Lesotho’s universal minimum pension

These two posts are from 2008, before TdJ became an online blog. Each was sent as an email to list members, and can be viewed here and here. The links still work!

The purpose of this paper is to present the preliminary findings from survey research done between 2005 and 2007 of how the availability of a universal old age pension since November 2004 has affected the economic and social well-being of its elderly recipient in Lesotho. ….

This rapid survey [shows that] the allocation of the pension within the household is under control of the pension recipient, who as the head of the household still is treated with respect and acting as an advisor to other household members. ….

Recipients are pleased with the pension delivery system that is demonstrating high levels of efficiency and customer care. Dissatisfaction is with the level of the pension and the qualifying age. Pensioners acknowledge that, in their financially poor communities, setting the pension age at 70 excludes many households that are in a worse position than those fortunate to qualify for the pension.

The pension ‘works’ as an instrument to allow extra consumption. It makes little difference to the amounts of income going into direct investment and asset building that will have long run effects on poverty.

The use of a significant amount of the pensioner’s added income to help with the education and health needs of young people in the family may eventually have some longer term rewards though the creation of better human capital. The pension probably also allows the pensioner household to take on the care of more orphans and vulnerable children.

Beyond these financial benefits the ability of Lesotho, from its own domestic resources to transfer up to 2% of Gross Domestic Product from tax revenues for undirected spending by some of the poorest and least well protected in society should be a source of public pride.

A.C. Nyanguru,, “The Economic and Social Impacts of the Old Age Pension on the Protection of the Basotho Elderly and their Households“, June 2007, pp. 5, 32-33.

The author is professor in the Department of Department of Sociology, Social Anthropology and Social Work, National University of Lesotho. Lesotho’s pension is not quite universal. Those elderly who receive an occupational pension (approximately 5% of the population) must choose between that pension and the new ‘universal’ pension, so the scheme in effect guarantees that all elderly persons receive a minimum pension. This ‘pension test’ amounts to a 100% tax on pensions smaller than the guaranteed minimum. This is still an impressive achievement for a country as poor as Lesotho. The scheme was enacted without outside aid. Indeed, the government faced considerable opposition from donor agencies, including the World Bank and the IMF.

Lesotho is the most recent country in Africa to establish an old age pension. It is the only LDC in Africa to operate a non-contributory pension and along with Nepal, is one of only two LDCs worldwide to do so [??]. The Lesotho pension is the outcome after many years of waiting on the sidelines of the policy agenda and has been advocated by many parties at various times. The ruling Lesotho Congress for Democracy (LCD) first announced that the pension was to be implemented in the 2004 Government budget and within months the first payments were made. …. All Lesotho residents over 70 years old are entitled to receive the single rate of M150 (¬£12.50) per month. In May 2005, there were 69,046 registered recipients, out of a total of 74,000 citizens of 70 years and over (2001 updated census). [p. 4]

One of the most striking aspects of the Lesotho pension is the absence of the international arena. The intention to remain independent of donor assistance was expressed unequivocally by the Minister of Finance in parliament, ` We cannot depend on getting foreign aid to pay pensions, we must do it ourselves’ (Dr Thahane, 2nd Reading, 17th November 2004). There was no consultation with, or announcement to, donors and …the donor community was only informed of the pension when it was announced to the public, during the registration process (October, 2004). This is another indication of how little reaction the pension caused in Lesotho. The IMF expressed a standard cautionary opinion over the sustainability of the pension, given that this is to be funded by the government alone. Donor agencies expressed interest and overwhelming support for the pension, but they had very little knowledge about it. No donor contributes funds directly to the pension (and at the time of the field research, there was no direct budget support to the Government from donors). [p.11]

In Lesotho, there is anecdotal confirmation that a social pension can indirectly serve to integrate community members. One Lesotho pensioner remarked, “I’m happy because I can now contribute to the household.” The regular cash income provided the pensioners with a regained sense of self-worth in the community even though the benefit of their pension had to be split within the household. The culture of family support is in fact better characterised as one of reciprocity and therefore pensions encourage remittances because the beneficiary can return the assistance. [p. 30]

Larissa Pelham, “The politics behind the non-contributory old age social pensions in Lesotho, Namibia and South Africa“, Chronic Poverty Research Centre, Working Paper 83, June 2007.

Larissa Pelham is a political scientist working as consultant for the World Bank. Her statement that Lesotho “is the only LDC in Africa to operate a non-contributory pension and along with Nepal, is one of only two LDCs worldwide to do so” is simply not true. Assuming that she means universal age pensions, these are provided by Botswana and Namibia (both of which she mentions!) as well as Mauritius (which she ignores). And there are many non-African examples of universal,non-contributory pensions other than Nepal, including Samoa and Bolivia. New Zealand is the only¬†developed country operating a universal, non-means tested, non-contributory basic pension.

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