WHEN I turned 17, I left home and started work. With my first pay cheque, my father took me into the Old Mutual (OM) office and instructed me to take out a policy that would mature when I was 65 and give me a pension. I filled in the forms and then a bank stop order to pay the subscription every month. When I did so the local pound was worth 2,5 UK pounds. My bank faithfully paid that monthly contribution for the next 48 years. Over the next 48 years I increased my insurance cover with four more Old Mutual contracts and when I was a senior executive, my employer kindly advised me that if I paid 10% of my salary to their pension Fund (also run by the Old Mutual) they would top it up with another contribution of the same value. I was set up for life.
When I turned 65, Old Mutual never contacted me. The country was in the throes of a massive crisis and I was in business and never really worried about my hidden savings with the Old Mutual. However, when the crisis passed and we dollarised in 2009, I saw an advertisement in the newspaper asking me to come to Old Mutual offices to discuss my insurance and pension policies. My wife went in as we have always managed our financial affairs through her and she was told that the value of my five policies was such that they wanted to pay us out completely instead of sending us a small meaningless sum each month. My pension, they told her, was US$15 per month. She burst into tears and asked how we were expected to live on such a sum. My salary as an MP in 2009 was US$50 per month.
Just as well I had a business. But for tens of thousands of Zimbabweans, this was a catastrophe. A member at my son’s church collected his “pension” and went home and committed suicide.
Then there is the issue of how do we provide for the education of our children? We all know that if we cannot give our children a decent start, they will be unable to find their way in this increasingly complex world.
The digitalisation of the global economy has just made things worse, we live in a divided world where the “haves” get richer and the rest continuously slide into poverty.
This divide has always been there, but our global system today and the ease of movement among the continents, has made these differences ever more critical.
Our budget collects about 25% of our formal national GDP — quite a high ratio for a low-income developing State and this is because anyone who works in the formal sector, pays very high levels of taxation.
The Boston Tea Revolt was over a 5% tax on tea! Zimbabweans find that laughable. But even so and even though we spend over 20% of the budget on education, we cannot provide the great majority of our children with even a half decent education. Over 95% of our children go to school but I would hazard to say that a great majority learn very little, certainly nothing like what they need to compete.
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So here in little Zimbabwe we have a tiny system of private and community schools who provide a very high standard of education in a well-rounded and sophisticated system that makes the product much sought after. But the rest come out semi-literate and numerate. Government schools here are simply a disaster — large classes, poorly paid and unmotivated teachers and almost no support services.
Health services are the same. Here it’s not just the absence of adequate resources but also the way the system is organised and managed. As an employer, when I had a staff member who needed treatment, they would always choose a mission or church-related hospital or clinic. State institutions are regarded as mortuaries. Clients waiting to see a doctor for hours on end, then discovering that they did not even have disinfectants to clean the place, let alone medicine.
The global situation in this area does not teach us anything. The National Health Service in the UK absorbs an enormous portion of the budget but does not deliver. Clients wait for hours for an ambulance, months for an appointment to see a doctor and years to see a specialist. It may be free, but it costs a great deal and does not deliver. The most expensive system in the world is in the US, funded by insurance and grossly over-developed. Those who have insurance cover are able to get what they need, but this is the most expensive health system in the world, and despite former President Barack Obama’s efforts, leaves up to a third of all Americans behind.
Add to these basic human needs, the need for shelter, clean water, transport and a healthy diet and three meals a day and you have a formidable task that faces every government in the world. How these needs are provided and maintained very much determines the quality of life for everyone. If you have money, anything is possible. If you only have a little, even the smallest need is a mountain.
In seeking to provide the basics there are three essentials — the system used to deliver, the resources available and the management of the whole thing. I once had an employee injured in an accident — he broke his leg. He was admitted to a local State-managed hospital and after a few days was released. I got the account two years later. Great for me, not so great if you are trying to make the hospital (which is a business) work. Mission hospitals are not any better than State hospitals from an equipment and staffing perspective, but the motivation is totally different.
My own view is that only community-based and managed systems work in the long term. Schools require the participation and support of the parents. The State should support what the community does with a student grant and capital grants for development. We need to give every child access to the internet and electricity so that they can connect and learn on their own. We need to give our children a healthy meal once a day at school to make sure every child has the physical capacity to study.
It's the same with health services, community-based healthcare clinics with advisory services online are the solution to 85% of all health needs. A basic healthcare system is affordable and possible. Government support via Treasury can make the difference in poor communities that simply do not have the resources. Medical aid systems that are community managed and a private health system that is competitive, is the solution for those who can look after themselves. Above all communities must have choices and the system used must be competitive in character.
It is much the same for shelter and basic food needs, in the former Soviet Union 90% of household food came from 3% of land that was allocated for private use. Give people small plots of land and they will build houses for themselves. When States take on the responsibility of providing water, the systems inevitably break down — almost all successful water delivery schemes are privately managed and controlled.
As for pensions? I will never advise anyone to take out a policy with a company or to subscribe to a scheme managed by a company. Invest your surplus funds when they are available in an asset that will not depreciate or devalue and control it yourself.
- Eddie Cross is an economist and former Bulawayo South legislator. He writes here in his personal capacity.
