Countries across Africa are at different stages of creating comprehensive and inclusive social security systems. Although some are further along this journey than others, most have introduced some form of arrangement for pension provision or have social security as a strategic goal.
Similar to global trends, the vast majority of retirement income in Africa is funded by governments, derived from taxes or other forms of government revenue (essentially a pay-as-you-go system or PAYG). With a large proportion of formal sector workers concentrated in the civil service, pension funds for public sector workers are well established and benefits are often more substantial compared to the private sector. Defined Benefit (DB) schemes dominate across the continent although regional differences are notable. While DB schemes are common in many Francophone West African countries, the Maghreb region as well as Egypt & Sudan, Defined Contribution (DC) schemes (often provident schemes) are prevalent in English-speaking parts of Africa, especially sub-Saharan Africa (Stewart and Yermo, OECD paper).
Coverage on the continent however, is much lower compared to the rest of the world. Data from the International Labour Office’s 2014/15 World Social Protection Report estimates that currently only 16.9% of older people in sub-Saharan Africa receive an old age pension. Although this number is higher in North Africa at 36.7%, it is still considerably lower than much of the developed world (90% in North America and Europe). A recent report on the pension sector in the East African Community estimates that between 80-90% of the population is not reached via public or private pension fund schemes.
In part, this is due to the unique circumstances in Africa including demographics (young population), a large informal employment sector, migration with limited pension portability, and dependency on government finances. The pace of regulatory reform has also led to divergent coverage trends between countries and regions.
To meet this challenge, Africa has been on a journey to design, finance and deliver social security to the continent. Many countries have transitioned in line with the multi-pillar model proposed by the World Bank in their 2005 report and subsequent refinements. While each country has forged its own distinctive path, two main areas of focus have emerged. The first is the introduction of a basic safety net or non-contributory pension for those who have no other income. Pension systems provide a way of securing long-term savings but also an indirect way to alleviate poverty, which affects many on the continent. A number of African countries including South Africa, Namibia, Mauritius and Lesotho have used non-contributory universal pensions as a foundation for broad social security coverage. Many pensioners spend their pension income on books, school fees and health care for grandchildren. Research suggests transmission via a basic retirement income has the ability to significantly alleviate poverty and directly impact socioeconomic factors.
The second trend has been a move from unfunded to funded solutions, and DB to DC schemes, albeit at slower pace than in developed countries. This is a broad reflection of the increased pressure on government budgets, and the unsustainable fiscal burden that PAYG pension systems create.
African economies have made great strides to shape their social security systems. Importantly, the continent has been building institutions that account for African priorities and their unique challenges. Regulators have looked beyond the developed world experience to regions such as Latin America and Eastern Europe for their learnings. Nigeria for example was the first on the continent to explore the Chilean-style individual-funded accounts and also cites Mexico as a country they examined as part of their reform journey. Extending and ensuring an adequate level of social security remains a continually evolving process as governments and regulators across the world adapt to changes in the environment and financial markets, no less so in Africa.
 The World Bank proposed a conceptual frame work for pensions in their 2005 report, Old Age Income Support in the 21st Century: An International Perspective on Pension Systems and Reform. This note has seen subsequent refinements.
 For example, research shows that 60 per cent of the monthly pension received by persons aged 70 or older in Lesotho is redirected consistently to children. Evidence also suggests that this mechanism has halved Lesotho’s hunger rate (Croome and Mapetla, 2007)