Local economic realities, from the Eskom disaster to massive youth unemployment, make the prospect of an ageing South African population daunting.
If you think the hand-wringing of the elites in Davos each January is an entirely pointless exercise in hypocrisy, you’re not alone. Or as The Guardian put it, “has there ever been a meeting-that-should-have-been-an-email so glaringly as Davos?”
At the World Economic Forum (WEF), the masters of the universe’s political and financial worlds “opine sombrely about solving poverty and climate change”, even though the mechanism by which they arrived in Switzerland was, in many cases, on a procession of party-of-one jets.
And yet, if we look past the performative self-aggrandising from sanctimonious CEOs (and non-profit organisations which are roundly ignored the rest of the year), there are occasionally deeply relevant debates that deserve a wider hearing. Take, for example, the talk this year of the “longevity economy”, or the “ageing crisis”. Or, more specifically, the escalating pressure on governments to finance a world of more retirees than ever.
As the WEF itself put it: “Global life expectancy has risen from 34 years in 1913 to 72 years in 2022, and is expected to continue along that trajectory.”
Since 1960 alone, life expectancy has risen by 20 years globally — which has some rather serious implications for retirement.
Credit ratings agency S&P Global has already spoken of a “global ageing crisis” and, as The New York Times reported last week, “unless countries begin serious policy action to cut age-related spending … a potential avalanche of longevity-fuelled junk ratings will follow, raising costs for future generations.“
You might say that’s pretty low on the priority list for most South Africans who are, right now, otherwise focussed on how to survive the daily power cuts which, this past month, escalated to the extent that many households had power for only half the day.
And yet this presents a clear threat in a country with a unenviable socio-economic twist: most of the youth is unemployed, only seven million people out of 60 million contribute to pension funds, and more than 18 million people depend on a grant of some kind.
Consider that last year, the government spent R1.3 trillion on “social services”. Healthcare, including public hospitals, got R259bn, old age grants clocked in at R92bn, child support grants at R77bn, social security funds got R84bn, and “other grants” amounted to R78.9bn.
But for the first time, these “social services” took up more than half of the government’s entire spending bill of R2.1 trillion — and the pressing concern is that this trajectory is only likely to accelerate. The fact is, the government has no option, constitutionally and ethically, but to care for its elderly, even if Treasury was quick to argue that “increases in social grants need to be fiscally sustainable”.
The figures paint a scary picture. Amid the rather alarming welfare picture, South Africa’s life expectancy is steadily rising too: from 53 years on average in 1960, it has now hit 64.8 years, according to the World Bank. People are living longer, in other words, even as the population is expanding faster than the country can create jobs.
In an ideal world, workers would be allowed to work for longer, past retirement age. As Lynda Gratton, a professor of management practice at London Business School, told The New York Times: “I would like companies to have to report how many people are employed at different ages so we can get a sense of, ‘Are you employing people in their 60s and 70s?’”
But in South Africa, many companies view retirement as an opportunity to shrink their workforce. And anyway, there’s already a youth employment crisis on our hands, so getting them into jobs is already a priority for many companies.
BIG demand
Will South Africa’s retirement apparatus be able to handle any “ageing crisis”?
Intuitively, you wouldn’t want to bet on too many practical solutions emerging from the governing party, the ANC, whose instinct seems to be to spend out of any crisis, as the ballooning welfare bill illustrates.
In December 2022, policy documents presented at the ANC’s elective conference spoke of how the welfare system “should be protected from inflationary pressures, and should be expanded to provide for basic incomes as fiscal space allows.”
This underscores, again, that the party’s policymakers aren’t averse to denying fiscal reality when the mood strikes. This is despite the fact that finance minister Enoch Godongwana has repeatedly warned that the National Treasury doesn’t have the cash to even continue the monthly Covid grant of R350 per month, let alone a basic income grant of at least double that number.
As it is, the power crisis at Eskom bears eloquent testament to the ANC’s unwillingness to face economic realities. You probably wouldn’t want to see its action plan to tackle the “longevity economy” either.
