State pensions as an income safety net in Namibia

I 1 VIlIwl’oIN’r

State pensions as an income safety net in Namibia

Richard Morgan

At independence Namibia inherited a widespread but highly regressive and discriminatory old age pension system. Despite its shortcomings, the system nevertheless seems to have played a significant role in enhancing food security among the most economically marginalized. The government intends to equalize pension payments over a number of years, and it seems likely that these payments will make an important contribution to alleviating long-run poverty and reducing income disparities. Equalization will be expensive, however, and could draw money from other welfare programmes, so caution is required. Few other African countries are wealthy enough to launch similar schemes, but Botswana could be an exception.

The author is the Senior Programme Offic- er, United Nations Children’s Fund (Un- icef), Sanlam Center, 1st Floor, PO Box 1706, Windhoek 9000, Namibia. This article is written in a personal capacity and does not necessarily represent the views of Unicef.

Grateful acknowledgement is made to Dr Mary Zepherin, Dr Reginald Green, Dr Roger Hay, Mr John Williams, Dr Alexan- dre Zouev, MS Bonnie Setshwane and Mr Pierre-Emeric Mandl for their comments and assistance on drafts of this paper. Resoonsibilitv for final content rests.

Namibia and South Africa are possibly the only mainland sub-Saharan Afri- can countries to have widespread, if not yet comprehensive, state-run old age pension systems. In the case of Namibia these pensions provide a significant safety-net against extreme deprivation for considerable numbers of absolutely poor families, and contri- bute to the containment of child mal- nutrition and the avoidance of starvation. They function as a stable if hitherto small ‘core’ of income and food security for such families, and are particularly important ic the context of local economies frequently subject to sudden downturns in the event of drought or loss of access to employment and remittances.

This Viewpoint examines the main features of the pension system in Namibia, including its financing solely by government, and considers its present and potential role in enhancing food security and overall welfare for poor Namibian households. Consider- ation is made of possible alternative and complementary means of providing state support for these objectives in newly independent Namibia, including commodity and other direct financial transfers. Finally, issues of feasibility and affordability are raised in relation to the possible adoption of some form of government-financed

Namibia at independence Namibia achieved its independence in March 1990 after several decades of colonial rule and a protracted political and military struggle for liberation. Land ownership was concentrated by the German occupying powers in set- tler hands in the early part of the 20th century, and subsequent rule by South Africa resulted in the entrenchment of a system of internal labour migration. This involved particularly the move- ment of young adult men from the populous far north of the country to the mining enclaves, fishing enter- prises and ‘white-owned’ livestock farms in the semi-arid centre and south, on a contract and ‘pass’ basis. Some of the harsher provisions of the migrant labour system were relaxed before independence, but the historic- al patterns of migration have largely continued, resulting from a concentration of employment opportunities around the mines, on the private farms and, increasingly, in the central- ly located Windhoek urban area. The lack of development in the ‘communal’ areas with tribally administered land use systems in the far north and parts of the south, as well as the impact of war and South African military occupation in the northern regions throughout the 1970s and 198Os, have served to reinforce these

however, with-the author. pension provision by other African trends. countries, particularly Botswana. The ‘communal’ areas of the coun-

FOOD POLICY October 1991

‘UN Statistical Office, ‘Provisional estimates of basic data for Namibia’, UN memorandum, mimeo, 1989. ‘UniceWFSG, Household Food Security in Northern Namibia, Unicef Windhoek and Food Studies Group, Oxford University Press, Windhoek, 1989. 31n some regions of South Africa, such as Transkei, the pensions system has provided considerable scope for patronage benefits to local chiefs and headpersons, who are called upon to certify the elrgrbrlrty of applicants: C. Tapscott, University of Namibia, personal communication. 41t is also notable that the extent of dif- ferentiation in levels of pension payments to different racial groups (so classified) was, by 1990, much less in South Africa than in its former colony. The South Afri- can ‘black’ pension level in 1990 was 63% that of ‘whites’, compared to 14% for northern Namibians. The former was increased to 74% in the 1991 budget pro- posals (Johannesburg Star, 21 March 1991) while the Namibian basic pension, after the 1990 increase, is now 24% of the ‘inherited’ top level. Consideration needs to be given, however, to relative levels of coverage (access) for different groups in South Africa under the means-tested system used at present.

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try, whilst containing some two-thirds of Namibia’s population, are charact- erized for the most part by widespread poverty, semi-subsistence family farming and the cumulative impact on agricultural productivity of a combination of adult labour shortages, inadequate land access (particularly for grazing animals), often severe water shortages, environmental degrada- tion, frequent droughts and the dis- ruptive effects of war.

Namibia’s national product and particularly its exports are largely accounted for by the ‘enclave’ mining industries and privately owned commercial farms. As a result, overall GDP per capita is relatively high in African terms (about $1100 per annum in 1990). but the country suf- fers from extreme income inequality. Whilst the wealthiest 5% of the population (mainly ‘white’) were pro- visionally estimated to have income levels in 1988 of over $14 000, per capita incomes for the remaining 95% were estimated to average about $320, with some 45-55X of households considered absolutely poor.’ This picture is confirmed by a Unicef Household Health and Nutrition Survey (HHNS) undertaken in two regions of major population concentration in 1900, which found reported average high- density (‘black’) urban, peri-urban and rural annual per capita cash incomes at $581, $318 and $102 respec- tively.

Food availability and security at the household level are largely deter- mined in most parts of Namibia by levels of cash income. This is the case not only in the towns and the semi- arid central and southern regions, where livestock sales and farm employment provide the main income base, but also in the drought-prone Ovambo region, where almost half of the country’s population resides. Mil- let production in Ovambo and neighbouring Kavango provides a central contribution to household food availability in good rainfall seasons, but it often requires supplementation from commercial purchases of food staples (usually maize meal). Following poor harvests (perhaps one year in every two). farming families in Ovambo

become heavily reliant on food purchases from retail outlets.

Given the longstanding migration away from rural areas by young adults, absolute poverty has tended to be concentrated in the labour- exporting rural areas. These regions are not only mainly infertile or drought-prone, but are also largely isolated from commercial markets for their cereal and livestock products.’ Since 1989 household food security in Ovambo has faced additional strain due to employment losses in the military sector (scaled down in conjunction with the UN-supervised peace process) and to the repatriation of some 40 000 former exiles. This strain was offset by good rainfall and millet harvests in 1990 and 1991, but the long-run prospects for family incomes in the rural areas remain precarious.

Numibian pension system Widespread monthly pension payments began to be provided in Nami- bia by the state administration during the South African colonial period, and were regulated under the Social Pen- sions Act of 1973. Provisions along similar lines exist in South Africa (including the ‘homeland’ areas).’ However, the two systems differ in various respects, particularly in that pension eligibility in South Africa is (to date) means-tested, whilst in Namibia it has in recent years been automatic on reaching the qualifying age, at least in principle. Levels of pensions paid in South Africa, even at the lower levels, are, on the other hand, considerably in excess of those in Namibia.”

The standing of Namibia’s system was enhanced under the constitution of the new republic, adopted at independence in 1990. This provides for the state to adopt policies aimed ‘to ensure that the senior citizens are entitled to and do receive a regular pension adequate for the maintenance of a decent standard of living and the enjoyment of social and cultural opportunities’ (Article 95). The political and social policy influence of the constitution is likely to remain strong, given the centrality of the document to the establishment of the nation follow-


ing the ceasefire and UN-supervised elections in 1989.

As with most state-provided services during the colonial period in Namibia, the administration of the pension system was undertaken by the various and now defunct racially and ethnically based ‘second-tier authorities’, covering designated geographical areas or population groups. The fragmented nature of this administrative system accounts for two important features of the system prior to independence: the large variations in coverage and access, and the highly unequal and discriminatory nature of the levels of pensions paid.

Eligibility and coveruge

‘Administrative practice s

Although pensions have not been

was the main factor provided on a ‘means-tested’ basis,

determining coverage in the extent of coverage has varied widely among regions within Namibia.

the colonial-period’ - More than 80% of those eligible in the northern Ovambo and Herero- speaking regions, as well as in southern Namibia, are receiving pensions, whereas this falls to less than half in the extreme north-east (Caprivi) and to about one-third in the northern Kavango region.5 The variable coverage appears to be an immediate legacy of the different levels of efficiency among the former ‘second-tier’ authorities, from which the system was taken over by the Ministry of Health and Social Services when these bodies were abolished in 1990. The authorities were responsible for registration of pensioners as well as disbursement; it is probable that for many older people lacking birth certificates registration was a fairly arbitrary process depending on local practice.

Other possible factors leading to poor coverage in some parts of the country include inadequate transport infrastructure and communications, eg in Kavango. However. such constraints also affect those ‘communal’ areas in which relatively high coverage has been obtained, and the Ovambo

‘Based on 1990/91 estimates of the Minis- region has high coverage despite re- try of Health and Social Services. cent extensive social disruption due to “Given widespread doubts about the degree of reliability of the latest available

war. This suggests that administrative

Census in Namibia (1981), all population practice was the main factor determin-

estimates must for now be heavily qual- ing coverage in the colonial period. ified. Overall, in 1990 more than 56 000


Namibian senior citizens were receiving pensions, or about half of the 7% of the population estimated to be aged 60 or over.6 The present less-than- comprehensive coverage partly re- flects the fact that, prior to independence, men only became eligible for receipt of pensions at the age of 65. In October 1990 reform to the system provided eligibility for all citizens at the age of 60.

Inequality in levels of pensions paid The racially and ethnically based ‘second-tier’ authorities during the colonial period set their own levels of pension payment for the populations they were created to serve. The Admi- nistration for Whites, largely funded by individual taxation among this population group, paid by 1989/90 a level of R382 (about US$154) per month. The Administration for Col- oureds paid R192 ($77). and the other population groups (comprising about 90% of the total) received between RlSO and R5S ($22) per month. These payments were funded from general ‘territorial’ revenues, including payments to the treasury from South Africa, and were distributed via block grants to the ‘second-tier’ authorities.

The system was highly regressive as a result, with the almost invariably better-off minority groups being best assisted. The ratio between the highest and lowest levels of pension was almost 7:l. The lowest levels were paid in the neglected, war-affected northern regions, where up to two- third of Namibians reside.

In 1990 the post-independence government announced its intention grad- ually to equalize pension payments for all those eligible. This will be done by freezing the higher levels and raising the lowest levels over time. All new entrants will receive the lowest level at time of entry. As a first step, the minimum pension was in 1990 raised from R55 to R92 per month, an increase of 67%. In contrast to pre- vious practice, all pension payments are now made by the Ministry of Health and Social Services from its yearly budgetary allocation, derived from general government revenue. This in turn is based mainly on taxa-

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‘The pension system has begun to operate as a redistributive mechanism’

%nicef, Report on the Household Health and Nutrition Survey (HHNS) in Katutura and Selected Areas of Northern Namibia, Unicef Windhoek with the Food Studies Group, Oxford University Press, Wind- hoek, 1990. ‘Unicef, Situation Analysis of Children and Women in Namibia, Unicef, Windhoek with the Namibian Institute for Social and Eco- nomic Research, Windhoek, 1991. ‘Ibid.

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tion of companies and individuals (in practice the hitherto mainly ‘white’ higher-income minority), as well as on receipts from general sales tax and the Southern African Customs Union. The pension system has thus begun to operate as a redistributive mechanism, following the consolidation since independence of its revenue sources and the abolition of separate funding arrangements for the better-off minority. There has to date been no donor aid contribution to the system.

The pension system as a sufety nrt

As a result of widespread internal labour migration, rural-area families in Namibia are often headed by women (between 40% and 49% in rural Ovambo)’ and have a relatively high proportion of older people and children. In the southern ‘communal’ areas, where job and income prospects are negligible given the semi- desert and land-scarce environment, households commonly comprise older women bringing up young children. For many such families, pension funds appear to constitute the sole, or sole reliable, source of cash income with which to purchase food and other necessities and thereby avoid destitution.

In the more populous northern areas, productive sources of income are more diverse, although often low and subject to fluctuation. They include seasonal small-scale production of millet and other crops for home consumption, at least in non-drought years; small-scale trading, fishing and craft production; and remittances from migrant family members (on what scale and with what frequency is not known). Pensions thus form an important and relatively stable cash income source, particularly for families in the Ovambo region. In the HHNS some 30% of households in rural Ovambo reported pensions as one of their income sources.

Thus, despite the incomplete coverage of the pension system and the marked racial/ethnic differentials hitherto in amounts paid, the receipt of pensions appears to be a significant factor contributing to food security for a considerable number of absolutely

poor households in Namibia. At the raised 1990/91 minimum level of R92 per month a pensioner should receive the equivalent of some $442 per year: enough to buy nutritionally adequate quantities of the main purchased staple, maize-meal, for about three people at late-1990 prices in Windhoek, assuming 40% of poor household mar- ginal income was spent on the staple. If the whole basic pension were spent on food, it could provide a full basic minimum diet for almost three people (2000 kcal/person/day, six commod- ities, estimated to cost R32/month in 199(j).’ The new minimum pension thus represents a considerable boost to household resources, with poten- tially strategic implications for poverty reduction, in a context of widespread poverty, limited alternative income sources, and rates of young child undernutrition exceeding 30% in rural areas.”

Conclusions on the importance of the pension system for household food security can as yet be only tentative. The lack of household-level data, particularly on income sources and expenditure patterns, so far precludes a detailed understanding of the role of pensions in helping to meet basic family needs. For example, whilst the present importance of pension payments for elderly household heads with direct responsibility for child care seems clear, and is confirmed by community-level church and social workers, research is needed on the extent of contribution to family incomes of remittances from younger, migrant family members. To the extent that such remittances are reliable and significant, the importance of income from pensions for families with remitting absentee members would be lessened. However, with rates of open unemployment estimated at around 35% in Namibia’s urban centres. stable employment conditions which would permit and encourage regular remittances to families are often not attained by migrants. The lack of job security and low cash wages commonly paid in the commercial farming and domestic worker sectors also diminish the scope for remittances. Conceivably, too, the


I 1 vIIEwl’oIN’r

‘The impact of pensions on the standing of older people is a factor for consideration’

“Ibid.


provision of pensions by the state could have effects on intrafamily remittances.

Efficiency of pensions as a safety net Whether an old age pension system can be considered an efficient option among possible measures to protect the food security of the poor in Afri- can countries - whether from press- ures generated by ecnonomic adjust- ment, social or environmental change, or from poverty itself-will depend on several factors. In a particular country context it would need to be asked whether older people tend to be among the poorest or members of poor families; and how the benefits of pension payments are likely to be distributed within the family. Such an analysis would include examination of how pension receipts or other margin- al incomes are actually spent: an issue of widespread concern in Namibia is that of the extent of spending believed to take place on alcohol, even among poor households, sometimes at the expense of food and other needs of children.“’ This may be an issue of general concern for safety-net mechanisms based on financial transfers.

In the Namibian context, with older people tending to be more strongly represented in lower-income regions (due to outmigration of younger males), to have little effective control over or access to other economic resources, but frequently to have child-raising functions and responsibi- lities, the pension system is likely to have significant direct benefits for the more vulnerable groups, including children. For the latter such benefits may often accrue in terms both of survival and of nutritional development, where inadequate dietary in- take linked to household-level food shortage is often one of the limiting factors. In addition, as discussed above, the pension, where it is received, appears to provide an important stabilizing element to family incomes in situations common to Nami- bia of income vulnerability to climatic and other factors.

Such conditions may not obtain similarly or to the same extent in other

African countries: in particular, the degree of authority of older people within the extended family may differ, since the extent of their economic marginalization in parts of Namibia, within overall conditions of progres- sive deprivation (eg increasingly low levels of family livestock holding), is probably unusual. The impact of pensions themselves on the standing of older people is a further factor for consideration. They may have served to preserve (or restore) prestige and authority for the elderly in Namibia, but the effect in other circumstances could be different - eg to reduce intrafamily support to older people as the state extends its supporting role.

More general factors in favour of a universally applied pension system in a developing country context may include: its simplicity of application (although proof of age may often be difficult); the channelling of benefits to an often objectively needy group (eg one with overall higher needs for medical care); and, with reasonably good delivery mechanisms, the reliability of pensions as a contribution to total family income.

A possible further argument in favour of pensions as a social security mechanism, particularly compared to child benefit, is that they may reduce anticipated dependence on children for support in old age and thereby modify preference in respect of family size (ie ease the rate of population growth).

Under present conditions, many African countries would face severe constraints in the actual administration of a widespread pensions system and in delivery of payments. Compre- hensive distribution mechanisms for cash (or vouchers) are often difficult to establish (and sometimes to protect), particularly in rural areas, where local government institutions and transport infrastructure tend to be weak. However, once such mechanisms are established they may facili- tate additional development and welfare interventions such as wage payments to workers on community- based public works.

A further major drawback of a universal pension system relates to ex-

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“C. Mesa-Lago, ‘Social security in Latin America and the Caribbean: a comparative assessment’, in Ahmad, Dreze, Hills and Sen, eds, Social Security in Developing Countries, Clarendon Press, Oxford, 1991. ‘2R. Morgan, Social Welfare Programmes and the Reduction of Household Vulner- ability in the SADCC States of Southern Africa, DERP/London School of Econo- mics, 1988.

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pense. In contrast to commodity transfers, the recurrent cash outlays involved in pension payments are highly unlikely to attract donor support. Consequently most African countries operate pension systems, if at all, for limited numbers of formal sector employees on a contributory basis (such arrangements, additional to the broad-based pension system, exist for public sector employees in Namibia). By contrast, wide-coverage schemes are common in the higher-income and more urbanized Latin American region and increasingly also in the Caribbean. ”

A further drawback of universality, for pensions as well as other measures

such as food subsidies, is a lack of targeting, so that the better off are equal beneficiaries with the poor (and often have readier access). Targeting may possibly be dealt with, albeit im- perfectly and with ‘leakages’, on a geographical basis (eg limitation to poorer rural and/or low-income urban areas)

Options for expense reduction would include the use of administrative means tests, and graduation of pension levels based on needs-related criteria. In most African countries, however. the weakness (particularly in rural areas) of state administrative institutions and possibilities for patronage would tend to undermine the feasibility and fairness of means-tested arrangements. In particular, the costs (including time) and other disincen- tives for poorer families in gaining access to means-tested benefits would normally be a cause for concern. Simi- lar difficulties would face graduated systems, unless based, as suggested above. on geographical criteria. These in turn may tend to give rise to political strain. In certain circumstances means tests may be a feasible option if operated through representative community (or church) organizations, or by local government bodies where these are effective.

The option of using child or mater- nal benefit grants as a transfer mechanism would be constrained by severe problems of affordability and administration in the case of universal applicability, and by the difficulties of

applying means tests in most developing-country contexts.

As a family income and food security enhancement measure pensions may be most directly compared with the provision of supplementary food supplies. The latter involves a bulkier commodity than cash or cheques, and often requires considerable resource outlays on storage, transport and man- agement. A number of African countries experience structural food de- ficits combined with foreign exchange constraints and would depend on food aid for such schemes. However, external assistance in this area is much more likely to be obtained than for local currency transfer payments. Furthermore, foodstuffs are more easily targeted to children and mothers, usually among the high- priority beneficiaries of welfare- oriented programmes, through local clinic or school distribution systems. or by appropriate product selection. In a number of remote or war-affected regions, moreover, poor access to commercial supply of basic commod- ities renders direct food provision a more effective transfer mechanism than cash payments.

A further alternative and potential- ly complementary intervention to promote income stabilization and food security enhancement in rural economies similar to those of Namibia is the use of village-based public works programmes. These were successful in neighbouring Botswana in post- drought periods during the 1980s as a general income support measure for rural areas, and were fairly effective in reaching women and the poor.” In both Botswana and Namibia the essential conditions for making cash payments and using cash, including widespread retail networks and effective local administrative and distribution systems, are basically in place. In contrast to Namibia, cash income transfers in Botswana have focused hitherto on village-level project workers and on destitute people registered with local authorities. A sizeable proportion of these workers and ‘des- titutes’ have tended in fact to be older people, suggesting that the Botswana programmes have involved a compa-


I I vIl~wl’oINT j3The Ministry of Health and Social Ser- vices estimated a total disbursement in old age pensions, maintenance grants for mothers unable to support themselves (available only in certain regions) and other welfare arants of R102.66 million in 1990/91. The text figure is an estimate for pensions only, based on calculation of the numbers in various categories of pension recipient, with an estimate added for directly attributable transport, administrative and other costs incurred by the government in the delivery of pension payments. ‘?e direct payments covering about 98 000 beneficiaries out of 130 000 total eligible by that time, x R2280 per year, and adding a constant 16% for administration and transport. A rapid increase in the proportion of those eligible who actually gain access to the system is probable, given the more welfare-oriented priorities of the new government and the improve- ment in demographic information expected to result from the 1991 Census. Improved life expectancy would tend to accelerate the rate of additions to the number eligible. 15This is slightly optimistic because a main taxable sector, mining, is in a ‘consolida- tory’ rather than expansionary phase, due to currently poor market conditions for uranium and copper-nickel; individual, sales and company taxation rates and collection are already fairly high in Nami- bia; and a quarter of state revenue comes from payments by South Africa under the Customs Agreement, which will have to be secured in future through negotiation. In- creased future revenue would come mainly from lease of offshore fishing rights, and possibly from oil and gas exploration in the longer term. “Although it is notable that during the 1980s droughts the Botswana government devoted up to 20% of its recurrent spending to resource transfers, mainly of an income support nature, to drought-affected families, such expenditure shares are not wholly unprecedented in comparable countries. On the other hand, Namibia’s budgetary position is more constrained now than Botswana’s was during the 1980s including by debt servicing, and its first post-independence budget has already given significantly increased priority to spending on social and community services, raising this to around 40% while reducing defence expenditures to below 5%. “As the system expands towards universality, the percentage of fixed administrative costs would tend to fall but that of variable costs (particularly transport for mobile delivery to remoter areas) would rise. “Under these assumptions the nominal cost of the system would be some R702 million in the year 2003, covering 132 000 beneficiaries and including 16% administration costs.


rable means of reaching a similar target group.

Are universal pensions affordable? In consideration of the affordability of a universal pension system, on the likely assumption that this would be financed without external assistance, we return to the Namibian case. With one of the highest levels of per capita income in sub-Saharan Africa, and a relatively efficient individual and company taxation system which provides the main base of state revenue, Nami- bia presents an almost ‘best-case scenario’ for assessing the sustainability of basic state pensions for this region.

The present Namibian system involves the disbursement of about R86 million per year; with administrative and transport costs, the overall financial implication would come very roughly to RlOO million. ” This represented some 6.2% of total estimated current government spending in the 1990/9 1 financial year.

The Namibian pension policy is now aimed at equalization, through freezing the higher and raising the lowest levels, and placing all new entrants at the lowest level; as well as (less expli- citly) at improved coverage. If one assumed an equalization by 1995 at a level of R190/month in 1990 prices (using a 13% annual inflation rate to ‘reduce’ the highest level), an increase in coverage from about SO’% now to 75% by 1995 and an increase in total numbers eligible of about 3% per year, the total cost of the system would come to some R259 million per year in 1990 prices by mid-decade.‘” Could the Government of Namibia afford this rapid increase in costs?

On optimistic assumptions, Nami- bian government current revenue and spending (net of foreign aid) might expand by 3% in real terms up to 1995.” In this case the expanded pensions system would need to take up some 13.9% of total spending, by mid- decade, compared to around 6% now. This ‘demand’, under the assumptions used, would largely stabilize there- after if pensions remained equalized and fixed to the rate of inflation, but it is arguable whether such a level of budgetary commitment to pensions

would be politically sustainable. Equally, it might not be considered wholly desirable in terms of the probable reduction, other things being equal, of financial resources available for application to complementary programmes aimed at poverty reduction and improving the survival and development chances of vulnerable groups.‘h

Using the option of means testing would reduce the outlays on direct payments, but it would tend to increase administrative costs, probably sharply; would, as argued above, increase the dangers of patronage and exclusion of the most needy; and would remove an important economic and constitutional ‘right’ now available to the elderly. Thus equalization of universal payments over a long period of time at eventual real levels somewhat lower than those assumed above would seem to be the main means of containing the overall cost of the system while retaining its basic objectives.”

One alternative scenario could therefore involve maintaining the present (recently boosted) real value of the basic pension (R92 per month in 1991) by increasing the nominal value in line with inflation, with the higher levels remaining frozen. Under the same assumptions used above con- cerning the annual rates of inflation (13%) and increase of numbers eligible (3%) with coverage rising to 80%, equalization would be achieved by the year 2003 if such a policy were fol- lowed. Meanwhile, with 3% growth in government revenue and recurrent spending, the share of pensions in

such spending would be limited to some S.2%, including a constant allowance for administrative costs.lx This would be similar to present levels, and, on moderately optimistic revenue assumptions, financially sustainable. The period concerned would see natural attrition to the numbers receiving the higher ‘inherited’ state pension levels, and could also be used to promote the development of contributory schemes for higher-income and formally employed citizens as a future supplement to the basic state pension. Polictical pressure may be

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‘A universal pensions system in Botswana would be administratively feasible’

“Government of Botswana, Household Income and Expenditure Survey 1985186, Central Statistics Office, Gaborone, 1988. 20Calculated from Government of Bots- wana, Statistical Bulletin, Vol 14, No 4, Central Statistics Office, Gaborone, 1989; and Government of Botswana, ‘National Development Plan 7’, draft, mimeo, Minis- try of Finance and Development Planning, Gaborone, 1991.

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substantial, however, for nominal equalization at an earlier date. There will therefore be a fairly direct trade- off between the pace of equalization and the budgetary burden during the equalization process.

The broadly similar macroeconomic conditions of Botswana, and its excep- tionally strong budgetary position over the last decade, based on dia- mond export earnings, raise the ques- tion of whether a universal pensions system would also be feasible in a second Southern African country. Although household poverty may be somewhat less severe in Botswana at the lower levels, conditions analagous to Namibia of widespread low incomes, with considerable reliance among poorer households on casual or seasonal employment, high-risk crop production and receipt of remittances were confirmed by the 1985/86 national Household Income and Expendi- ture Survey.‘” Absolute destitution in Botswana, though relatively rare, appears from local council registra- tions to be increasing in scale.

The adoption of a universal pensions system in Botswana would be administratively feasible, given its reasonably efficient local government structure (already used to making widespread cash payments in some years to drought relief project workers), and would also be consistent with its government’s broad and long-held policy objectives of social justice and providing universal access to basic services and welfare.

With some 62 000 citizens aged 60 or above in 1991, and supposing a 75% basic pension coverage at the present minimum levels of Namibia (equivalent to about Pula 70 per month), the annual cost of such a system to Botswana, at about Pula 45 million (including administrative costs), would represent only 1.3% of estimated state revenue in 1990/91, net of development grants. This amount would represent some 2.7% of estimated 1990/91 Botswana central government recurrent spending, or about half the present proportion of such spending allocated to pensions in Namibia.“’

Conclusions

Although the calculations made above are partly illustrative, they suggest a need for caution regarding the affordability of universal pensions as a safety-net mechanism for all but a few African countries, particularly in comparison to transfer schemes based on food aid. Additionally, the administrative difficulties in achieving wide pension coverage would be considerable for many countries. However, in the case of Namibia, a relatively wealthy country with much of its population living at low income levels in a semi-desert environment, the pension system plays an important role in enhancing food security, providing basic income support and possibly averting starvation among the most economically marginalized. The welfare justi- fications for pensions-related expenditure, and for selected additional outlays in times of climatic or other stress, are therefore strong. The questions of affordability in Namibia relate to the pace of extension towards universality and equity, and to longer-run sustainable levels of payment, rather than to the system’s existence. Issues of administration and delivery in Namibia do not pose a major constraint.

The contribution of pension payments to an emerging national strategy for alleviating long-run poverty and reducing income disparities in Namibia’s post-independence era is also likely to be significant. The links between pensions and other probable elements of such a strategy (such as rural, small-scale agricultural and in- formal sector development, as well as other direct welfare measures) remain to be explored. As suggested by the comparison with recent income transfer and stabilization measures in Bots- wana, considerable scope for mutual reinforcement and complementarity appears to exist between various options for state intervention, in both a programmatic and administrative sense. In countries such as these, the relative health of public finances would permit a combination of inter- nally funded cash and externally assisted commodity transfers to different beneficiary groups under a general poverty reduction strategy. whilst


I I vIlEwl’oINT the persistence of poverty and the high risks to basic incomes posed by the environment provide a strong welfare justification.

In this context the present importance for the welfare and food security of many absolutely poor Namibian families of state pensions, and of income transfer programmes overall,


may only begin to diminish once measures to raise the income-earning capacity and employment access of such families on a sustained basis are effectively in place. Given the nature of the country’s resource base and the likely path of economic growth, this dilemma is not likely rapidly to be resolved.

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State pensions as an income safety net in Namibia

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