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Saturday, 18 April 2015

Changing the Retiriment Age in Zambia

Editor's note: This is a guest post by Henry Kyambalesa, a resident contributor to Zambian Economist. He is a Zambian academic currently residing in Colorado, USA. The article makes some observations on the changes to the retirment age.
In November 2014, Acting President Guy L. Scott signed Statutory Instrument No. 63 of 2014 that raised the retirement age from 55 to 65 years, or 35 years of service.

In December 2014, the Minister of Labor and Social Security is quoted by Doreen Nawa of the Zambia Daily Mail as having defended the change in the country’s retirement age as follows: “We adjusted the retirement age as a way of increasing people’s life span. Information has shown that most people that have retired at 55 have died earlier because of many factors.”

The Minister is also quoted as having said that retirement age in the southern African region and beyond is 60 years.

In March 2015, President Edgar C. Lungu directed that changes be effected through an amendment to Statutory Instrument No.63 of 2014 signed by Acting President Scott to introduce a graduated arrangement designed to provide for the following three retirement options:

(a) Early retirement – 55 years;
(b) Normal retirement – 60 years; and
(c) Late retirement – 65 years.

These changes to the retirement age are unacceptable for a number of reasons. Firstly, the changes needed to be made in sincere consultations with relevant non-governmental stakeholders—including the Zambia Federation of Employers and the Zambia Congress of Trade Unions and its affiliate labor unions—rather than by presidential decree.

Secondly, it is unrealistic to have retirement options that are above our people’s life expectancy that is currently between 48 and 56 years, depending on one’s source of information, which places the country in the 160th position out of 182 countries surveyed by Country Economy.

According to the findings of an international health study published online in the Lancet (a medical journal) in May 2010, Zambia had the worst female death rate and the second-worst male death rate in the world. So, there is no wisdom in mimicking countries whose citizens have higher life spans in setting the retirement age for employees in our country!

Therefore, realistic retirement options for Zambian employees should have been the following:

(a) 45 years old, or 25 years of service – early retirement;
(b) 50 years old, or 30 years of service – normal retirement; and
(c) 55 years old, or 35 years of service – late retirement.

There is also a need for Parliament to enact legislation designed to make retirement benefits payable within 60 or so days (Saturdays, Sundays, and public holidays inclusive) from a retiree’s last date of work. Benefits (or any portion thereof) not paid within this period should fetch 5% interest per month.

Delayed payment of retirement benefits has made some retired citizens to re-enter the job market as part-time workers to earn a living while they await the disbursement of their benefits, while others have died before they are paid their benefits.

In this regard, there is a need for the National Pension Scheme Authority (NAPSA) to find viable ways and means of reducing marketing, public relations and administrative costs, and to seek low-cost suppliers of machinery, equipment, sub-contracted services, office fixtures and supplies, and so forth.

The Authority’s management needs to do so in order to save financial resources for meeting some of its obligations to pensioners. Does it, for example, make sense for the Authority to maintain a soccer team?

And if it is true (as reported in the Zambia Weekly of February 20, 2015) that the Zambian government owed NAPSA a total of K2.6 billion in unpaid remittances (K239.4 million) and penalties (K2.3 billion) as at September 30, 2014, then the government is partly to blame for the Authority’s failure to honor its obligations to pensioners in a timely manner.

Thirdly, the high levels of unemployment in the country militate against the increase in the retirement age. There is no doubt that the higher retirement age is going to lead to unprecedented numbers of young job seekers roaming the streets due to inadequate job openings mainly resulting from older citizens’ delayed retirement.

Moreover, retirement would make sense when pensioners still have some energy left in them, especially if benefits are paid in ‘lump-sum’ rather than in monthly instalments so that the pensioners can invest portions of their benefits in starting and operating small and medium-sized enterprises (SMEs).

As the United Nations has maintained, a growing body of empirical evidence supports the widely held view that SMEs are instrumental to economic development; they are important for the following specific reasons, among others:

(a) They can create employment opportunities for talented citizens and family members who cannot find jobs in large business establishments;

(b) They can collectively func tion as a vehicle through which the government can economically empower the people by enabling them to participate actively and directly in their country’s commercial and industrial activities;

(c) They can facilitate the generation of wealth for all sectors of our country’s economy and thereby reduce existing income disparities;

(d) They can function as the backbone of our country’s economy because they would be both indigenous and permanent, as Andrew Sardanis has maintained; and

(e) They can participate in elevating their host communities’ social and economic welfare through the provision of various kinds of needed goods and services.


Henry Kyambalesa
Academic | Guest Author

1 comment:

  1. As far as I know, life expectancy is generally based on expectancy at birth. We know that once children live past, first infancy and secondly the age of 5, their life expectancy increases. I don't know if such data are available for Zambia or how much life expectancy is at various milestones. Since men and women enter the job market in the mid to late teens (or in their twenties if they continue to tertiary education) I would imagine a higher retirement age would make sense based on adjusted expectancies.


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