AfricanPension FundConference

Anne Cabot-AlletzhauserHead of the Alexander Forbes Research Institute

BenefitsALL Barometer Africais the thought leadership publication of the Alexander Forbes Research Institute

This publication challenges employers,fiduciaries, policymakers and financialservices providers to help address thewell-being needs of South Africans.

We invite our readers to discuss and debate issues on this crowdsourcing platform in our quest to develop and implement sustainable solutions

INTRODUCING

BenefitsALL Barometer Africa ISSUE1

Why do we need yet another series of articles on Africa?

Over the past few years there have been a spate of books and research pieces on Africa. For the most part, these studies tend to occupy one of two camps:

But a critical element is missing in all this analysis. Extracting the true economic potential of Africa will demand an altogether different strategy. It will no longer be a question of whether the policymakers get it right. Nor will it be a question of whether corporates can play their strategic hands more adeptly. Rather, unlocking future value will depend on a true collaborative effort between business, government, communities and the people who inhabit this continent.

They focus on the economic prospects for Africa’s future. Examples are annual publications from the Brookings Institution, the World Bank and the African Development Bank.

They serve to advise corporates and multinationals on how best to succeed in their African-based businesses. Examples are McKinsey’s Africa’s Business Revolution – How to Succeed in the World’s Next Big Growth Market, and the Unilever/UCT project, African Lions, which assesses African consumerism andthe nature of the African middle class.

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How did it all get so complicated?

If we’re going to effectively tackle the problem

We need to vastly simplify the discussion

We need to make the discussion relevant to emerging economies

We need to make the discussion relevant to Africa

Most importantly:We need to understand the

objectives/agendas/conflicts of the different players

The Ultimate PPP Partnership Model

PublicSector Private Sector

PeoplePersonnelPersonal

Inherited systems,Reform needs,

Enabling environment

The ChallengeHow to cope with: Competing objectives Competing agendas Competing “hot points”

The bottom line:

Getting it right isn’t about compromising to address immediate political/economic demands of each party

Getting is right is about not-compromising the futures of multiple generations of a nation.

The Ultimate PPP Partnership Model

What’s everyone’s requirement – their objectives?

Public Sector• Govt needs to provide basic social protections:•Old age, child and unemployment income

• Health/Education/ Housing

• Infrastructure

Private Sector•Employer/employee compact

•Employee wellness = greater productivity

People•Security:

•Income :•Loss of job•Disability/Death •Post-retirement

•Health• General Well-being• Family

What’s everyone’s requirement – their agendas?

Public Sector•Political legitimacy•Redistribution or wealth

•Develop capital markets

•Greater global legitimacy

•Target investing to “national” interests

Private Sector•Whatever is provided must make economic sense

•Minimise financial burden on company

People•As a citizen/ employee, this is my right•The financial dependency of a family/extended family/ village/etc.

What’s everyone’s requirement – their constraints?

Public Sector•Fiscal demands•Limited skills in:

• Administration• Good governance• Finance

•Limited regulatory framework

• Limited capital markets

Private Sector•Weak or non-existent human capital development skills

•Not core business•Financial constraints

People•Financial literacy –even literacy

• Immediate needs take precedence over the end game or even the financial journey

TRUST?

How are members doing with their compulsory savings?

Basically…. The system doesn’t work the way it was intended

Let’s look at the facts when preservation isn’t compulsory

Less than 10% preserve when changing jobs

Less than 5% of members > 75% replacement ratio

People don’t see retirement as their priority – mortality reality

Trust is low: in financial services; in government

Employer as locus for well-being. –but our industry will need overhaul:• Financial journey

includes debt• Financial coaches not

advisers• Product that incorporate

financial education• Solve for engagement,

funding, compensation

Pension reform shifts focus away from the employer/employee need Need to solve for the journey

The system is too fragmented to deliver on the promise of physical, mental and financial well-being

Get stakeholders back to the table to create integrated solution

Fourth Industrial Revolution has now changed the game. Retirement/employer concepts changedNeed to put “employee” back into “benefits”

Critical building blocks:• HR Data analytics• Customised benefits• Well-being programme• Skills development

Benefits Barometer brought fresh new insights for South Africa

Our research

quest

How effectively is the current model of employee benefits addressing member needs? Who does it really benefit?What would we need to do to get better outcomes?

2013 - 2017

Our insights Should compulsory savings only solve for retirement in a developing economy? Social mobility not just social protection – the power of the Singapore model to teach fiscal responsibility and address basic needs:• Emergency savings• Housing• Education• Health

Developed economy assumptions Developing economy reality

FAMILY

Daughter’s child

Wife’s parents FAMILY

School-going brother

College-aged child

Child of divorced sister Matric-aged

child

Lens of responsibility

There is no such thing as “average” or “median” in Africa

African nations rank the highest on the diversity index This suggests the “conventional models” simply do not apply effectively

Demographic profile

The challenge for the future will be:• Less about planning for retirement• More about planning for life

The answer:• Translating our compulsory savings

programmes into:“A Guided Financial Planning Framework”for individuals

12 themes for Africa

The context for our on-going Benefits ALL Barometer AfricaNarrative

Understanding these issues can vastly improve the dynamics of the public/private partnership around employeebenefits

Theme 1: Africa’s Youth Bulge – Dividend or Demerit?

Theme 2. How is Africa’s human capital development faring?

World Score= 65 Education score and youth population (2008-2027)Average education scores have been declining since 2013 and have not kept up with youth population growth

Human capital optimization in Africa

Finding solutions for healthcare –an important starting point• Demographics• Productivity

Can African workers compete globally?

Africa and the challenge of the Fourth Industrial Revolution

Africa’s capacity to adapt and exposure to the future of jobs

Theme 3: Rapid growth prospects – but for whom?

Source: IMF, RMB Global Markets

Cape Verde

> 7% growth

2%-4% growth

4%-7% growth

< 2% growth

Togo

GuineaGambia

Lesotho

Botswana

NamibiaMauritius

RwandaSao Tome and Principe

GhanaCôte d’Ivoire

Burkina Faso

Tunisia

Zambia

Liberia

Morocco

Benin

Gabon

Niger

Algeria Egypt

Ethiopia

Mali

Tanzania

Sierra Leone

Angola

Eritrea

Guinea-Bissau

Libya

Sudan

Somalia

Djibouti

Equatorial Guinea

Seychelles

Democratic Republic of

Congo

KenyaUganda

Mozambique

Madagascar

Cameroon

Nigeria

Chad

Central Africa Republic

Zimbabwe

South Sudan

Burundi

Mauritania

Comoros

Malawi

Senegal

South Africa

Congo

Swaziland

Libya, Ethiopia, Ivory Coast and Mozambique are expected to experience the highest growth rates

Namibia, Botswana and Zambia likely to grow in line with the rest of the continent at 4%-7%

Regions like Nigeria and Zimbabwe will see little to no growth

Africa growth prospects fragmented, with little regional/continental trends evident

Forecasted GDP growth pa (2017-2022)

Africa’s most important graph

The 2017 Ibrahim Report on African Governance identifies perhaps the greatest challenge to economic growth: the fact that African governments have failed to produce environments that enable their citizens to pursue economic goals and provide the opportunity to prosper.

Africa: Sustainable Economic Opportunity average trend and percent increase in GDP (2008-2017)

“While in 2017 the range between the highest (Mauritius) and lowest (Somalia) governance scores is the smallest it has been in ten years, increasing divergence appears between country scores.

In the earlier years of the last decade, countries were concentrated around the African average score, but over the last ten years have dispersed. Within the last three years, 18 countries displayed their worst Overall Governance performance in a decade, and 28 achieved their best in the same period, highlighting the diverging trends on the continent.”

Theme 4: How will political will play out on the continent?Fulfilling Africa’s ambitions will demand different insights about growth and what is required?

Barriers to economic growth

Why inclusive growth is critical to sustainable economic growth

Inclusive development performance and interpersonal trust

Theme 5:Who controls our growth and how?

Managing the impact and influence of foreign direct investment and the influence of multinationals

Which constitutes a better answer for growth?

Selected African SME’s contributions to employment and GDP

Theme 6: A different growth potential for Africa – an integrated Africa

Africa trade and economic organisations

Theme 7: Could technology lead Africa through a different development path?

Theme 8: Migrationand skills

Main Intra-African migration corridors, stocks in 2017

Theme 9: Rapid Urbanization

Theme 10:How the future of finance in Africa will demand a new model

Using retirement savings to simply put money in people’s pockets won’t be enough

In summary:

Employers will have to play a critical role as the catalyst for

change

Lessons we have been learningPutting the “benefit to employees” into employee benefits:

• Transforming compulsory savings into a guided financial planning framework

• Skills development and lifetime learning = tangible lifetime benefits = making African workers globally competitive

• Solving for employee well-being for themselves and their lens of responsibility • Healthcare• Low cost Funding solutions • Portability to where the jobs are

• The workplace as a catalyst for social inclusion and social cohesion

This will mean being able to demonstrate:

o to employers how this improves their bottom line

o to regulators – how this addresses financial capability and social protection

THANK YOU