The Economic and Social Impacts of the Old Age Pension on the Protection of the Basotho Elderly and

their Households.
Paper presented at the Charlotte Maxeke Conference on the Economics of Social Protection 12th 15th June 2007, Ivory Tree Lodge, Pilansberg, South Africa

Professor A.C. Nyanguru, Department of Sociology, Social Anthropology and Social Work, National University of Lesotho, Roma 180 Lesotho

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Acknowledgements

The author acknowledges the resources made available by the Institute of Southern African Studies of the National University of Lesotho, the Research and Conferences Committee of the University, HelpAge International, London, United Kingdom and the Southern African Regional Hunger Vulnerability Project that have supported the research on which this paper is based. These sponsors have also graciously allowed him to share with participants at the conference on the Economics of Social Protection the results of this work in progress. All views, errors and omissions remain exclusively those of the author. As this is work in progress the results should only be used after contacting the author. David Croome, Honorary Research Fellow, Institute of Southern African Studies and Volunteer Extension Educator, Institute of Extra-Mural Studies, National University of Lesotho has made a substantial contribution to this paper in his capacity as convener of the NUL ISAS Lesotho Pensions Impact Group.

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LIST OF CONTENTS Section One Introduction : The role of the Old Age pension as an instrument of economic and social protection. Section Two Section Three Social Protection and the Elderly The Creation and Implementation of the Old Age Pension in Lesotho Who are the Pensioners ? The Social Impacts of the Pension The Economic Situation of the Pension recipients

Page

4 9 14

Section Four Section Five Section Six

18 20 26 28 32

Section Seven The Old Age Pension and Nutritional Security. Section Eight Conclusions

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The Economic and Social Impacts of the Old Age Pension on the Protection of the Basotho Elderly and their Households.
Section One Introduction : The role of the Old Age pension as an instrument of economic and social protection.
1.1 The purpose of this paper is to present the preliminary findings from survey research done between 2005 and 2007 of how the availability of a universal old age pension since November 2004 has affected the economic and social well-being of its elderly recipient in Lesotho. 1.2 A survey undertaken by Nyanguru (Nyanguru, Croome and Pelham 2005).in June 2005 acted as a 'scoping study for more extensive questionnaire-based research in April 2006 and April 2007 conducted by the Lesotho Pensions Impact Group This is a multi-disciplinary research consortium including twelve of the Departments and Institutes of the University1 (LPIG 2006, LPIG 2007). The Institute of Southern African Studies, the research arm of the National University of Lesotho, manages the Group. Papers from the discipline groups will be presented at a conference planned for August 2007. By the end of 2007 ISAS will to publish a research symposium with chapter based on the conference papers. The econometric study to be presented to the conference by a team from the NUL Department of Economics is a component of this research programme. 1.3 Resources for the 2005 survey were provided by Save the Children (UK), HelpAge International and other international donors seeking evidence of the initial impact pf the newly introduced old age pension on the well being of

Departments of: Sociology, Social Work, Business Administration, Development Studies, Economics, Health Sciences, Politics and Administrative Studies, Geography, Demography and Statistics. Institutes of Education, Extra-Mural Studies, Southern African Studies.

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children in the pensioners households 2. HelpAge and the NULs Research and Conferences Committee then funded a questionnaire based investigation of the impact of a sample of 250 pension recipients in the north central foothills area of the Roma Valley. This surrounds the NUL main campus in the Roma Valley (the Manonyane survey) (LPIG 2006). The survey took place in April 2006. The preliminary results are available from HelpAge International3. The third survey was carried out in April 2007 shortly before the NUL received the invitation to submit papers for the Charlotte Maxeke conference on the Economics of Social Protection. 1.4 This survey (the White Hill survey) had been undertaken in response to a request from the Regional Evidence Building Agenda of the Regional Hunger Vulnerabiity Programme (RHVP-REBA). Lesotho is a member of the RHVP Network and was allocated a number of studies related to Hunger Vulnerability in Lesotho. These have included case studies of the role of Burial Societies, the provision of free lunches for primary school children, and the impact of the old age pension. Desk studies were done on the general topics of asset protection and asset building and on the causes and effects of Hunger Vulnerability in Lesotho. We are grateful to the various organisations that have funded the work of the Pensions Impact group and to all our colleagues in the LPIG for allowing us to respond to the invitation from the organizers of the Charlotte Maxeke conference to talk about how the work we have in progress may contribute to the themes of the Pilansburg meeting. 1.4 This paper concentrates on the third survey that was funded by the RHVPREBA and administered in the White Hill area in the southern mountain District of Qachas Nek.(LPIG 2007). The analysis of the responses to a questionnaire administered to a sample of 150 pensioners in White Hill is hot off the press.
The research findings were used in the Making Cash Count study of cash transfers in four African countries (Ethiopia, Zambia, Mozambique and Lesotho (Save the Children 2006). The Lesotho country report can be obtained at 3 hai@helpage.org
2

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The research instrument used was based on the April 2006 document used in the Roma Valley. The questions were adapted to gather more about the role of the pension in terms of reducing hunger vulnerability. As well as being the main concern of the RHVP-REBA sponsors, this topic is currently generating increased attention in Lesotho because it is likely there will be substantial food shortages during winter 2007, especially of the staple commodity, maize. The possibility of famine conditions returning is due to the relative failure of the harvest in Lesotho, with more serious implications for the subsistence farmers and, more importantly, the partial failure of maize producing areas of South Africa especially the Free State which regularly produces and exports to Lesotho about 70% of the maize bought in the Lesotho market.4 The prospect of greatly increased food vulnerability in terms of poor supply conditions has increased interest amongst the food donor agencies as to what role the pension may play as an instrument to protect individuals, households and communities from the worst effects. 1.5 This conference paper will take a general view of social protection as it relates to the elderly. It will discuss this in terms of the situation of the elderly in developing countries and in Lesotho and the Pension Impact study areas n particular. Some of the social and economic trends affecting he elderly in Lesotho are illustrated. The paper then describes the decision to introduce the old age pension as an instrument of poverty mitigation and social protection for the elderly citizens of Lesotho. It summarizes the procedures for selecting the recipients and for delivering the pension cash, currently M 200 a month, to them efficiently and effectively. The perception of the processes by the pensioner clients reported in the surveys is noted.

The supply situation s likely to be exacerbated by the shift world-wide into using maize as the base for ethanol production, which has seriously reduced the capacity of farmers in areas such as the U.S. mid-West to make their usual grain surplus available for export, even though land planted for maize in 2007 was the highest area since 1948. Forward maize prices have risen from Rand 100 to R 600 a tonne. In Lesotho shop prices for maize have doubled since November 2006 and are set to go up my at least another 30% by August 2007. .

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1.6

The paper goes on to describe some of the social effects of the pension, especially how it has impacted the relations between the pensioner and her or his household including dependent children and adults for whom the household is caring often because of HIV and AIDS infection. The effects on consumption patters, especially access to food are discussed. Short accounts are provided of the impact on the health of the pensioner and household and the pensioners habits (drinking, smoking and putting money in the church collection plate.

1.7

Three main economic aspects have been investigated in the surveys. These are: i) The aggregate effects of poverty. How far does the pension transfer take individuals and households out of poverty, however this is defined. This question is answered by the conference paper from the NUL Economics Group and will not be dealt with further in this paper. ii) The consumption expenditure effects, including the

expenditures on health and education, but concentrating on the impact of food expenditure and hunger vulnerability. iii) Investment and asset building effects including the use of the pension as an instrument for economic development or, more precisely, the seemingly non-use amongst the pensioners in the areas we have studied. 1.8 The paper will argue that, while the old age pension in Lesotho is generally seen by its recipients as inadequate for its stated objective of reducing the poverty of the pensioners as individuals in one of the most income vulnerable groups in Lesotho, it is in fact reasonably adequate for this purpose at its present level and system of allocation. The judgment of its inadequacy reflects the fact that the recipients do not see it as something that should be directed Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 8 of 35

only to their own personal direct well-being but, as might have been expected in the cultural milieu of Lesotho, an instrument to take the household out of poverty. In terms of providing a social protection instrument against hunger vulnerability in normal, non-famine situations the pension at its present level may be enough to protect up to a quarter of the Basotho from hunger and will make an important contribution to mitigate many of the effects of the impending food crisis. .

Section Two
2.1

Social Protection and the Elderly

Today, 365 million people over 60 live in developing countries. By 2050 the figures will be 1500 million (Gorman, 2004). According to Petersen (2000:4) and Nyanguru (2003:56) older people are the fastest growing population group. By 2050, one in five persons will be over 60 and for the first time in history, people in this age group will out number children. This is especially apparent in developing countries. Juggessur (2000) and Nyanguru (2005a) observe that the number of older people is growing rapidly in Africa. A demographic age quake is being experienced - a global transition from high birth and death rates to low fertility and delayed mortality for the elderly. The effects of HIV and AIDS, leading to high mortality in the 15 49 age group, are exacerbating the shift and leaving countries like Lesotho with a declining total population within which the proportions of the very young and the elderly are increasing. The dependency ratio, showing the numbers outside the economically active age groups compared with those in the age group that is most likely to be available for the labour force, is rising. The developing world faces the harsh reality that it is growing old before it is rich, with potentially traumatic consequences for older people, their families and societies.

2.2

Older people and especially older women in the developing world are often over represented in the population groups living in extreme and chronic

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poverty. Those over 70 face greater poverty than any other age group and those over 80, who are predominantly female, are at even greatest risk of chronic poverty. Comparisons between households show that, almost without exception, the poverty rates in households with older people are up to a third higher than in households without. In a recent World Bank study in 15 African countries, Kakwana, and Sabbarao (2005) found that in several countries the poverty level and especially the poverty gap ratio for households consisting of older people only, those with only older people and young children and those headed by older people is much higher than the average for the whole population and the differences are statistically significant. The World Bank study showed that the poverty gap ratio for various household types in which the elderly are living is 6 to 12 percentage points higher than the national average. Likewise, in 11 of the 15 countries studied the poverty gap ratio among older people-headed households is higher than the average. But the greatest household poverty differences were not always related to the presence of the elderly. The World Bank study found, for example, that in Mozambique and Nigeria the presence of young children created a much worse poverty situation than the effect of having an older people in the household.(see also HAI 2005 Section 1.2) 2.3 The availability of a non-contributory universal old age pension paid at a rate that allows basic living needs to be met forms with the availability of an occupational pension and supplementary pensions created from personal savings the three pillars seen by the World Bank as necessary for an effective, comprehensive pension system to provide the resources necessary for the elderly to continue to maintain an appropriate life style. (World Bank 2004) The old age pension is also seen as a vital component of the social protection policies required for the functioning of the moral state. 2.4 The United Nations Principles on Older Persons acknowledge five rights for the elderly or older persons. These are the rights to independence, care, selfNyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 10 of 35

fulfillment, dignity and participation.

The principle of independence

recognizes the wish of older people to be independent as far as possible. It is closely linked to ensuring that they have, under their own control, access to basic material needs of food, shelter, health care etc. These rights together with over 100 recommendations in an accompanying Action Plan to ensure they are met, were confirmed by the 2002 Madrid Conference. Although Lesotho does not appear amongst the delegates to the Madrid Assembly it has been presumed that the Kingdom accepts its conclusions (United Nation 2002) 2.5 Social Protection issues underlie the commitments made by the Government of Lesotho and expressed in three important documents produced in the first years of the new century. These are Lesothos National Vision 2020, the adoption of the requirements to meet the United Nations Millennium Goals by 2015 and the Poverty Reduction Policy Statements. All these make the elimination of poverty their centre-piece, recognizing that until the high levels of poverty affecting as much as two-thirds of the Basotho are reduced, specific targets in the areas of education for all, adequate universal basic health provision, and the improvement of the physical environment would not be sufficient to meet the goals of the Nation.. 2.6 The introduction of he old age pension in the April 2004 Financial Statement (GOL 2007) was specifically targeted at taking old people out of poverty. This was expected to be a significant step to realizing the Millennium Goal of halving the number of Basotho in a situation of chronic poverty, It would also provide part of the foundation against which the National Vision would be achieved and reflect the requirement in the Poverty Reduction Strategy that vulnerable groups would be protected from poverty reducing policies that had a discriminatory effect on some section of the population particularly susceptible to the extremes of poverty.

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. 2.7

In 2004 Lesotho was already classified as a Low Human Development country by the United Nations Development Programme. In the UNDP Human Development Report 2005 it was ranked 142nd of the 191 countries in the UNDP Human Development Index and 91st of the 103 developing countries surveyed in the UNDP Poverty Index. Income inequality in Lesotho is amongst the highest in the world.(UNDP 2005 Tables 1 and 3)

2.8

The pension was introduced in an economic environment in which three factors appeared likely to worsen the poverty status of pensioners. The Economist Intelligence Unit 2007 Country Report on Lesotho is a valuable summary of the current political and economic situation in Lesotho including the effects of the 2007 General Election (EIU 2007). It describes three major economic threats facing Lesotho. These are : The continuing contraction of the job opportunities for Basotho men in the South African mining industries. The potential reversal of the growth of incomes and employment, mainly for women workers, from the rapid expansion of the textile manufacturing industry under the stimulus of the African Growth and Opportunities Act and The increasing and cumulative effects on household poverty from the continuing high level of HIV infection and consequent development of AIDS.

2.9

The reduction in opportunities from mining work in South Africa has had its main effect on reducing the numbers of individual households across the country, and particularly those in rural areas, that include a household member in a position to send a regular remittance of pay back to his familiy in Lesotho. Even though the total value of the remittances has not gone down at the same rate as migrant employment numbers and households that still contain a miner have benefited from this, the numbers of households that do not have this

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source of income, including those containing and elderly person, has fallen rapidly. 2.10 From the late 1990s, there was some replacement of the income from remittances as employment rose rapidly in the textile manufacturing industry. This industry expanded under the influence of the African Growth Opportunities Act (AGOA) that allowed goods manufactured in Lesotho tariff free access to North American markets. The Government of Lesotho encouraged expatriate entrepreneurs to take advantage of this concession and locate in the new, subsidised and inexpensive factories provided on the industrial estates. Even more important than this the textile manufacturers benefited from the large local supply of very low cost female labour and Lesothos position of not being covered by the production quotas previously agreed through the World Trade Organisation. To a limited extent the jobs and incomes lost by the miners were replaced by the incomes earned by the women in the textile factories. As much as 50% of the aggregate incomes earned by the workers were remitted to their home villages to provide household income and to care for groups outside the labour force such as children and the elderly. 2.11 At its peak the industry, which is almost entirely owned by Chinese entrepreneurs, employed about 60,000 people. This situation was disrupted after January 2005 by the ending of the WTO Multi Fibre agreement what allowed other low cost countries such as Bangladesh and, most importantly, China to export manufactured textiles without a quota restriction. Almost immediately some of the existing marginal producers in Lesotho closed. Up to 20 000 jobs have already been lost. The Government of Lesotho now claims that the employment situation has stabilized and AGOA arrangements continue to give Lesotho an advantage in US markets. But unit production costs are relatively high because of low productivity. The income generating ability of the textile industry, as in almost all manufacturing in Lesotho remains uncertain and another income stream for poor families throughout Lesotho may be lost. Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 13 of 35

2.12

The third factor pressing down on output and income in Lesotho is the continuing high prevalence of HIV and AIDS. With almost 25% of the 15 49 age group known to be infected, Lesotho is now is the country with the fourth highest infection rate in the world. The continuing high level of new HIV infections now balances the high number of AIDS related deaths (UNAIDS 2006). The continuing loss of large numbers of people in their most productive years, both as members of the formal and informal labour force or as people undertaking responsibilities for bringing up children and caring for the elderly is having a devastating effect on all areas of Basotho economic and social life. A recently published study of the impact of HIV and AIDS on Agriculture and Food Security in the SADC Region, including Lesotho, shows how families containing people that are HIV and AIDS infected had significantly lower incomes and levels of productive assets than non-affected families (FARPAN 2006).

2.13

As an example of the dire situation caused by HIV and AIDS the FARPAN report shows that n Lesotho 61% of rural households affected by HIV and AIDS had sold their farming implements in order to raise cash. This is required to cover the income lost because a previous wage earner was now too sick to keep a cash income job and to pay the extra medical and other expenses associated with caring for an AIDS affected person. (Op cit Table 3.2 p 52). HIV and AIDs has the consequence of increasing the importance of old age pension income in household with infected members. The hollowing out of households and families through the loss of people in the 20 to 49 year age range means fewer income earners are available to share the burden of household expenses, the remaining households members must spend more on medicines and other care for the infected members and the elderly have to take on more of the caring for children who have lost parents.

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2.14

In summary, although its objectives related specifically to alleviating the poverty of the pensioner, the old age pension was paid in a situation where many households had lost one or more previously important sources of their income, particularly the cash income that previously could be anticipated from some of the younger members of the household. There was also more demand for the elderly person to take over some household caring duties previously done by the younger and more able-bodied members.

Section Three The Creation and Implementation of the Old Age Pension in Lesotho
3.1 The Lesotho Congress for Democracy (LCD) that has governed Lesotho since democratic rule was re-introduced in 1993 has always had a Manifesto commitment of providing an old age pension in Lesotho whenever resources permitted this. In the late 1990s consultants were used examine the cost of this but no further actions was taken until 2004 when it was introduced at very short notice into the Financial Statement for 2004/5. Various hypotheses have been advanced for the introduction. Most seem to regard it very much as the personal initiative of the Prime Minister. What is known is that Lesothos development Partners from the United Nations were skeptical about the sustainability of the pension and whether targeting the elderly should have a higher priority than, for example meeting more of the needs of children, for example by extending the free primary education introduced in 2000 to over the first five years of secondary school. Faced with the disapproval of Donors, the government agreed that the funding should come from the revenue of the Consolidated Fund. (LIPG 2006). 3.2 The value of the pension was set at M 150, two Maloti more than the national poverty line, thus confirming the poverty reduction purpose. The second factor was the decision to make the qualifying age at 70 or above. On the then available data, based on extrapolations from the 1996 Census, this would have

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produced about 50 0005 pension claimants and required a transfer of around 1.5 % of Gross Domestic Product to the pensioners. This was in line with the situation in South Africa, but higher than most othr developing countries (HAI 2004 table p 12)6. This may have been a factor in setting the minimum pension age in Lesotho. 3.3 The new pension subsumed some existing transfers to the elderly such as the very limited provision of national assistance and pensions for a few remaining second World veterans7. About 5000 people with Consolidated Fund paid occupational Pensions above M150 a month were excluded from the Grant. These were former civil servants who had occupied relatively well-paid positions. 3.4 The first installment of the pension was paid in November 2004, exactly as promised in the April statement. Three decisions that contributed to this rapid implementation were i) Using the already available data from the Voter Registration cards to authenticate name, residence and date of birth. The local chief attested these. ii) Not using any means related or other test other than the basic information iii) Subcontracting the cash delivery to the Post Office so that the payments could be made at existing and very familiar local post offices and the postal agencies that are based in shops in rural villages. This

In the event this was an under-estimate and about 70 000 were registered when the first payments were made. The underestimate was due to the underreporting of age during the 1996 Census and during voter registration in 2002. Since the Voter Registration was only concerned to establish whether the respondent was 18 years old or over and therefore eligible to vote, less scrutiny was given to the claimed age of obviously elderly people, When in 2004 a financial advantage was available by proving that a person was in fact 70 years old at least, respondents took care to produce documents and external witnesses to prove their age and get the pension. 6 The RSA old age pension is means tested. It is paid to women aged 60 and over and men ages 65 and over. 7 In the recent 2007-8 Financial Statement, the war veterans were given back their war pension which is now paid in addition to the old age pension.

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left the Ministry of Finance with the job of making the policy for pensions dealing with subsequent changes in the roll of registered pensioners and calculating how much should be transferred in aggregate to the Post Office to pay pout each month. By delivering through the established mechanisms of the Post Office the delivery could be priced closed to marginal costs, rather than having to bear the fixed costs of setting up of a new agency, The delivery charges have been about 8 percent of the value of the pension cash paid. 3.5 The registration and delivery appear to have been efficient and effective. Evidence from the surveys of recipients in the foothills and mountain areas respectively showed that the pension cash is normally paid out on the day announced. The Post Office staff is usually praised for the way they deal with the recipients. Most pensioners, especially those in the foothills, can walk to the pay point. In the mountain zone more use local taxis. The average time taken to get to the pay point is around 45 minutes and the cost to the average pensioner is around 5% of the pension paid. These findings and those in subsequest are all drawn from the survey reports and their accompanying data analysis sheets prepared for the LPIG (LPIG 2006 and LPIG 2007) 3.6 Most pensioners (average age 78 years) went to get the cash by themselves or with pensioner neighbours. Other household members were usually only involved in the 20-30% of cases where someone else had to be sent to get the pension. Only 2% or respondents in the mountains and 5% in the lowland survey would have preferred the pension to have been paid through a bank account. Contrary to views that had been expressed in the Parliamentary debate on the Pensions Bill and by pensioners that were interviewed in the June 2005 study, respondents in both the foothills and mountain areas expressed few concerns about the dangers of having the pension stolen after they had collected it or were keeping the cash in their homes. When asked how they would change the system a majority said they would like to be paid in their Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 17 of 35

village. To the surprise of many people used to dealing with government agencies, the implementation of the old age pension has turned out to be a model of good public service delivery practice. 3.7 Survey responses indicate that the allocation of the old age pension is regarded by the pensioners as not favouring anyone because of their political party affiliation. They regard it as their right and less than 10% of respondents in both the questionnaire surveys expected that the pension would ever be taken away from them. Responses showed confusion over who pays for the pension, with around 25% of respondents still believing that the money comes from donor agencies. 3.8 If there was little dissatisfaction with how the pension was paid, there was general concern about the amount of the pension and the qualification criteria. Ninety percent of recipients saw the amount as inadequate in meeting their person needs. The majority opinion in the mountain community was that the rate should go up to M 400 a month. In the foothills, surveyed a year before, the consensus was that it should be set at M 450. Most people said they wanted the qualifying age to be reduced to 61 years. Responding to a question about how the government should react if there was more money available for pensions the majority of responders gave priority to lowering the pension age rather than increasing the amount. 4.9 In the April 2007 Budget statement the government announced that the pension would be increased to M 200. This is an increase of about 15% in real terms over the initial M 150. Payment at the higher rate began in May. If the qualifying age had been reduced to 61 and the previous rate retained the cost of the transfer would have doubled. It has suggested by recipients that the Lesotho pension rate should be closer to the rate of M 850 a month paid in South Africa, However, since average income per head in the RSA is at least four times that

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in Lesotho the new rate of M 200 a month is now comparable with the rates across the border. 3.10 The old age pension as an instrument of social protection is also a means of reducing hunger vulnerability. Extrapolating from case studies of the role of textile workers remittances to their families in the villages, it can be estimated that the old age pension could be used to purchase sufficient of the staple food maize flour (papa), to meet the kilocalorie need of the average household in Lesotho of 5 adult equivalents, counting a child and 0.5 of an adult.( MAF 2005) However, this is at the maize prices at the end of 2005. The recent rapid increases in food prices caused by the poor harvests in Lesotho and South Africa have already pushed up maize prices to new heights A third of the pensioners in White Hill were expecting they would need to use more of their pension money to counter the expected food insecurity and were depending on external donors to make up the shortfall with deliveries of free food.

Section Four Who are the Pensioners ?

4.1 The survey details from the research done in the foothills (Manonyane) and the mountain area (White Hill) confirmed the impressions from the initial survey visits in April 2005. The majority of pensioners are women, most of them still living with other members of their household. The average age in both surveyed areas was around 78, meaning a significant proportion were very old elderly aged 80 and over. 7 out of 10 are regarded de jure and or de facto as the head of the household. Nine out of 10 recipients consider that they are in charge of how the pension would be allocated within the household. Almost all pensioners have living children, grand children and great grandchildren. Most of them have lived in the same village for at least 20 years. None that were interviewed saw having the pension as a reason to want to move anywhere else. Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 19 of 35

4.2

In both communities a significant proportion said that they lived alone or, in a few situations, with a spouse that was also a pension recipient. 70% was literate. Women had received higher levels of education than men, but only 15% had more than a primary school education. All but a very few said they were members of a Christian church, the majority were Roma Catholics.

4.3

The proportion of women to men recipients was higher in White Hill than in Manonyane. This reflects the general situation in the remote areas of Lesotho, where a higher proportion of men have been migrant workers in the mines and tend to have shorter lives because of the dangerous and unhealthy environment for this sort of work, in particular the risk of contracting T.B. The surveys showed a higher number of pensioners claiming to be living alone than the similar figure for Manonyane. This may reflect the higher proportion of women in the total of those living alone since it is generally less likely that an elderly man will choose to live alone, while women are more capable of looking after themselves .

4.4

However, the responses to this question may not be an accurate reflection of the true situation. The perception of what is meant by living alone may have several meanings in the rural villages. The elderly person may be living and sleeping in a separate dwelling from the rest of the household even though this house may be within the family compound. The respondent may have taken this to be living alone, even though she or he may have been sharing all or some meals with the household group, which technically would be taken as meaning they were not living alone. The point is important in determining how far the pension income is taking the household above the poverty level. If the pensioner were really living alone as a one-person household then the M150 pension would have all been applied to taking that pensioner out of poverty. This point is discussed further in the conference paper from the NUL Economics team.

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Section Five
5.1

The Social Impacts of the Pension

In both Manonyane and White Hill there was overwhelming agreement that having the old age pension had made the pensioner more satisfied with her or his life. Table One shows the percentage distribution of the responses to this question in the two surveys Table One The Pension and Satisfaction with Life.

Has your satisfaction with your life in general changed now that you are getting the Old Age Pension? Are you now White Hill (Mountain zone % all respondents agreeing with statement. n = 142 A lot more satisfied A bit more satisfied A bit more dissatisfied A lot more dissatisfied No change 5.2 26 55 13 3 3 29 56 5 2 7 Manonyane (Foothills) % all responders agreeing n = 215

The figures from the two communities are very similar with around 80% of respondents in each saying they were more satisfied with their lives than before getting the pension. This similarity, although the surveys were separated by a year and the overall material situation for the foothills community can be expected to be better than in the remote mountain zone. One reason for the similarity is that satisfaction is a general term and for most people will be

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defined in terms of a comparison with other people known to the respondent. In Manonyane people are more likely to have been exposed to the consumption patterns of the more well off people in the urban community. Many Manonyane households will have people that will be traveling in to Maseru. More people will have televisions and access to newspapers and magazines illustrating affluent life styles. In White Hill it is probably less likely that such comparison will be made regularly. The nearest to an urban society that will be visited by most people is the District town with a population one twentieth of the capital city. 5.3 In both communities responses indicated that the pensioners perceived that the others in their households, especially the children, regarded them with a large amount of respect. Also they were still treated as people whose advice was sought by others in the family. There was little indication that having the pension had made much difference to this situation. The responses show that in these two rural areas the network of social relationships and support within the household remains strong and provides the immediate safety net for family members. It was strong before the pension was available. 5.4 Contrary to what some of the White Hill residents had predicted when they were interviewed in mid 2005, the availability of a significant amount of cash to be allocated by the elderly person in the household does not generally appear to have produced intra-family tensions on a large enough scale to cause significant dissent. Noting the insistence of the pensioners that they were the ones that controlled how the pension was spent, they appear to be doing it a way that maintains family harmony and support. 5.5 The pension money transforms the pensioner from someone that depends on the willingness of other household members to provide them with a share of the households often meager resources to becoming a household asset in themselves. And this is an asset that not only provides the traditional services of giving advice and imparting the wisdom of age, but also can provide that Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 22 of 35

most important function of being able to pay cash. A small example is the finding that one use of the pension by a significant number of pensioners is to take over the payment of the burial society subscriptions for themselves and other household members. While the allocation of the pension is probably never regarded as a payment for services received, it means that the pensioner is seen to be paying her or his own way. 5.6 Noting again the United Nations defined rights of old people are independence, care, self-fulfillment, dignity and participation the ability to allocate the pension money in the household and, to a smaller extent in the community, can only be seen as a positive instrument towards achieving these rights. 5.7 In the areas of the provision of the health and education of household members, the survey responses showed that the pensioner was using some of the pension grant to directly contribute to household welfare. In both survey communities pensioners had recorded that a substantial number of their households included dependent children and that they were paying for some of the educational and health costs of these children. 5.8 In White Hill 30 recipients (20% of the pensioners surveyed) were providing direct educational support for a total of about 20 children. Those providing the support were each paying an average of M 80 a month for this, suggesting that these were the better off households that could spare a substantial proportion of the pension income after basic needs had been met,. This included spending on the ancillary educational expenses of making sure the child had a school uniform and shoes, stationary and books, transport and being able to go on school trips. In a very low income and cash poor community children getting this financial assistance and being able to afford these things will mean that they can regard themselves as being more like the children of better off families and therefore more able to integrate with the class group. Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 23 of 35

5.9

While the recent abolition of fees for children in primary schools has relieved this burden from families (and increased numbers in school from 350 000 to 450 000 children) there has been a tendency for schools to try to retain some of their previous income by charging extra for a range of services, for example, computer classes. Some pension money has gone into paying for secondary school fees. The White Hill responses were similar to those in Manonyane. Duflo has shown in South Africa that the grand daughters of grand mothers getting an old age pension are healthier and grow faster than when there is no pension income to support them.(Duflo 2000) We have not been able to show this in our surveys in Lesotho, but the principle is also probably true in this country.

5.10

There was a similar situation with regard to health spending. Here the support of the health costs of other household members took place alongside significant amounts of spending by the pensioners on their own needs. The pension was used primarily to allow visits to the local hospital or clinic. In Manonyane these were about an hours travel for the average pensioner. In White Hill it took significantly longer. Many pensioners had not previously been able to get to the health centre because of infirmity and lack of money to arrange transportation. They also could not afford the cost of any treatment or drugs prescribed. Health care had been obtained from the unqualified Village Health Worker and from traditional healers. The pension, therefore, must be seen as the pensioner choosing to scale up the level of health care that they were receiving and helping members of their household to do this.

5.11

As the final set of questions about the social impact of the pension respondents were asked whether having the pension had led to any violence against them from people anxious to get their money. In both White Hill and Manonyane the numbers of pensioners receiving domestic violence was very small at 2 5%

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of all pensioners. Only in three cases from the almost 400 pensioners interviewed was it suggested that having the pension was contributing to this.

Section Six
6.1

The Economic Situation of the Pension recipients.

It has already been stated that the governments objective in providing the old age pension was to lift elderly people above the poverty line. The success of the pension in doing this will be discussed elsewhere at this Conference. This paper will briefly look at the survey evidence about the assets and income of the pension recipients and the relation of these to the pension.

6.2

Previous surveys have shown that, while there is general poverty throughout Lesotho, with 50% of the population living below the national poverty line of around M 150 a month, this poverty is at its worst the mountain regions, and the foothills regions are at about the national average. For example in its study Poverty in Lesotho 2000 Sechaba Consultants noted that 69% of households in the mountain zone could be classed as Destitute compared to 48% in the foot hills, 19% in urban areas and 49% nationally.nationally. (Sechaba 2000 p 74, Table 4.4).

6.3

In the pensions surveys 43 out of the 215 questioned in Manonyane said that they were receiving cash income fro other sources that the pension, In White Hill only 10 out of 150 respondent claimed to have a non-pension cash income source. Cash came from children, from the very few that were earning a regular wage, from part time jobs and from the sale of surplus produce from subsistence farming. In general these cash income sources were small and likely to be irregular. This emphasizes the value of the pension, not just as an additional amount of cash but also as an income stream that is regular and dependent. One consequence of this is that enables the pensioner and household to have easier access to short term credit, for example the local shop supplying goods on credit knowing that this will be repaid when the

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pension money comes. Almost a third of the White Hill pensioners and 10% in Manonyane said they were doing this. 6.4 Pensioners reported that they had few assets other than their house and the fields that they had been allocated. 90% of the respondents claimed they owned their own house. 60% had fields. These high figures are a consequence of the communal tenure system in Lesotho, where all land is owned by the Basotho nation, held in trust by the King and allocated to individual in villages through the local chiefs. Houses are generally substantial. Most villages will have two or three large and well-built houses inhabited by the families of mineworkers who have sent money home for this purpose. Although having reasonable good accommodation and access to land in Lesotho is possible for most households, the tenure system means the virtual absence of freehold property and a market in land. This means that it is difficult to use the main part of the assets held by families as collateral against borrowing cash for short or long term investment purposes. (MAFS 2005) 6.5 The access to pension funds, as has been seen above, may improve access to very short term credit from shops, but it does not appear to be used for longer term investments. Few respondents said that they were saving any of the pension money or using it for non-financial asset building. In both communities respondents said they were interested in using the pension for improvements to their house, the domestic water supply and improved sanitation. But, only around 10% had actually spent money on these. The other 90% remained as plans. 6.6 Similarly the availability of the pension appeared to have made little difference to the stock of livestock assets or farming implements possessed by the pensioners household. Some people reported buying another cow or some chickens, but these were balanced by the situation where stock had been sold

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or fallen victim to the still rampant stock theft in rural areas, including Manoyane and White Hill. There was almost no change in land holdings. 6.7 In both communities the pension had been used to create some wage-paying jobs. In Manonyane about 45 such jobs had been created, in White Hill many fewer. However, from the job descriptions and the wages paid it appears that the job creation may actually have been taking the form of the household now being able to pay cash to a domestic or farm worker where previously they would have been paid in kind. There was little evidence of the pension being used for entrepreneurial activities save the response from a few pensioners that they would now buy stocks of candles, matches and paraffin and then resell these at a small profit back in their village. 6.8 The apparent failure of the cash transfer to have significant multiplier effects in creating new incomes contrasts to the situation reported in other developing countries where the possibility of getting a loan of a very small amount of cash, for example through a micro-lending scheme, is seen as a way in which small businesses can get started. In terms of food production it is at first surprising that some of the new cash flow has not been invested in expanding subsistence farming and, possible, creating more surplus crop production that can be sold for cash. 6.9 The reason for this lack of enterprise may be the fact that the general perception of agriculture in Lesotho, and especially away from the lowland zone, is that it is unprofitable, very hard work and subject to high risks from the weather stock theft and the failure of lenders to provide planting to harvest credit reliably. . Almost everything that can be produced on the small, unfertile fields of Lesotho can be produced very much more cheaply on the large farms in the Free State and imported into Lesotho to be sold at prices that are lower than local production costs. While there was general agreement that the availability of the pension would probably not reduce subsistence farming, no Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 27 of 35

one expected it to re-energize the rural economy. Where the pension was providing cash, the best use for this cash was to go and buy things that were desired but unobtainable when there was no cash income.

Section Seven The Old Age Pension and Nutritional Security.

7.1 So far it has been seen that the pension has little role in stimulating investment in additional assets for the household. Only the increases in spending on the education and health of children, including the pensioner enabling the household to take on the care of more Orphans and Vulnerable Children, can be regarded as even an indirect investment in the growth of human capital. 7.2 As noted by Case and Deaton in their study of the impact of the old age pension when it became available to millions of previously excluded poor South Africans in 1994, the pension income has to be seen primarily as an extension of household income, and is spent in the same pattern as other household income is spent (Case and Deaton 1998). Since in Lesotho household savings and investment rates are low (apart from the forced savings that results from the use of hire purchase to obstain consumer durables lie furniture and electrical goods) it would be expected that most of the pension is used for immediate consumption. Although severe malnutrition is rare in Lesotho, there is evidence that many children are undernourished. This is probably also true of old people but no statistics have ever been collected on this. We would expect the first use of consumption expenditure from the pension would be to buy food. 7.3 This is what happens. The results are that in both the communities survey pensioners were able to claim that the pension has made a major impact on their access to food. Table Two shows responses in White Hill to a question regarding the major items of household diet there

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Table Two

The Pension and access to staple foods.

Percentage of Total Responders Without it we wouldnt Helpful , but not be able to have enough essential 61 20 36 35 43 32 49 22 55 21 52 24 63 34 67 66 76 23 23 23 White Hill Could manage without the pension 18 28 23 29 22 23 3 9 10 10

Food total responders N= Papa, 112 Sorghum 96 Wheat 82 Potatoes 86 Beans, peas 92 Other vegetables 86 Bread, rice, Noodles 76 Milk, 99 Eggs 99 Meat 106

For papa, the staple source of carbohydrate, and for the three non-vegetable sources of protein namely milk, eggs and meat, over sixty percent said that their access would be inadequate without the pension. Just one in five said they could get enough papa without the pension. The cash made available from the pension was necessary for buying meat, bread, rice and pasta, most of which products have to be bought from the shop. The pension money was less crucial for buying the other staples, some of which, like beans and peas would feature in subsistence farming. When asked what new items the pensioner could now put in their shopping basket meat, eggs, milk, cakes and biscuits and sugar headed the list. 7.4 Pensioners confirmed the importance of the pension in their response to a further question about changes in their overall sufficiency of access to sufficient food before and after the pension had been obtained. Table Four shows the results from White Hill

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Table Three Compared to before you had the pension what is your food situation now?
Before the Pension I never had/have enough to satisfy my hunger n=96 57 I sometime had/have enough food to satisfy my 67 hunger n = 92 I always had/have enough food and I am never hungry 33 N =80 I had/have more than enough food and can give some 3 away n = 71 After the Pension N= 32 32 67 9

N = number that commented on statement Access to the pension halved the numbers that never had enough food and doubled the number that always had enough food to satisfy their hunger. Compared to White Hill Manonyane had a much smaller proportion of people that were always hungry before they got pension cash. Here too the numbers were reduced by half after the pensionwas gained. There was an increase in the numbers of people that always had enough after getting their pension. The impact of the pension here was not as great, because the elderly in Manonyane started-off being better fed before getting their pension. 7.5 76% of respondents said they were using the pension to buy more food for the household. It is possible that respondents interpreted this question as whether they were spending more on food rather than an increased quantity of food, remembering that by April 2006 food prices were already rising sharply. Of the M 150 monthly pension as it was then, M108 was being spent by the average household on buying more food (about 66% of the transfer). Despite the price rises some of this would be supplying extra nutrition either as more of the same food or more of higher nutritionally valuable foods, for example meat being substituted for beans. Within this, pensioners who probably accounted for about 20% of the average household food consumption, appeared to be doing well. Nyanguru The Social and Economic Impacts of the Old Age Pension in Lesotho Page 30 of 35

In 10% of all cases it was claimed that the entire pension went on food for the pensioner. The average spent on the pensioner's food was M 80 out of the M 108 of the pension money spent on all food. When asked about the extra food the pensioners were buying they confirmed that these were high protein commodities such as meat, eggs milk and other dairy products, plus luxuries like sugar, sweets and biscuits. It is still some distance from the prediction of one of the M.Ps speaking in the 2004 Pensions Debate who said his constituents had told him they would be living on strawberries and chocolate but as one of the survey respondents at White Hill quipped Those without a pension live on vegetables, those with a pension can have meat. 7.6 It is convenient, even though perhaps inappropriate, to conclude this section on nutrition with information obtained about the pensioners habits, good and bad. It was said by a cynic that when the pension was introduced the main benefits would go to Maluti Mountain Brewery. And indeed, some of the pensioners at White Hill admitted to spending more on alcoholic drinks for themselves and others. Of the 32 that regularly indulged, 12 spent more, and contributed on average the grand sum of M 12 ( two cans of lager beer) a month extra to the revenues of Maloti Mountain Brewery. It was the same with tobacco, (including in Lesotho the considerable number taking snuff). Of the 90 who indulged in this habit, 60 were buying more tobacco a month, but on average spending only M 10, the equivalent of eight cigarettes at todays prices. Eve allowing for likely pressure to under-report access to the pension has made little difference to these habits. 7.7 The spending on beer and cigarettes was balanced by the extra spending that was made in giving more to church collections and charity. 6 % were giving a lot more to church and charity another 35 (20%) said they gave some more. The average monthly increase was M 10. To this might be added the already

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noted response s showing that more of the elderly are now paying their own burial society subscriptions

Section Eight
8.1

Conclusions

This rapid survey of the old age pension as an instrument for the social and economic protection of the elderly and their households shows that in the two communities surveyed it is fulfilling this function. The allocation of the pension within the household is under control of the pension recipient, who as the head of the household still is treated with respect and acting as an advisor to other household members.

8.2

In this way the pension appears to be stabilizing and supporting the already strong family structures that still exist in rural Lesotho. The pension leads to almost all recipients feeling more satisfied with their lives.

8.3

Because the pensioner chooses to regard the pension as part of the family income it will have a reduced role in taking the pensioner her or himself out of poverty. However, there will be many benefits for the pensioner in being able to consider that he or she is able to contribute while they live that most precious of assets, a regular, dependable and significant cash flow to household income.

8.4

As expected in the financially poor rural communities of Lesotho, the first need that is satisfied is for food. The main use of the pension in this respect is to enable the household to have more of its nutrition from the foods that are preferred such as meat, dairy products and eggs, rather the vegetable protein from food such as beans. In the currently anticipated situation of shortages of and much higher prices for staple foods such as maize, it is likely that some of the pension expenditure will be switch back from meat to papa.

8.5

Recipients are pleased with the pension delivery system that is demonstrating high levels of efficiency and customer care. Dissatisfaction is with the level of

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the pension and the qualifying age. Pensioners acknowledge that, in their financially poor communities, setting the pension age at 70 excludes many households that are in a worse position than those fortunate to qualify for the pension. 8.6 The pension works as an instrument to allow extra consumption. It makes little difference to the amounts of income going into direct investment and asset building that will have long run effects on poverty. 8.7 The use of a significant amount of the pensioners added income to help with the education and health needs of young people in the family may eventually have some longer term rewards though the creation of better human capital. The pension probably also allows the pensioner household to take on the care of more orphans and vulnerable children. 8.8 Beyond these financial benefits the ability of Lesotho, from its own domestic resources to transfer up to 2% of Gross Domestic Product from tax revenues for undirected spending by some of the poorest and least well protected in society should be a source of public pride.

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BIBLIOGRAPHY (part) EIU 2007 Economist Intelligence Unit, Lesotho Country Report 2007 London. GOL 2007 Financial Statement. Government of Lesotho website www.lesotho.govt.ls Gorman 2004 Juggerssur, J. (2000) Age and Security HelpAge International , London Policy framework for ensuring a regular income to older people in Africa, Paper presented at the AU/HAI Experts meeting held in Kampala, Uganda 27-1 December, 2000. Kakwana, N. and Subbaro K 2005 Ageing and poverty in Africa and the role of social Pensioners, The World Bank, African Human Development, March, 2005. .

LPIG 2006

The Impact of the Old Age Pension in Lesotho 2004 2006 : First Report from the Manonyane Pilot Survey ISAS , Mational University of Lesotho, Roma Lesotho.

LPIG 2007

The impact of the Old Age Pension in Lesotho: Preliminary Report and Results from the White Hill Survey

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Nyanguru,A.C.(2005a)

The rights of the elderly in Lesotho Journal of Social Development in Africa Vol.

UNDP 2005

Human Development Report 2005 New York

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