By Staff reporter

A social welfare problem is looming if the Zimbabwe government does not quickly move to ‘formalise’ the informal economy or draft policies that ensure that those in the informal economy have some form of financial security when they are too old to work.

Data in the Insurance and pensions Commission quarterly report of June 2014 shows that total fund membership fell from 337 000 reported in the same period last year to 295 000 mainly due to some funds failing to submit their returns and exits. Exits grew by 36% from 2 000 to 3 000.
For the current reporting period, employer contributions amounted to $29 million or 13% of total contributions (June 2013:12%or $18 million) whilst member contributions were $19 million or 8% compared to $23 million or 15% in June last year. $172 million or 79% of total contributions were in arrears (June 2013:74%or $114 million).

Pension contributions have been going down as company closures intensify owing to the negative economic environment. Most companies are experiencing serious liquidity problems. In his budget statement Finance Minister Patrick Chinamasa said that companies had closed down leading job losses.
Most people who are losing their jobs are resorting to eking a living in the informal sector where they become vendors or take other low paying occupations. It is reported that the informal economy employs more than 5, 7 million people and an estimated 7 billion is believed to be flowing in the informal economy.

However none of this money is being taxed by the government. Those counted as employed in the informal sector are not making any contributions to the National Social Security Authority (NSSA) or to any privately administered pension funds.

Gift Soko sells airtime at the traffic lights on 7th street and Samora Machel and he says he makes $30 a day. However he has no medical aid and does not save anything for his pension insurance. He does not think it is necessary and is happy to live each day as it comes.
Thousands of vendors and other informal sector workers who ply their trade in different parts of the city are also in the same predicament. They face a bleak future.

This means that many Zimbabweans will be left vulnerable in the future with no disposable income to use in their old age. The pensions authority is unable to collect from those in the informal sector as the majority of them are not considered as gainfully employed.

Tafadzwa Chiganga an actuarial scientist based in Italy said many citizens in the country were living in 20-45 age bracket and they will not be able to keep on working in the next 20 years due to old age.

‘Pension contributions are also a source of long term savings that can be used for big projects that develop the economy. ‘We do not even need to wait 20 years to see the effects of a dysfunctional pension system. In the next 10 years we may see extreme poverty in the adults, the old and new graduates fighting for few jobs.’ she said

‘A poor adult population means the working class will have a bigger economic burden because all of the government’s expenses will have to be paid for by the taxes collected from the small working class only ‘she added

Government set up NSSA in 1994 as a social security measure to protect employees and their families but 20 years later the economy has shifted and government has done nothing to cover its citizens from the current reality.
But the current situation means that the Zimbabwe government is sitting on a time bomb as it will lead to massive social insecurity and poverty in the future.

‘This government is creating problems for future generations who will have to deal with this man made poverty caused by a government that is obsessed by staying in power at the expense of the economy’ said Gogo Mutasa who lost her pension savings when the Zimbabwe dollar was scrapped away.
‘It is the role of governments to ensure that citizens have social security especially when they become vulnerable but this government goes on as if there is no problem’ she added.

Dr Pedzisai Ruhanya, a political analyst refused to blame government alone for the looming crisis. “Businesses are closing down in Zimbabwe and this affects government’s ability to provide social services. Those in the informal sector must play their part by paying taxes and making pension contributions. On the other hand government must lead by creating an environment that allows entrepreneurship to flourish’ he said
Government must implement necessary policy interventions to ensure that the burden of fighting poverty is not placed on future generations.
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