Africa’s Pension System Was Built Around the Wrong Worker
Walk through almost any African town before sunrise and the economy is already in motion.
The market trader is arranging her stock. The boda boda rider is beginning his first trip. The small-scale farmer is checking produce for the market. The artisan is opening his workshop. The food vendor is lighting the stove. The mechanic, domestic worker, construction labourer, digital freelancer and micro-entrepreneur are all creating value, earning income and sustaining families.
- They are working.
- They are saving.
- They are planning.
But most of them are not building a pension.
These are Africa’s missing millions: economically active people who power the continent’s daily life yet remain largely invisible to retirement systems designed around a monthly salary, a payroll department, a permanent employer and a predictable contribution cycle.
In my presentation at the 6th Annual Africa Pension Funds & Retirement Summit 2025, in Casablanca, Morocco, I highlighted the scale of the contradiction. The informal sector accounts for roughly 80-90% of employment in many African countries and contributes an estimated 35-60% of GDP, yet fewer than 10% of informal workers have access to any form of pension coverage; in many sub-Saharan African markets, coverage is below 5%.
The people producing much of Africa’s economic value are the people least protected against poverty and dependency in old age.
That is not simply a coverage gap. It is a design failure.
The Informal Sector Is Not a Smaller Version of Formal Employment
Most pension systems begin with assumptions that make perfect sense for a salaried employee: income arrives monthly; deductions can be automated through payroll; an employer can co-contribute; employment is relatively continuous; records are stable; and retirement occurs at a defined age after a recognisable career.
The informal economy works differently.
Income may arrive daily, weekly or seasonally. It may come from several activities. A good week may be followed by a poor month. Business cash and household cash are often inseparable. The same worker may move between formal employment, self-employment, casual work and entrepreneurship several times during one working life.
Yet we have too often taken a product built for regular salaries, reduced the minimum contribution, added a mobile payment channel, renamed it a micro-pension and expected mass adoption.
But a smaller formal-sector product is not automatically an informal-sector solution.
If the underlying design still assumes monthly discipline, distant benefits, limited liquidity, institutional trust and a conventional retirement journey, digitising the collection mechanism does not solve the problem. We have improved the doorway without redesigning the house.
The Informal Worker Is Already a Saver
Africa’s informal workers do not need to be taught that saving matters.
Across West Africa, people save through susu, esusu, osusu and tontines. In Southern Africa, they use stokvels. In North Africa, daret and jama’iyya perform a similar role. In East Africa, chamas and merry-go-rounds are deeply embedded in community life. Millions also use SACCOs, village banks, mobile wallets and informal investment groups.
Why do these mechanisms endure?
Because they fit people’s lives. Contributions can be small and frequent. The goal is visible. The group creates discipline. Trust is social rather than abstract. The benefit is understandable: school fees, stock for a business, a motorbike, farm equipment, land, a house or help during an emergency.
The informal sector is therefore not rejecting saving. It is rejecting a retirement proposition that often feels disconnected from the financial realities of today.
That distinction should awaken the pension industry. If millions of people can consistently contribute to a chama but not to a pension, the question is not merely, “Why won’t they save?”
The more honest question is, “Why have we not built something they consider worth saving into?”
The Root Cause Is Relevance, Not Only Affordability
Affordability matters. But it is an incomplete diagnosis.
An informal worker deciding what to do with today’s income is not comparing retirement with nothing. Retirement is competing with food, rent, school fees, healthcare, working capital, debt, family obligations and the productive asset that could raise tomorrow’s income.
Telling a 28-year-old trader to lock away scarce capital for a benefit at 60 may be actuarially responsible, but behaviourally unpersuasive. To her, the immediate risk may not be old-age poverty. It may be insufficient stock next week. To a boda boda rider, the most transformative financial outcome may be owning the motorbike he currently hires. To a farmer, it may be irrigation equipment that raises yields and reduces seasonal vulnerability.
Traditional pensions say, “Sacrifice today so that you may be secure decades from now.”
The informal worker asks, “Can this help me become more secure now, so that I have more capacity to save for later?”
That is not short-term thinking. It is economic reality. Our policy and product design must begin there.
Trust Is the Other Missing Currency
Even a relevant product will fail if people do not trust it.
Informal workers reasonably ask: Where is my money? Who controls it? Can I see it? What happens if the provider fails? Will the rules change? Will I be paid when the time comes? Can I resolve a problem without spending days travelling between offices?
The pension industry often answers with legislation, governance structures and institutional names. Those safeguards matter, but trust is not created merely because protections exist. Trust grows when members can experience them.
A mobile balance that updates after every contribution. An instant confirmation. A clear view of investment growth. A simple projection showing progress towards a goal. A complaint resolved quickly. A benefit paid accurately and on time. Plain-language education explaining that pension assets are segregated and independently held.
Every one of these moments either builds or destroys confidence.
This is particularly important in close-knit informal communities, where reputation travels faster than advertising. One unpaid or mistreated member can discourage hundreds. One trader who achieves a visible goal through a trusted arrangement can become a more powerful ambassador than an expensive national campaign.
The Informal Economy Does Not Need Another Product. It Needs a New Architecture.
The redesign must go beyond flexible contributions and digital onboarding. It must align pensions with how informal workers earn, decide, trust and progress.
I propose an Africa-fit architecture built around seven shifts.
1. From fixed monthly contributions to cash-flow-responsive saving
Members should be able to contribute any affordable amount, at any time: daily, weekly, monthly, seasonally or irregularly. The system should understand contribution patterns rather than punish people for not behaving like salaried employees. A farmer’s harvest cycle and a trader’s daily cash flow are not exceptions to be accommodated; they are the design brief.
2. From retirement-only messaging to goal-led entry
The fastest route to retirement saving may not begin with retirement. It may begin with a productive, tangible goal that matters now.
Imagine a goal-oriented two-pot arrangement. One pot supports defined short-to-medium-term wealth-creation goals such as acquiring a motorbike, expanding a business, purchasing equipment, paying school fees, buying land or building a house. The second pot is preserved for retirement.
Members could begin with an allocation suited to their circumstances and progressively increase the retirement portion as income, confidence and financial resilience grow. The goal-based pot should not become an unrestricted transaction account; access should be governed by a defined target and carefully limited hardship rules. The discipline of preservation must remain, but the path into preservation must become more realistic.
3. From old-age protection alone to lifetime productive capacity
Many informal workers may never experience retirement as a clean break from work. They may continue trading, farming or providing services well into later life. Retirement design must therefore help people build sustainable income-generating assets throughout the life course, not only accumulate a lump sum for a fixed exit date.
The rider who owns his motorbike, the farmer who improves productivity and the trader who grows her enterprise are not moving away from retirement security. They are increasing the capacity from which future retirement contributions can be made.
4. From institutional opacity to radical digital visibility
Mobile money made digital finance credible because the user could see and confirm the transaction immediately. Pensions need the same everyday visibility through mobile apps, USSD and SMS.
Members should be able to see contributions, balances, investment returns, goal progress and projected achievement dates in language they understand. Technology should not merely collect money more efficiently. It should make value visible and trust continuous.
5. From generic communication to a personal financial coach
Data analytics and artificial intelligence can help schemes identify dormancy risk, understand irregular contribution patterns and provide timely, personalised nudges.
“At your current pace, you could reach your equipment target in eight months.”
“An additional contribution of 20 shillings a day could bring the date forward by three months.”
“You have reached 75% of your goal.”
This is more useful than an annual statement filled with pension terminology. The administrator of the future must move from passive recordkeeping to active financial guidance.
6. From invisible performance to public accountability
Regulators should publish simple, standardised dashboards that allow the public to compare long-term pension performance with relevant alternatives such as savings accounts, fixed deposits, SACCOs and money market funds. Comparisons must reflect risk, costs, liquidity and inflation – not create misleading league tables – but citizens deserve understandable evidence of how professionally managed savings perform.
Transparent performance, service standards and member-outcome measures can shift competition away from fighting over the same formal-sector schemes and towards creating new savers. Providers should compete not only on assets under management, but on participation, persistence, goal achievement, trust and retirement readiness.
7. From compliance-led regulation to member-outcome regulation
A product can comply with every rule and still fail the person it was created to serve.
Regulators must therefore ask more than whether contributions were collected, investments remained within limits and reports were filed. They must ask whether members can access the system, understand it, trust it, achieve meaningful goals and progress towards adequate retirement income.
This is where an outcomes framework such as the Member Outcomes Compliance Audit (MOCA) becomes valuable: measuring accuracy, timeliness, clarity, accessibility, fairness, trust, redress, governance and continuous improvement from the member’s point of view.
The Preservation Question
Some will object that permitting a goal-based pot weakens the sacred principle of retirement preservation.
That concern deserves to be taken seriously. A pension system that allows unrestricted leakage can leave members with little protection in old age. But we must also confront the other side of the argument: a perfectly preserved account that millions never open preserves nothing.
The choice is not between perfect preservation and reckless access.
The real design challenge is to create disciplined progression:
First, attract people through relevant goals.
Then help them achieve visible success.
Use that success to build trust.
As income and confidence rise, progressively increase retirement allocations.
Ultimately, convert participation into meaningful long-term preservation and sustainable retirement income.
The destination remains retirement security. What changes is the route.
We Must Stop Measuring Inclusion by Registration
Opening millions of accounts would be a poor victory if most become dormant.
True inclusion is not the number of people enrolled. It is the number who contribute with reasonable persistence, understand what they are building, trust the institution, achieve relevant intermediate goals, preserve an increasing share for later life and eventually reach old age with greater financial independence.
That requires different measures: active participation, contribution density adapted to variable incomes, dormancy and reactivation rates, goal-completion rates, growth in retirement allocation, complaint resolution, benefit-payment timeliness, projected retirement adequacy and member confidence.
If we only count registrations, we will digitise exclusion and call it progress.
Related Article: https://systechafrica.com/africa-doesnt-have-a-pension-problem/
Africa Has an Opportunity to Lead
Africa does not need to import pension models built for labour markets dominated by stable, long-term employment. Our economic reality can become the catalyst for better design.
We have mobile-first populations. Deep traditions of collective saving. Expanding digital identity systems. Rich transaction data. Innovative financial technology. Young populations accustomed to real-time services. And millions of workers whose economic lives do not fit the twentieth-century employment contract.
The opportunity is not to force the informal economy into the pension system we inherited.
It is to build a retirement system around the Africa we actually have.
A system for the trader whose income changes daily.
For the farmer whose money arrives after harvest.
For the worker moving between employment and enterprise.
For the young person building several income streams.
For the woman balancing a business, household needs and extended-family responsibilities.
For the millions who may never retire from work in the conventional sense, but who still deserve to grow older with assets, income, choice and dignity.
The informal sector is not waiting to be included in somebody else’s model.It is waiting for a model worthy of its reality.
Until we redesign pensions around that reality, the missing millions will remain missing – not because they cannot save, but because we have not yet given them a compelling enough reason to save with us.
