Covid-19 keeps exerting pressure on the world of work and pension funds.
The coronavirus disease has disrupted economies worldwide. Malawi is no different.
In his first weekly radio address on August 1, President Lazarus Chakwera affirmed that the Covid-19 pandemic has severely disrupted the country’s economy and social order as several businesses have been forced to either close or scale down operations by laying people off or sending them on leave.
He further said that in some cases, entire sectors and industries have ground to a halt. This is unmistakable in the tourism industry, international travel and education sector.
Pension funds in Malawi will be hit hard by the impacts of Covid-19.
As the pandemic brings businesses to their knees, increasing job losses mean reduced contributions to the pension fund and a rise in requests for early access to accumulated benefits.
On the other hand is the risk of diminished investment returns as the financial markets react to subdued economic growth amid the ravages of the pandemic.
The pressure on pension funds will require rigorous policy consideration to mitigate devastating socio-economic effects both immediate and long-term.
Primarily, pension savings guarantees one an income in the grey-hair years or when permanently disabled. When one dies, it constitutes an inheritance for the deceased’s dependants.
According to the Pension Act, pension savings can also be utilised for economic development as they provide long-term and affordable source of capital for business projects and expansion. In this way, they can stimulate job creation and competition in the economy.
Therefore, it is imperative to ramp up the implementation of measures to reduce the impact of Covid-19 in workplaces to lessen the pressure pension fund may face.
The International Labour Organisation four-pillar policy framework highlights the need for large-scale, integrated policy measures.
These include (1)stimulating the economy and jobs; (2) supporting enterprises, employment and incomes; (3)protecting workers in the workplace; and (4)social dialogue involving governments, workers and employers to find solutions.
In line with pillar one, pension savings can be utilised to stimulate economic growth and jobs through bridging loans to selected affected employers.
Under pillar two, affected enterprises can utilise the debt market to get funding from pension funds to grow new opportunistic businesses that will create better income and employment.
During any crisis, there is always an opportunity. In Malawi, opportunities are many, but usually hidden in informality.
For example, agriculture-based products and services present an opportunity for economic growth, including revenue and job creation, but it is heavily politicised.
Another prospect where pension savings can be invested is the water, sanitation and hygiene (Wash) sector. As the world slowly opens up, companies, schools, public places and other spaces will require proper sanitisation and hygiene as primary preventive measures against Covid-19 spread.
Under pillars three and four, market players within the pension industry, including life insurance companies and asset managers, can utilise their corporate social responsibility plans to support Covid-19 or occupational health and safety messages to protect workers.
They can also support social dialogue meetings to understand the challenges employees and employers are facing in the world of work.
As the world slowly accepts that the Covid-19 pandemic may take longer to end, policy measures that preserve both the world of work and pension funds should be central. The two can support each other in more ways than just member contributions and benefit payment.