PensionReforms' summary and comments
Zanzibar is a semi-autonomous part of Tanzania and is a low-lying archipelago in the Indian Ocean.  Its population is about 1 million that is largely dependent on growing cloves and also on tourism for income.  Tanzania as a whole is a poor country with an estimated per capita Gross Domestic Product of $US1,400 a year (estimate for 2009).  The report says that the number for Zanzibar alone is less than half that - an estimated $US513 a year.

About half of the population lives below the official poverty line of $US182 a year.

The last Census (2002) found that only 4% of population was aged over 60: About two-thirds of older people are dependent on agriculture or fishing to feed themselves..

"Zanzibar runs a system of contributory pensions covering those employed in the public and formal sectors. All current workers are now paying into the Zanzibar Social Security Fund (ZSSF). The fund had 53,798 members in September 2008representing 10 per cent of the overall workforce (taken as those aged between 18and 60). This scheme has been operating since 1998...

"Alongside the contributory pension system the government also runs a small cash transfer scheme for vulnerable groups (including older people), which is administered at community level. Recipients now receive 5,000 TZS (US$3.8) a month, increased n 2007 from 500 TZS (US$0.38), the original amount when the scheme was introduced in 1966."

However, only 40% of older people receive any form of regular cash payment.  The true value of the 5,000 TZS (US$3.8) a month is clear: it covers only about one third of the cost of food.

The report documents an attempt to find out how old people are faring by asking them and running basic medical checks.  Some of the findings included:
-   More than half of older people are caring for young dependants; either their own or their children's.
-   If they received a "small amount of extra money", those on the lowest (or no) incomes would spend it on food.  Others would "use the money to invest in income-generating activities, for example, purchasing a cow in order to sell the milk."
-   Older people tended not to be supported to a satisfactory level by their families.  In one district, about one third received no family support.

The report then looked at the options open to Zanzibar.  Improving the contributory ZSSF depends on growing the formal work force.  However:
"Reforms to the existing contributory system do not address the current levels of poverty amongst older people, nor the situation of those reaching retirement age in the next 20-30 years when they will not have had time to build up contributions."

Extending the current monthly cash grants' system looks more promising. However, the local control of that scheme is potentially problematic.

A Universal Pension seems the best way forward:
"A small pension payment to all older people in Zanzibar would provide them and their wider households with significantly increased protection from poverty. The cash would help older people to afford food, enable them to access services such as healthcare, support the caring role that older people play and facilitate investment within communities. The pension could provide income to the 16.5 per cent of households headed by older people, and to other households where older people are present, particularly the most vulnerable, in which both older people and children live. For older people who are currently dependent in these households, the cash would enable them to make a positive contribution rather than being regarded as afinancial burden."

The report suggests that a Universal Pension has the following potential "...benefits:
.  significantly lower administrative costs as compared to means-tested schemes, due to the scheme's simplicity and ease of administration.
. ensuring coverage of all poor older people - experience across the world has demonstrated that universal schemes have been very successful in reaching poor older people. The eligibility rules for universal schemes are much easier to understand and communicate.
. the possibility of running a universal scheme at national scale from the outset rather than gradually scaling up.  The size of the scheme can also allow for the use of private sector delivery mechanisms and thus for the improvement of financial or communications infrastructure across the country.
. the political popularity of universal pension schemes as older people know that they will receive the payment and those who are not currently of pensionable age expect to receive it in the future."

The report then modelled a number of alternative amounts from alternative starting ages.  A mid-point 30% of per capital GDP represents approximately the current food poverty line.  The total cost of that varies from 1.27% of GDP from age 60 to 0.53% from age 70.  With economic growth, the monetary value of pensions will increase but fall over time relative to GDP.

The recommendation:
"Given the retirement age and life expectancy in Zanzibar, the pension should benefit all citizens over 60 years of age. In terms of affordability, HelpAge International Tanzania suggests a starting amount of 11,500 Shillings per month equivalent to 20 per cent GDP per capita. This should be indexed to inflation and can be increased to respond to market changes in the future."

The report then discussed implementation issues - registration procedures, delivery responsibilities, and payment processes.  And then there is the problem of finding the money.  Donors will pay a significant role here.

PensionReforms applauds the report and will keep an eye out for future developments in Zanzibar.  If there has to be cash aid paid to poor countries, delivering it through Universal Pensions seems like a good idea. (File size 305 KB; 30 pp)  376

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