension funds under the Act.In terms of section 58(1) of Ghana’s National Pensions Act: (t)he social security […]
