Delivering Lesotho’s Old Age Pension Katharine Vincent

1. Delivering Lesotho’s Old Age PensionKatharine Vincent DSA annual conference IDS, 18-20 September 2007

2. Lesotho’s vulnerability context • April 2006 population census showed population has declined from 2.1 to 1.8 million • Life expectancy is falling rapidly (37 years for females and 36 years for males) • Two-thirds of the population live on less than US$2 per day; 43% on less than US$1 per day • Ruling Lesotho Congress for Democracy committed to an old age pension on its election manifesto in 2002 • Although it was not introduced as a response to HIV and AIDS, it did recognise that the elderly are particularly vulnerable through now being a “generation of carers”

3. Key features of the Old Age Pension - 1

4. Key features of the Old Age Pension - 2

5. Approaches to delivery systems • “Pull” mechanism Beneficiary is required to come to a specific place at a specific time to receive their cash • “Push” mechanism Funds are transferred electronically into a bank account/onto a smart card/mobile phone which beneficiary can access at any time through financial infrastructure

6. The pension delivery system – Post Offices • Post Office was chosen to deliver the pension based on its distribution throughout the 10 districts • Other public buildings (chiefs offices, health centres, courts) are also used – making 291 paypoints in total • Cash is transferred from the government account to post office account

7. Challenges of the pull mechanism-to government/post offices • Mountainous landscape: poor road infrastructure and bad weather can make it hard to reach remote areas (military helicopter is used) • Inclusion errors due to complexity of system and multiple paths of registration • people registering below the age of qualification • local authorities failing to notify deaths • corrupt officials creating “ghost” beneficiaries • Problems of carrying cash • Armed robberies/cash-in-transit heists (now use Lesotho defence force and mounted police) • Costs: M12 per transaction (6% of transfer cost)

8. Challenges of the pull system-to beneficiaries • Travel inconveniences in getting to the paypoint • High cost of using public transport • Time (although NUL study showed 75% take an hour or less) • Large waiting times at the paypoint • Sometimes post offices run out of cash (although 68% had never experienced this • Dignity issues • 95% said the officials were respectful • Higher risk of becoming victims of crime when transporting cash (although few beneficiaries cite this as a problem)

9. Innovative delivery mechanisms - cellphones • Individualised multipurpose mobile smartcard • Expanding use and successfully introduced for mobile cash transfer in Kenya (the m-pesa scheme) – like a parallel banking system where transfers are made by sms and payments/withdrawals are made through agents (retailers) • As a push mechanism has advantages for both government and beneficiaries in terms of convenience and cost • Thought to have potential in Lesotho due to good network coverage (although feasibility of other options will also be assessed)

10. RHVP pilot cellphone project in Lesotho • 10 cellphones distributed amongst 3 women’s farming groups in different agro-ecological zones in Lesotho • 1 to a chicken farming group at St Michael’s (lowlands) • 4 to a pig farming group in Nyakasoba (foothills) • 5 to a seed potato and vegetable farming group in Semonkong (highlands) • Intention was “to support remotely-located rural people and to connect them with markets, primarily” (Chaka Ntsane, RHVP Country Coordinator for Lesotho)

11. Follow up evaluation in May 2007 - advantages • Access to communications has massively reduced the time spent on travelling (previously ladies in Semonkong would make a 4 hour round trip to meet within the cooperative at Bishop Allard Vocational School, whereas now they can call immediately and find whether there is a need for them to physically travel) – also wider benefits of accessing medical care in emergencies, etc. • Helps them respond more quickly to the market, which has increased their sales • Some younger ladies in Semonkong have started selling airtime through sms (acting as middlewomen)

12. Follow up evaluation in May 2007 - challenges • 1 lady in Semonkong dropped her cellphone into water whilst doing her laundry: it is currently being repaired in Maseru • Technological capacity – becoming accustomed to the cellphones took some time for women of a variety of ages • Electricity availability is a problem for recharging • Although there have been no incidences of theft the ladies recognise that having cellphones makes them a target – even from within their families! • Airtime is prohibitively expensive compared to public phones, so little selling occurs (ZAR1.60 to ZAR2.90 per minute)

13. Current state of play • The government of Lesotho is proud of the success it has had to date in implementing a national pension programme despite international financial institutions warning it would not work, and they are keen to continue being forward looking and a leader in southern Africa • RHVP is about to begin a feasibility study looking at various innovative delivery mechanisms in Lesotho (including banking/debit cards, smart cards and cellphones)

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