No hope for the poor

Ghana Social Watch Coalition

While the vast majority of workers, and especially women, are employed in the informal economy, only a minority of workers, mostly in the formal sector, benefit from the current national social security scheme. And the proposed ‘three-pillar’ approach would continue to benefit only a small few. Clearly, a different national social security system that specifically targets women, the informal sector and other disadvantaged groups is needed to ensure a minimum lifeline provision for the poor and marginalized.

Every country must commit to thedisadvantaged by having a social development policy that promotes universal andequitable access to a minimum set of social services and resources. This ensureslong-term improvements in the living standards of both women and men in thesociety.

In Ghana, there is a recognized basket of social provision. This includes accessto water and sanitation, universal tuition-free basic education for allcitizens, and primary health care. Other basic social services are foodsecurity, social security (such as pensions), housing, and economic servicessuch as energy and transport infrastructure. A more comprehensive approach tosocial security must include access to a minimum level of income for allcitizens of working age and all families (The Women’s Manifesto for Ghana,2004). Thus a good social security system must provide protection against basicincome loss in cases of illness and injury, old age and retirement, invalidity,and family responsibilities such as pregnancy and child care. Such benefits areimportant especially for women, given the particular inequalities anddisadvantages they experience. This paper attempts to examine Ghana’s socialsecurity system from a historical and gender analytical perspective to identifychallenges and options. It traces the system’s historical development andaddresses the current attempts at privatizing the sector and its implicationsfor women.

Women, a majority of the informal sector

The country has a working population ofnine million, with women accounting for 51% of the total. The formal economyemploys about 13.7% of the labour force aged between 15 and 64, while theremaining 86.3% work in the informal economy – divided between 52% inagriculture and 34.3% in non-agricultural activities (ILO, 2003). Womenconstitute 77% of the informal sector, and engage in both agricultural andnon-agricultural activities. Informaltrading is a major source of employment for many Ghanaians, especially those inthe urban centres: there are 1.9 million households operating 2.3 millionsmall businesses, and women operate over 66% of these small businesses. Over 56%of all non-farm enterprises are engaged in some trading activity, 24% inmanufacturing, and the remainder in other activities (ILO, 2003).

Clearly, the vast majority of workers in Ghana are in the informal economy. Yetonly 10% of the workforce, mainly those in the formal sector, benefit fromsocial security (SSNIT, 2005). As a result, workers in the informal economy,most of whom are women, have no social security coverage. This is in spite ofthe fact that membership in the Social Security and National Insurance Trust(SSNIT) is supposed to be open to all who work in the informal economy, on avoluntary basis.

The history of social security

Before the introduction of a formal social security system in Ghana, theextended family system served as a source of social protection and a cohesiveunit that provided security for vulnerable groups. But as Kumado and Gockel(2003) have noted, the advent of colonization changed this traditional system asmen moved into employment centres to work in the mines, cocoa farms or the civilservice. Women were virtually left on their own to engage in food production tosustain household members. The government and some private sector operators thenintroduced private social security schemes aimed at providing wage earners whowere mainly men with some form of social protection.

The Compulsory Savings Act of 1961 sought to provide pensions for formal sectorworkers. The scheme created, however, collapsed through gross mismanagement. Amore comprehensive social security system was subsequently introduced throughthe Social Security Act (Act 279) passed by the First Republican Parliament in1965. The Act fixed the retirement age at 60 years for men and 55 years forwomen. It further established a Social Security Fund for the provision ofsuperannuation, invalidity, death/survivors, emigration and unemploymentbenefits. It also provided for the payment of lump sums or what is known as the‘Provident Fund’. In terms of contributions to financing the scheme, workerswere to contribute 5% of their monthly basic income while employers were to add12.5%.

Weaknesses in the social security scheme adopted in 1965 were rectified throughNational Redemption Council Decree (NRCD) 127 of 1972. Under it, the SSNIT wasestablished as an independent corporate body to administer the scheme. Theretirement age was reduced from 60 to 55 years for men and 55 to 50 for women.The lump sum payment to retired workers was retained. The scheme also providedfor coverage for up to five employees.

In 1991, the government of the Provisional National Defence Council (PNDC)repealed the 1972 social security decree, NRCD 127, and replaced the scheme thenin place through PNDC Law 247 which was an attempt to redress the major defectsof the provident fund scheme. Therefore, the main thrust was the conversion ofthe system from the payment of lump sum benefits into a pension scheme underwhich monthly payments would be made to members until death. Benefits enjoyedunder this law are superannuation/old age pension, death/survivors benefits andinvalidity benefits. The scheme is supposed to be open to all classes ofemployees in both the formal and informal economy.

As a result of the inadequacies in the social security system’s coverage ofthe working population, the majority of Ghanaians have continued to rely oninformal social security schemes such as social networks, trades associations,credit unions and remittances to meet their social security needs. These schemesoblige individuals, groups and communities to offer mutual support through thepooling of resources based on their own principles of insurance to extend helpto each other within certain basic regulatory conditions. Such self-financedinitiatives are essentially based on trust and the capacity of the group tomanage the scheme. Informal social security schemes are the main sources ofsecurity for the poor, allowing them to continue to meet contingencies such ascare and support for children, the aged and the disabled. However, there havebeen major changes in the form of mutual aid based on social networks, resultingin low well-being outcomes for the poor across all age groups. This is evidencedby health-related problems like malnutrition, livelihood stress, and thedetention of newborns in maternity wards pending the payment of hospital bills.

The National Health Insurance Scheme

In 2004 the government unilaterally decided to use 2.5% of workers' SSNITcontributions to establish what it called the National Health Insurance Scheme(NHIS).[1]The NHIS was created to replace the ‘cash and carry’ system, based on theprinciple that the inability to pay the costs incurred at the point of serviceshould not prevent access to health care services. While three types ofinsurance schemes were available under the law – district-wide mutual healthinsurance, private mutual health insurance and private commercial healthinsurance – the government opted for a district mutual health insurance schemethroughout all 138 districts in Ghana. Contributions are based on the ability topay, and workers in the informal economy have been categorized into socialgroups to enable individuals within each category to pay according to what theycan afford.

TABLE 1. Contributions payable by socialgroups in the informal sector

Name of group


Who they are

Minimum contributions payable annually

(USD 1 = GHC 9,000)

Core poor


Unemployed adults without any identifiable support for survival


Very poor


Unemployed but with identifiable financial support from sources of low income

GHC 72,000



Employed adults with low income and unable to meet their basic needs

Middle income


Employed adults who are able to meet their basic needs

GHC 180,000



Adults who are able to meet their basic needs and some of their wants

GHC 480,000

Very rich


Adults who are able to meet their needs and most of their wants

Source: Government of Ghana, <>

Women who were interviewed for a recent study (Akakpo, 2006) fell withincategories B and C, which means they are either ‘poor’ or ‘very poor’and are only able to pay the lowest premiums (see Table 1). It is the right ofevery citizen to have equal access to good health care, but there are reports ofdifferential treatment given to NHIS card-holding patients and non-card-holdingpatients at hospitals. For example, because the women sampled fell within thecategory with the lowest paid premium, they were hardly ever given medicines,and instead were given prescriptions to buy them on their own.

Privatization of social security

Women have largely not benefited from Ghana’s social security system becauseof the large proportion of them employed in the informal sector, which is mostlynot covered by the system. Yet even beneficiaries in the formal sector havecomplained about the inadequacy of monthly pensions and their inability to meetthe basic necessities of life. Such concerns prompted the government to set up aPresidential Commission on Pensions in 2004. The Commission was to examineexisting pension arrangements and to make appropriate recommendations for asustainable pension scheme to ensure retirement income security for workers,especially those in the public sector.

The Commission proposed a three-tier pension structure, comprising two mandatoryschemes and a voluntary scheme. They suggested that the SSNIT should berestructured to implement a mandatory State Social Security Pension Scheme,which would pay only periodic monthly and other pension benefits. With regard tothe second tier, the commission recommended a mandatory privately managedoccupational pension scheme, preferably a defined contribution pension schemewith payments mainly in the form of lump sum benefits. Finally the commissionsuggested a third tier which would be a voluntary, privately managed personalpension scheme offering attractive tax incentives (Government of Ghana, 2006).

The government issued a White Paper on 25 August 2006, virtually acceptingall the recommendations made by the Commission without questioning any aspect ofthe report.

The challenge: higher pensions andinclusion

A recent study by the Research and Policy Department of the Ghana TradesUnion Congress (GTUC, 2006) revealed that salaries in Ghana are lower than thosein numerous countries in Sub-Saharan Africa with the same level of economicdevelopment.

One of the implications of the low salaries in Ghana is the poorpensions paid to retirees. Currently, the lowest pension that SSNIT pays is GHC182,000 (USD 20.50) per month, while the highest is GHC
14.9 million (USD1,675) per month.[2] Thus pensions are not onlylow, but their distribution also favours very few people, primarily men in theformal economy. The proposed ‘multi-pillar system’ will not address theseshortcomings; on the contrary, it will worsen disparities and exclude many more,especially women, from enjoying social security.

In terms of the distribution of pensioners by gender, of the 66,971 SSNITpensioners at the end of 2004, only 7,326 (11%) were women (SSNIT, 2005).Furthermore, despite the launching of an informal sector retirement scheme inJune 2005, by the end of the year only 13,577 informal economy workers wereregistered with the SSNIT (6,577 who had signed on under the new scheme,together with roughly 7,000 volunteer contributors), as compared to 898,368formal sector contributors (SSNIT, 2005). This underscores the need for a morecomprehensive scheme to address the needs of both men and women in both theformal and informal sectors.

The three-tier approach which the Pensions’ Commission has recommended to thegovernment is basically the World Bank’s template for managing pensionsthrough scaling down public schemes. The privatization of pensions will createan opportunity for a very few private individuals to access cheap funds at theexpense of the majority of citizens. Already a number of US firms areadvertising their private pension schemes in Ghana. This approach has failed inLatin America (Bakvis, 2005) and is unlikely to work here. Once the money goesinto private funds, the government would be deprived of resources to invest insocial services. Women’s socioeconomic well-being in particular would besacrificed, especially in terms of their ability to access affordable healthcare, safe drinking water and improved energy technologies.

Research by the International Confederation of Free Trade Unions (ICFTU) hasshown that the ‘multi-pillar’ system results in lower benefits for retirees,partly due to the extremely high administrative costs for private accountsencouraged by banks. Also, the fiscal cost of diverting contributions away frompublic pensions into mandatory private funds puts pressure on governments toreduce spending on other public services.

Clearly, a different national social security system that addresses issues ofinequality, and specifically targets women and other disadvantaged groups, iswhat is needed to ensure a minimum lifeline provision for the poor andmarginalized in rural and urban communities in Ghana.


Akakpo, P.B. (2006). “Social Protection for InformalEconomy Workers: The Case of Women Traders in Ghana”. MA Research Paper, Human Resources and Employment. The Hague:Institute of Social Studies.

Bakvis, P. (2005). “Social Security Systems and Neo-Liberal Challenge”. Apaper presented to the leadership of the International Confederation of TradeUnions.

Coalitionon the Women’s Manifesto for Ghana (2004). TheWomen’s Manifesto for Ghana. Accra: Combert Impressions. Available from:<>.

Gockel, A. F. (1996). The Formal Social Security Systems in Ghana. Accra: Friedrich EbertFoundation.

Government of Ghana (2006). PresidentialCommission on Pensions Report. Accra.

GTUC (Ghana Trades Union Congress) (2006). “Earning in the Private Formal andInformal Economies in Ghana”. Discussion paper presented to the leadership ofGTUC by the Policy and Research Department of GTUC. Accra.

ILO (International Labour Organization) (2003). “Decent Work Pilot ProgrammeCountry Briefs”. Background document for the ILO Staff Seminar PromotingPolicy Integration at the National Level Country Strategies on Decent Work.Turin, 9-11 July.

Kumado, K. and Gockel, A. F. (2003). SocialSecurity in Ghana. Accra: Friedrich Ebert Foundation.

SSNIT (Social Security and National Insurance Trust) (2005). AnnualReport. Accra: Checkpoint Ghana Limited.


[1] <>
[2] Figures as ofApril 2007. <>