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AfricanPension FundConference
Anne Cabot-AlletzhauserHead of the Alexander Forbes Research Institute
BenefitsALL Barometer Africais the thought leadership publication of the Alexander Forbes Research Institute
This publication challenges employers,fiduciaries, policymakers and financialservices providers to help address thewell-being needs of South Africans.
We invite our readers to discuss and debate issues on this crowdsourcing platform in our quest to develop and implement sustainable solutions
INTRODUCING
BenefitsALL Barometer Africa ISSUE1
Why do we need yet another series of articles on Africa?
Over the past few years there have been a spate of books and research pieces on Africa. For the most part, these studies tend to occupy one of two camps:
But a critical element is missing in all this analysis. Extracting the true economic potential of Africa will demand an altogether different strategy. It will no longer be a question of whether the policymakers get it right. Nor will it be a question of whether corporates can play their strategic hands more adeptly. Rather, unlocking future value will depend on a true collaborative effort between business, government, communities and the people who inhabit this continent.
They focus on the economic prospects for Africa’s future. Examples are annual publications from the Brookings Institution, the World Bank and the African Development Bank.
They serve to advise corporates and multinationals on how best to succeed in their African-based businesses. Examples are McKinsey’s Africa’s Business Revolution – How to Succeed in the World’s Next Big Growth Market, and the Unilever/UCT project, African Lions, which assesses African consumerism andthe nature of the African middle class.
12
How did it all get so complicated?
If we’re going to effectively tackle the problem
We need to vastly simplify the discussion
We need to make the discussion relevant to emerging economies
We need to make the discussion relevant to Africa
Most importantly:We need to understand the
objectives/agendas/conflicts of the different players
The Ultimate PPP Partnership Model
PublicSector Private Sector
PeoplePersonnelPersonal
Inherited systems,Reform needs,
Enabling environment
The ChallengeHow to cope with: Competing objectives Competing agendas Competing “hot points”
The bottom line:
Getting it right isn’t about compromising to address immediate political/economic demands of each party
Getting is right is about not-compromising the futures of multiple generations of a nation.
The Ultimate PPP Partnership Model
What’s everyone’s requirement – their objectives?
Public Sector• Govt needs to provide basic social protections:•Old age, child and unemployment income
• Health/Education/ Housing
• Infrastructure
Private Sector•Employer/employee compact
•Employee wellness = greater productivity
People•Security:
•Income :•Loss of job•Disability/Death •Post-retirement
•Health• General Well-being• Family
What’s everyone’s requirement – their agendas?
Public Sector•Political legitimacy•Redistribution or wealth
•Develop capital markets
•Greater global legitimacy
•Target investing to “national” interests
Private Sector•Whatever is provided must make economic sense
•Minimise financial burden on company
People•As a citizen/ employee, this is my right•The financial dependency of a family/extended family/ village/etc.
What’s everyone’s requirement – their constraints?
Public Sector•Fiscal demands•Limited skills in:
• Administration• Good governance• Finance
•Limited regulatory framework
• Limited capital markets
Private Sector•Weak or non-existent human capital development skills
•Not core business•Financial constraints
People•Financial literacy –even literacy
• Immediate needs take precedence over the end game or even the financial journey
TRUST?
How are members doing with their compulsory savings?
Basically…. The system doesn’t work the way it was intended
Let’s look at the facts when preservation isn’t compulsory
Less than 10% preserve when changing jobs
Less than 5% of members > 75% replacement ratio
People don’t see retirement as their priority – mortality reality
Trust is low: in financial services; in government
Employer as locus for well-being. –but our industry will need overhaul:• Financial journey
includes debt• Financial coaches not
advisers• Product that incorporate
financial education• Solve for engagement,
funding, compensation
Pension reform shifts focus away from the employer/employee need Need to solve for the journey
The system is too fragmented to deliver on the promise of physical, mental and financial well-being
Get stakeholders back to the table to create integrated solution
Fourth Industrial Revolution has now changed the game. Retirement/employer concepts changedNeed to put “employee” back into “benefits”
Critical building blocks:• HR Data analytics• Customised benefits• Well-being programme• Skills development
Benefits Barometer brought fresh new insights for South Africa
Our research
quest
How effectively is the current model of employee benefits addressing member needs? Who does it really benefit?What would we need to do to get better outcomes?
2013 - 2017
Our insights Should compulsory savings only solve for retirement in a developing economy? Social mobility not just social protection – the power of the Singapore model to teach fiscal responsibility and address basic needs:• Emergency savings• Housing• Education• Health
Developed economy assumptions Developing economy reality
FAMILY
Daughter’s child
Wife’s parents FAMILY
School-going brother
College-aged child
Child of divorced sister Matric-aged
child
Lens of responsibility
There is no such thing as “average” or “median” in Africa
African nations rank the highest on the diversity index This suggests the “conventional models” simply do not apply effectively
Demographic profile
The challenge for the future will be:• Less about planning for retirement• More about planning for life
The answer:• Translating our compulsory savings
programmes into:“A Guided Financial Planning Framework”for individuals
12 themes for Africa
The context for our on-going Benefits ALL Barometer AfricaNarrative
Understanding these issues can vastly improve the dynamics of the public/private partnership around employeebenefits
Theme 1: Africa’s Youth Bulge – Dividend or Demerit?
Theme 2. How is Africa’s human capital development faring?
World Score= 65 Education score and youth population (2008-2027)Average education scores have been declining since 2013 and have not kept up with youth population growth
Human capital optimization in Africa
Finding solutions for healthcare –an important starting point• Demographics• Productivity
Can African workers compete globally?
Africa and the challenge of the Fourth Industrial Revolution
Africa’s capacity to adapt and exposure to the future of jobs
Theme 3: Rapid growth prospects – but for whom?
Source: IMF, RMB Global Markets
Cape Verde
> 7% growth
2%-4% growth
4%-7% growth
< 2% growth
Togo
GuineaGambia
Lesotho
Botswana
NamibiaMauritius
RwandaSao Tome and Principe
GhanaCôte d’Ivoire
Burkina Faso
Tunisia
Zambia
Liberia
Morocco
Benin
Gabon
Niger
Algeria Egypt
Ethiopia
Mali
Tanzania
Sierra Leone
Angola
Eritrea
Guinea-Bissau
Libya
Sudan
Somalia
Djibouti
Equatorial Guinea
Seychelles
Democratic Republic of
Congo
KenyaUganda
Mozambique
Madagascar
Cameroon
Nigeria
Chad
Central Africa Republic
Zimbabwe
South Sudan
Burundi
Mauritania
Comoros
Malawi
Senegal
South Africa
Congo
Swaziland
Libya, Ethiopia, Ivory Coast and Mozambique are expected to experience the highest growth rates
Namibia, Botswana and Zambia likely to grow in line with the rest of the continent at 4%-7%
Regions like Nigeria and Zimbabwe will see little to no growth
Africa growth prospects fragmented, with little regional/continental trends evident
Forecasted GDP growth pa (2017-2022)
Africa’s most important graph
The 2017 Ibrahim Report on African Governance identifies perhaps the greatest challenge to economic growth: the fact that African governments have failed to produce environments that enable their citizens to pursue economic goals and provide the opportunity to prosper.
Africa: Sustainable Economic Opportunity average trend and percent increase in GDP (2008-2017)
“While in 2017 the range between the highest (Mauritius) and lowest (Somalia) governance scores is the smallest it has been in ten years, increasing divergence appears between country scores.
In the earlier years of the last decade, countries were concentrated around the African average score, but over the last ten years have dispersed. Within the last three years, 18 countries displayed their worst Overall Governance performance in a decade, and 28 achieved their best in the same period, highlighting the diverging trends on the continent.”
Theme 4: How will political will play out on the continent?Fulfilling Africa’s ambitions will demand different insights about growth and what is required?
Barriers to economic growth
Why inclusive growth is critical to sustainable economic growth
Inclusive development performance and interpersonal trust
Theme 5:Who controls our growth and how?
Managing the impact and influence of foreign direct investment and the influence of multinationals
Which constitutes a better answer for growth?
Selected African SME’s contributions to employment and GDP
Theme 6: A different growth potential for Africa – an integrated Africa
Africa trade and economic organisations
Theme 7: Could technology lead Africa through a different development path?
Theme 8: Migrationand skills
Main Intra-African migration corridors, stocks in 2017
Theme 9: Rapid Urbanization
Theme 10:How the future of finance in Africa will demand a new model
Using retirement savings to simply put money in people’s pockets won’t be enough
In summary:
Employers will have to play a critical role as the catalyst for
change
Lessons we have been learningPutting the “benefit to employees” into employee benefits:
• Transforming compulsory savings into a guided financial planning framework
• Skills development and lifetime learning = tangible lifetime benefits = making African workers globally competitive
• Solving for employee well-being for themselves and their lens of responsibility • Healthcare• Low cost Funding solutions • Portability to where the jobs are
• The workplace as a catalyst for social inclusion and social cohesion
This will mean being able to demonstrate:
o to employers how this improves their bottom line
o to regulators – how this addresses financial capability and social protection
THANK YOU