Two-pot pension in South Africa and stabilization plan in Nigeria

Welcome back to the Vault.

This week we are discussing:

  • Two-pot retirement reform in South Africa
  • Emergence of Nigeria’s Accelerated Stabilization and Advancement Plan, and World Bank Support
  • Kenya’s inflation climbs to 5.1%

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Ramaphosa approves two-pot pension reform

President Ramaphosa has assented to the Revenue Laws Amendment Bill of 2023 that introduces a two-pot system, adding a further element to the bouquet of changes to the country’s retirement fund regime since 2012.

The new system was adopted to address complaints of lack of access to retirement funds by contributors even in cases of emergency or financial distress. Workers resorted to resignations to allow them have access to their retirement fund savings to pay off debt – which was economically detrimental and undermined retirement planning. The new retirement system comprises:

  • Savings component: This component will contain one-third of the total individual retirement fund contributions which will be available for withdrawal before retirement without any need for resignation.
  • Retirement component: Also housed within the currently available retirement fund like the savings component. Individuals are expected to contribute two-thirds of the total individual retirement fund which will be preserved until retirement.

All retirement savings accumulated before the implementation of this two-pot retirement system will remain as a vested component, while 10 percent of the vested component or R25,000 (whichever is lesser) will be made available as seed capital for the savings component. Withdrawals from the savings component may only be made once a year with a minimum withdrawal of R2,000 and no maximum withdrawal limit.

The new system does offer greater flexibility for access to retirement savings but concerns exist as to whether the reform partially defeats the purpose of a retirement/pension fund by increasing the risk of financial vulnerability after retirement.

Nigeria’s Accelerated Stabilization and Advancement Plan emerges and gets World Bank boost

As Nigeria’s food inflation (and inflation generally) continues to defy seemingly best efforts, the federal government appears to be considering far-reaching measures to forcefully and quickly reverse the trend.

Following various consultations, Nigeria’s finance minister (and coordinating minister of the economy) presented an Accelerated Stabilization and Advancement Plan (the “Plan”) to President Tinubu on 5th June 2024. The draft ASAP, produced by the Emergency Taskforce of President Tinubu’s Economic Management Team, is targeted at alleviating the impact of price increases on families, farmers, and businesses. As reported, the Plan outlines measures to tackle the economic challenges threatening the administration’s reforms and advance President Tinubu’s 8 economic priority areas, including Agriculture, Energy (Oil, Gas, and Power), Health and Social Welfare, and Business Support.

The President is expected to finalise and issue the Executive Orders for implementation of the Plan within the next two weeks.

On a related note, Nigeria has secured a US$ 2.25 bn financial support approval from the World Bank to finance the country’s reform program. US$ 1.5 bn is earmarked for Nigeria’s Reforms for Economic Stabilisation to Enable Transformation (RESET), while US$ 750m is allocated to Accelerating Resource Mobilisation Reforms (ARMOR) Program-for-Results.

According to the World Bank, the financial package “supports Nigeria’s ambitious, multi-year effort to raise non-oil revenues and safeguard oil revenues to promote fiscal sustainability and provide sufficient resources to deliver quality public services.”

Data Vault: Kenya’s inflation rate rises to 5.1%

Kenya’s inflation rate increased to 5.1 percent in May 2024 —a slight increase from 5.0 percent in April 2024. The major drivers of this increase were prices of commodities under Food and Non-Alcoholic Beverages, which saw a 2% increase, and Housing, Water, Electricity, Gas, and other fuels, which saw a 1.2% increase between April and May 2024.

Source: Kenya National Bureau of Statistics,  2024. Analytics by Policy Vault.

What we are also following

We’re also tracking some events in the news, and how they may affect the decisions of policymakers.

Ghana | Ghana rolls out free dialysis sessions for patients

Ghana’s National Health Insurance Authority (NHIA) has announced free dialysis sessions for citizens under 18 and over 60 suffering from kidney diseases, starting from June 1 to December 2024. Patients aged 18 to 59 at specific hospitals will receive a subsidy covering two dialysis sessions per month.

To implement this, the government and parliament have allocated GH¢2,000,000.00 for this initiative in addition to GH¢2,400,000.00 from the NHIA’s Corporate Social Responsibility budget.

South Africa | Pres Ramaphosa approves the South African Institute for Drug-Free Sport Amendment Bill

President Cyril Ramaphosa has signed the South African Institute for Drug-Free Sport Amendment Bill into law, aligning South Africa with the World Anti-Doping Code of 2021. The new law made several amendments concerning the South African Institute for Drug-Free Sport (SAIDS), which operates as a public entity under the Department of Sport, Arts, and Culture.

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