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Zanzibar’s Groundbreaking Universal Pension Scheme

In April of 2016, Zanzibar introduced the first government-funded universal pension in East Africa, which has proved to be a role model for the African region and the world at large in its impact and design. Zanzibar is a semi-autonomous archipelago, meaning that Tanzania exerts significant policy influence but the group of islands is run by its own elected government.

Pioneering Pensions

Zanzibar’s pension scheme is universal, government funded and noncontributory, and the only factor determining eligibility for the pension is age, as recipients must be aged 70 or older. Each pensioner is entitled to a monthly sum of 20,000 shillings, equivalent to $9. The Zanzibar pension is the first fully-funded government pension scheme in East Africa, and has proved a great success a year after implementation.

Pensions are of pivotal importance for the African region and have had significant impacts on poverty reduction. According to a 2009 OCED report, pensions have reduced the poverty gap ratio by 13% in South Africa and have increased the “income of the poorest 5% of the population by 50%.”

Pensions have large impacts across generations, as many family structures in Sub-Saharan Africa are intergenerational and headed by elderly head of households. Children with grandparents who receive pensions are far more likely to attend school, and this is especially the case for orphans who live with their grandparents as a result of the HIV-AIDS epidemic. This is evidenced by a cash transfer scheme in Zambia, in which school attendance increased for orphans whose grandparents received cash transfers.

Old-age Poverty

The vast majority of the elderly in Zanzibar live in extreme poverty, and the pension serves to provide a stable source of income for those who are beyond working age and unable to generate sufficient incomes for themselves and their dependents. Many of the recipients of the pension report that it helps to meet basic needs and also provides a valuable source of capital to invest in a small business.

The Zanzibar pension is intended for the elderly but has a direct impact on the lives of all generations and the society at large. Over 200,000 families are headed by a pensioner, meaning almost 80% of all private households in Zanzibar benefit from the pension funds. According to the Tanzania Zanzibar 2012 Census, the average number of people forming a household is approximately 5.1, and so the majority of pensions are being used to support entire family structures.

Grandchildren in particular benefit from their grandparents’ pensions, which are often used to pay for school fees, supplies, and uniforms. Many households are composed of older people living with children with no person of working age bringing in a stable income, and so the pension has a particularly measurable impact on such household formations.

A Social Security Fund is already in existence in Zanzibar, but only benefits those workers who were previously employed in the formal sector. The context of Zanzibar, and East Africa and the continent at large, is that the majority of the workforce is engaged in the informal economy. Thus Social Security Schemes based on formal sector employment exclude the majority of the population and must be reformed to incorporate informal sector workers. The majority of older people in Zanzibar have never been in the formal labor market, and so the recently implemented universal and government-financed pension is fitting to local needs and realities.

Development Strategies

The International Labor Organization, or ILO, has initiated strategies on social protection floors that ensure universal access to health care and income security at a “nationally defined minimum level.” Such a strategy envisions adequate levels of social protection for all levels of society and the Zanzibar pension represents a key step towards realizing such an aim. The primary actors behind the pension are the Government of Tanzania and the NGO HelpAge International, with recommendations from the ILO.

HelpAge International and the Economic and Social Research Foundation of Tanzania are still in the process of conducting a research survey of recipients, and the results so far are very positive. Many interviews with recipients have been released, and The Guardian has run a feature story on the pension. Many recipients have established small businesses, paid for grandchildren’s school fees, and been able to buy more nutritious food with the pension. The pension is particularly important for older widows or divorcees who may have no other means of supporting themselves, as divorce is a major cause of female poverty in Zanzibar.

The expansion of social security is of the highest importance to sustain livelihood strategies throughout Sub Saharan Africa, and the Zanzibar pension scheme represents the positive ripple effects of expanding social protection. The Zanzibar pension has set the tone for the East African region and joins the eight other African non-contributory pension schemes, primarily found in the Southern Africa.

The Southern African region, in particular, has shown a great willingness to innovate and expand social protection, with programs from Namibia to Botswana to Lesotho. South Africa is still in the talking phase of moving toward a Basic Income Grant, and there is an ongoing campaign to launch a Basic Income Grant for the entire Southern African Development Community. These expansions represent the expansion of the welfare state in the midst of a neoliberal world order, a trend that continues to gain momentum as African states craft welfare programs that use neoliberal mechanisms to achieve pro-poor aims.

Source: The Market Mogul