All throughout the world we are seeing a growing workforce but the pension pot is not growing in line with the growing workforce. A tragic story in Uganda last week saw a man who paid his pension for his entire working life and found he only had $12 to his name.
Even here in Rwanda, pensions are optional, therefore few actually take time to save for their future. It is not like other African countries, though, where there is an inherent aversion to public pension institutions, so there is hope yet.
In the world of savings and pensions, there are savers and spenders; it is something ingrained into the national character over generations of hardship. The biggest savers are China, Germany, and Japan. These are countries with a harsh history, a strong export market and good infrastructure.
The spenders are also borrowers on a massive scale, USA, Britain, Canada and such. So in the global economy, China bought American debt, Germany bailed out Europe and so on.
In countries that save like Japan and Germany, there is enough housing stock to accommodate people comfortably so the money saved on buying houses is banked. In USA and Britain, there is a home-owning culture that dates back to the post-war era, therefore money is borrowed to build housing.
Rwandans also fall into this category, there is a need to build your own house, the house for rent stock is limited, overpriced and built on debt, so you are better off borrowing to build than renting.
This means that property takes the place of pensions as a retirement investment.
This is to counter the risk caused by fluctuating currency exchanges, which often see a currency devalued with time.
Houses are investments that seem guaranteed to rise, but that is assuming that housing stock will always be this scarce. We might have a saturation of the market and see house prices fall. Even if they do, it is still a matter of cultural pride to own your home. While this consumer-debt and repayment cycle continues, it is unlikely that pensions will grow.
Another factor is that few public servants, who are the bedrock of any national pension scheme, see themselves working in the public sector for all their working lives. The public sector is a place to start then you move onto the private sector, therefore the pension will not have time to mature.
Another factor is people just do not see themselves living that long, our life expectancy will jump around 15 years since child mortality has been reduced so we will have a lot more people in their seventies in 10-15 years time.
Our young growing population is perfect for a viable pension plan, with half of the population under 18 we can have a pension scheme that underwrites our bank debt,that brings down interest rates, and funds the underprivileged.
This can only happen if we reduce spending and increase savings, housing is a good investment but it is not worth being in debt for decades without disposable income to save for a rainy day.