Mbabane: The Southern African Research Foundation for Economic Development (SARFED) has advised government to extend retirement age with not less than 3 years, use pension fund for COVID-19 economic recovery
This is contained in Economic and Business Commentary, Vol. 4, issue 26, August, 2020 which was published by SARFED Regional Coordinator, Dr. George H. Choongwa.
SARFED note that one of the greatest threats to Eswatini economy due to COVID-19 is that of shrinking labour force.
More than 8,000 employees have lost jobs on the basis of either suspension or completely dismissed due to company’s scale down strategy in less than 5 months. The aggregate outcome to this has a negative and devastating effect on the Gross Domestic Product (GDP) which has been projected to have reduced to about not more than 1% in 2021 despite having been expected to have increased to more than 2% in 2020.
The country’s huge labour force has potential to stimulate consumption spending which eventually becomes a source of revenue the government. At the same time extending the retirement age could stimulate both private and public investment spending in various sectors.
By extending retirement age due to COVID-19 problem could save government spending public pensions which could contribute to higher level of unsustainability on both ends namely the retirees because it will be challenging to begin and integrate in to the society during recession, at the same time government would be draining its revenue which would be used for other productive activities.
Social security and retirement age
The Economic and Business Commentary by SARFED notes that as life expectancy at older age increases, government might need to adjust Social Security’s retirement age to contain the costs of retirement programmes and encourage older adults to work and contribute to the economy based on experience.
However, if government is to rise the retirement age, it is necessary to develop and implement policies that would protect low-income people in all sectors. This would also bring about improved income equity among the labour force.
SARFED highlighted that it would be disastrous if the retirement age policy is not taken into consideration during and post COVID-19 because the majority of the retirees were also bread winners whose reduction of income could have a ripple effect of income crisis per house hold.
With one of the largest wage bill in the Sub-Sahara Africa, Eswatini can use its pension funds for economic recovery. This would be used for engagement in strategic economic activities which had high return on investment in short, medium and long term basis. This would help the government not to depend on external funding which mainly comes with high cost of borrowing for its recovery.