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Uganda’s Old Age Pension: Who Benefits?

24/10/2013

Uganda has been piloting two social protection schemes over the last few years, under its Expanding Social Protection (ESP) Programme. This is a 5-year government programme, supported by DFID and Irish AID. The pilot schemes are intended to gather evidence on impacts of cash transfers as a means of informing national policy. They have been progressively implemented from 2011, in a total of 14 districts. One is an old age pension – known as the Senior Citizens Grant (SCG) – and the other a Vulnerable Family Grant.

The SCG is provided to those aged 65 years and over in the pilot districts, except in the Karamoja region where life expectancy is shorter and eligibility was reduced to 60 years. The grant is currently 24,000 Ugandan Shillings per month (up from 23,000 Shillings when the programme started), which is aroundUS$9.50.

ESP has been interested in investigating possible multiplier or flow-on effects from this modest pension payment in local communities, to see if it impacts broader livelihoods and the local economy. Working with the ESP research coordinator Jane Namuddu and a small team of assistants, we conducted a rapid qualitative study to see what we could learn. We interviewed SCG recipients, family members and traders in two of the early pilot districts –Kiboga and Kyenjojo – over two weeks in June 2013.

Many of the SCG recipients interviewed recounted stories of subsisting in dire circumstances prior to the SCG and non-recipients recalled elderly people having to forage in the forest or beg for food during hard times. According to SCG recipients, their adult children struggled to care for their own families and were often unable to support them. All felt that the pension, however small, had made a significant difference to their lives.

Notable were the positive effects of elderly pensioners now being able to plan and save (and also to borrow) because of the certainty of their monthly income. SCG recipients spoke about saving – through savings and loan groups – to purchase more expensive items such as goats and other small livestock, which would provide additional income. Indeed, many of those interviewed had well thought through budgeting and savings strategies for making the most out of their small monthly payment. Many SCG recipients were also now able to get goods on credit because traders knew they received a monthly payment and would pay them back. (Conversely, other recipients were very happy that they no longer needed to ask for credit, because they could now pay for things themselves).

Apart from the direct benefits to SCG recipients – who reported improvements in their well-being, health and living conditions, with these views echoed by others in the community – interviewees routinely reported that local businesses were also benefiting. There were noticeable increases in economic activity in their communities, which they felt was good for overall development of these rural areas.

Almost every local general store owner we interviewed reported that business had improved after the introduction of the SCG, in some cases significantly and especially on SCG payday. Direct expenditure reported by individual SCG recipients was quite small, though regular, with their purchases usually limited to basic household needs, including salt, sugar, soap, cooking oil and basic foodstuffs. It is possible  that others in the community benefiting indirectly from the introduction of the SCG also increased their purchases from these stores, as many store-owners reported that they needed to restock more regularly and they opened their stores for longer hours now.

One clear difference mentioned by village traders was that business now continued around the year, whereas previously there would be a downturn at certain times in the agricultural cycle and during events such as droughts (as was the case when these interviews were done). In some areas, interviewees reported new shops and businesses had started up since the SCG, although we were not able to follow up to see whether there was any real link. However, thriving monthly markets certainly operated on SCG paydays around the paypoints, with both SCG recipients and others selling produce, foodstuffs and refreshments.

Male SCG recipients interviewed were particularly pleased to be able to afford to buy meat, a luxury some of them said they had not eaten for years. As a result, butchers were also doing markedly increased business. During the study, we passed people selling meat on the roadside not far from an SCG paypoint on payday, and they were doing brisk business.

Others in the community were also doing very well as a result of the SCG. Business was reportedly ‘booming’ for the boda-boda riders, young men providing the local motorcycle taxi service. As SCG recipients – or their nominated alternate – needed to travel to a designated paypoint every month to collect the payment, there was now guaranteed business for these young men, who might have several regular SCG customers every payday. In addition, there was increased business from trips to clinics or to take SCG recipients to larger towns where they could make purchases.

Casual employment was also being generated by SCG recipients. Those who had land but were not strong enough to work were saving up and using their SCG transfer to hire casual labourers to cultivate their land and grow crops for additional income. These labourers were sometimes hired from organized groups of young men but they were just as likely to be older men – and women – needing work. Some SCG recipients were also hiring labour to build or repair their homes. Saving to buy corrugated iron sheets for roofing was commonly reported.

Finally, one of the recurrent themes in interviews was the flow-on benefits to grandchildren of SCG recipients. Many SCG recipients spent part of their pension on school fees, books, uniforms and pencils for their grandchildren, who may or may not have been living with them. Family members living with an SCG recipient noted that they also benefited from the food and other purchases SCG recipients made, as well as being relieved of the burden of having to pay for healthcare and other costs for elderly parents.

While we used recognized qualitative methods, this was by no means an exhaustive study. However, in answer question on who benefits from the old age pension, in Uganda it would seem that quite a lot of people do.  And most of them are not old. This is not news: such flow-on effects have been noted in studies of cash transfers in other countries, such as Malawi. But the apparent multiplier effect from this small old-age pension payment in poor rural communities in Uganda suggests that rather than being seen as a potential drain on the national budget, a national old-age pension scheme should be regarded as an investment in the country’s economic development.

This blog is written by Fareeha Ibrahim, who works on food security and rural development for the Australian Agency for International Development (AusAID). This research and its findings are unrelated to the author’s employment with AusAID. The views expressed are those of the author and do not reflect the views or policy of AusAID or of the Australian Government. Her contribution to this research was self-funded.

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