Pension Markets in Africa

The existing pension systems in Africa tend to have very low coverage, and they are typically made up of civil servants or a few well-paid formal sector employees. This chapter examines the pension markets in Africa. It discusses the important roles the pension markets play in the economy, including establishing attractive pension schemes, mobilising and pooling national savings, facilitating financial market development, ensuring corporate governance and monitoring of firms, supporting infrastructure development, supporting the housing finance market, and financing green growth initiatives. Africa’s pension markets are confronted with a number of challenges, including high unemployment rate, large informal sector, and scarcity of appropriate investment vehicles. The chapter also examines the reform initiatives by African countries aimed at restructuring the pension systems. Countries like Ghana, Nigeria, and Kenya have introduced micro pension schemes, targeting the informal sector workers as this could increase the asset base of the pension industry as well as address some of these challenges. It is therefore important to get the remaining countries implement some of these policies to improve coverage, considering that the informal sector in Africa contributes about 80% of the working population.