Social protection in Lesotho: Innovations and reform challenges

Abstract

Given its current socioeconomic conditions and fiscal ability, Lesotho has achieved an impressive record in creating a basic social assistance and social protection system, informed by political commitment and through budget reprioritisation. It has set up and administered near universal schemes operating at scale with fairly low transaction costs, addressing core areas and serving vulnerable constituencies – including the aged, orphaned and vulnerable children and children of school-going age. A contribution-based comprehensive national social security scheme to provide coverage for Lesotho workers and their families is also planned. Nevertheless, the task of providing adequate social protection coverage faces systems and delivery challenges; several human development indicators have worsened, and most of the Millennium Development Goals are far from being achieved. There is scope for creating greater fiscal space by establishing a compulsory national contributory scheme, and donor support in the short to medium term is inevitable.

Keywords:

• comprehensive social security
• fiscal space
• social protection in Lesotho
• social security reform
• social transfers

1. Introduction

Bearing in mind the prevailing socioeconomic conditions and its fiscal ability, Lesotho has already achieved an impressive record in incrementally building a basic assistance system and a social protection floor. It has made substantial progress along the road to developing social protection initiatives to provide minimum levels of protection to everyone – even before this has become an official UN initiative – and introducing social assistance measures targeting the indigent and vulnerable. In addition, some acceleration has taken place in recent years. The programmes that have been introduced include, among others, a universal OAP (Old Age Pension) for those aged 70 and above, free primary health care and subsidised health services at public facilities, indigent support, orphans and vulnerable children support, free primary education and food security measures.

At the same time Lesotho is contemplating the establishment of a contribution-based comprehensive national social security scheme, to provide coverage for Lesotho workers and their families. This development is prompted partly by the insufficient protection available in the event of maternity, sickness, unemployment, occupational injuries and diseases, retirement, disability and survivorship (i.e. dependency).

In this paper I trace the socioeconomic context and current scope of these interventions, with particular reference to core areas of social assistance, social protection floor2 and social insurance-oriented initiatives and interventions. I highlight critical success indicators and identify deficiencies and shortcomings. I reflect on reform challenges facing policymakers, the legislature and service delivery institutions, and on how they can be meaningfully addressed. In conclusion I note that while impact evaluation studies of the various programmes have not yet been undertaken in Lesotho, it is evident that there is scope for improvement and synergy. In particular, I argue that there is scope for creating greater fiscal space to undertake further required reforms: international technical and financial support, at least in the short and medium term, remains imperative.

2. Contextual framework³

Lesotho is a small landlocked country3, with a population of approximately 1.9 million people. Poverty, deprivation and extreme vulnerability largely characterise Lesotho and the conditions in which Basotho live. The United Nations Development Programme (UNDP, 2012:para. 2) noted recently:

While, since its earlier years of political turmoil and conflict, Lesotho has made great progress in consolidating democracy following the successful 2002 general elections and local government elections of April 2005, the country still faces considerable development challenges, driven primarily by the effects of the high prevalence of HIV (estimated at 23 percent of the adult population, the third highest prevalence rate in the world). Lesotho's human development indicators have worsened rapidly over the last decade because of the increased mortality associated with HIV and resulting AIDS-related deaths since the 1990s. Life expectancy has been steadily declining over the past decade, dropping from 56 years in 1997 … to 35.2 in 2004 … Average incomes have also been falling during this period. As a result, Lesotho's overall position in the UNDP human development index (HDI) ranking fell steadily from 127 out of 174 countries in 1998 to 137 in 2003, then to 149 out of 177 countries in 2006.

Poverty and HIV/AIDS are endemic: 56% of Basotho are believed to live below the national poverty line, and 23.2% of the population are said to be suffering from HIV/AIDS. Food insecurity is prevalent, with the poor spending almost half of their income on food: 25% of the population are malnourished, and the severe 2007/08 drought affected 352 000 people (especially children) and required emergency interventions, involving in particular international agencies. There has, however, been a discernible improvement at national level in access to safe drinking water (UNDP, 2007, 2011a, 2011b, 2012). While there has been some improvement in the overall poverty rate, the poor have high dependency ratios. Due to the impact of HIV/AIDS, households headed by those aged 70 years or more have the highest dependency ratios, highlighting the need for social protection measures targeting both the elderly and the (orphaned) young (TWG, 2011).

While there has been a slight decrease in child mortality for children under five, infant mortality has in fact increased. In addition, maternal mortality is rising and is, according to the UNDP, among the highest in southern Africa (UNDP, 2011a, 2011b). Children in particular have been affected: 10% of all new HIV cases are children below four years of age (UNDP, 2007). The number of orphaned and other vulnerable children has been rising and was reported to be 220 000 in 2006, significantly up from 180 000 in 2004 (TWG, 2011; UNDP, 2011a).

From an overall perspective, both HDI (Human Development Index) and HPI (Human Poverty Index) trends have worsened (UNDP, 2007); by 2011 Lesotho's position had fallen to 160 out of 187 countries and territories in the UNDP human development ranking (UNDP, 2011a). Added to this is Lesotho's extreme vulnerability to shocks, which appear to be compounded by the weak economy and high levels of poverty. And further, while inequality may have decreased outside rural areas, and despite a much higher percentage of women working in the public sector, gender inequality and disparities remain, especially in the labour market (UNDP, 2007, 2011a). It is increasingly clear that Lesotho will not be able to meet most of the MDGs (Millennium Development Goals); in fact, only two are said to be on track in Lesotho: achieving universal primary education and promoting gender equality and empowering women (UNDP, 2011a).

Economic activity is generally low and often marginal. According to the 2008 Integrated Labour Force Survey, the overall labour force participation rate is 42.3% (MFDP, 2011). In 2008 the unemployment rate was 25.3% – this reportedly rose to more than 29% in 2009 (UNDP 2011a, 2011b). Almost 72% of the total employed population is only informally employed (MFDP, 2011). Of particular importance is the figure for those involved in subsistence farming, indicating the deep geographical segmentation in Lesotho – of the 617 000 people who are actively employed in Lesotho, 238 000 are engaged in subsistence farming (93.5% in rural areas and 6.5% in urban areas) (MFDP, 2011).

The labour market position described above is exacerbated not only by the impact of the current economic crisis on small underdeveloped countries such as Lesotho in particular but also by the economic impact of certain negative developments, especially in the regional context. Three issues need to be mentioned in particular. First, SACU (Southern African Customs Union) revenues, which constituted 60% of Lesotho's GDP in 2008, declined by nearly 60% in 2010/11 (UNDP 2011a, 2011b). A limited projected recovery is foreseen for the 2012/13 and 2013/14 periods. Second, for some years now Lesotho has experienced the impact of competition in textile manufacturing and the phasing out, in 2005, of the Multi-Fibre Agreement (UNDP, 2012). Third, Lesotho has also been at the receiving end of changes in the South African migration policy, which saw a drastic decline in the number of Lesotho mineworkers in South Africa. This has had a direct bearing on remittances paid over to Lesotho – for example, in 2001 remittances in Lesotho were estimated to contribute as much as 26.5% of GDP (Crush et al., 2005).

3. The building of a social protection edifice in Lesotho

The situation described above requires serious intervention. The government of Lesotho has embarked on several initiatives to address this. However, given the magnitude of what it has to deal with, comprehensive international support, emanating in particular from the UN and the EU, has to be relied on. This is evident from, among others, the various steps taken under the current UN Development Assistance Framework (2008–2012), the support given to disaster management by the UN, and the activities of UN agencies such as the UNDP, the UN World Food Programme and UNICEF (the UN Children's Fund) (UNDP, 2011b, 2012). In addition, extensive support is provided by the ILO (International Labour Organization) in establishing a comprehensive contribution-based social security (i.e. social insurance) system that will provide short-term and long-term benefits (retirement, disability, survivors, occupational injuries and diseases, sickness, maternity and, later, unemployment benefits) – essentially for those who are formally employed within the framework of an employment relationship, but to be extended to own-account workers and those who work informally (ILO, 2011a).

To inform the creation of a social protection floor, with particular emphasis on those categories of persons who operate on the margins of society and who are generally poor, a policy agenda supported by a regulatory framework has been incrementally developed. Overall, this process has been guided by the adoption of Lesotho's National Vision 2020 (GoL, 2003), a 2005 poverty reduction strategy paper and several NSDPs (national strategic development plans) – the NSDP for 2012/13 to 2016/2017 is currently being developed, while an interim national development framework 2009/10 to 2010/11 covers the period leading to the new NSDP (GoL, 2005, 2009). A national social security policy was formulated in 2002 (TWG, 2011). These policies – as is the case with a host of sectoral policies in areas such as health, education, and OVCs (orphaned and vulnerable children) – were mostly developed with the support of international organisations and donor agencies. The regulatory framework covers parts of the state-provided social assistance, social protection floor support and contribution-based social insurance interventions. These laws include:

•	as far as social assistance is concerned, the OAP Act, 2005, the Education Act, 2010, and the Children's Protection and Welfare Act, 2011; and
•	as far as contribution-based social insurance measures are concerned, the Workmen's Compensation Act, 1977,4 the Pensions Proclamation, 1964, and the Public Officers' Defined Contribution Pension Fund Act, 2008.

However, as is discussed later in this paper, both the policy and regulatory frameworks are in many respects incomplete and often do not reflect a rights-based approach.

3.1 Social assistance and social protection floor initiatives

A key social assistance programme of the Lesotho government is the OAP. Introduced in 2004, this is payable to Lesotho citizens (other than an ex-civil servant who draws a government pension of a higher value) aged 70 years and above. Since the pension is not subject to a means or income test, it is therefore in principle a universal pension from the perspective of Lesotho citizens. The current value of the pension is 300 maloti (US$33) per month – incrementally increased from 150 maloti (US$16.5) in 2004 to 200 maloti (US$22) in 2007, and to 300 maloti (US$33) in 2009. The legislative basis for the payment of the pension is informed by the OAP Act, 2005, and the OAP Regulations, 2007. The pension is administered by the Ministry of Finance and Development Planning. Approximately 83 000 Basotho (4.5% of the population) are entitled to the pension, which for demographic reasons reaches more females than males. The number of pensioners covered by the scheme increased by 30% from 2004 to 2011, while the expenditure (288 million maloti – US31.8 million – for the year 2010/11) has risen five-fold over the same period, constituting 3.6% of recurrent expenditure (TWG, 2011).

The OAP is a truly national programme, fully funded from government's expenditure. Introduced in the face of initial donor opposition (EC, 2010) as a measure to bring about a more egalitarian society, and not merely to address poverty, the programme reflects strong government commitment and enjoys considerable political and societal support (EC, 2010). To enable government to shoulder the burden of expenditure, a fiscal reprioritisation took place. The OAP is largely funded from SACU revenues received by Lesotho, which indicates government's willingness to find and increase fiscal space despite the global economic crisis (EC, 2010; ILO, 2011b). It is, however, doubtful whether a scaling-up of the programme to include pensioners above age 60 would be financially sustainable given the current economic climate (EC, 2010). This large-scale programme is operated relatively inexpensively, as administrative costs account for only 2% of the organisational costs per unit of transfer (EC, 2010) – partly due to the use of post offices in Lesotho as the primary payment mechanism. However, a proper impact assessment of the programme has not yet been undertaken, although the African Peer Review Mechanism Lesotho Report of 2010 noted the perceived positive impact of the grant (APRM, 2010). Also, there has not yet been a concerted attempt to consider the OAP in the light of the rest of the social assistance programmes and social protection floor initiatives in Lesotho, and to link it in appropriate fashion to the social insurance framework. I suggest that this lack of a concerted attempt flows partly from the fragmented and disjointed nature of social security policy-making, provisioning and service delivery in Lesotho.

Cash transfers play a major role in alleviating conditions of poverty and vulnerability in Lesotho. The UN and implementing partners have been involved in a full roll-out of the Harmonised Approach to Cash Transfers since 2009 (UNDP, 2009, 2011b). In this regard, the Lesotho government launched a child grants programme (CGP) in 2009 that would reportedly provide a regular and unconditional quarterly cash payment of about $15.9 million between 2007 and 2011, with EU support channelled via UNICEF. The aim of the programme is to have financial resources available within households to ensure that vulnerable children can gain access to essential services (UNICEF, 2009). The CGP, for which the Ministry of Health and Social Welfare takes responsibility, pays out 120 maloti (US$13.25) per beneficiary (i.e. 360 maloti (US$39.75) per average three-member household) each quarter. This is intended to reach 50 000 children. The CGP has low transaction costs (5.6%) and is said to have a positive impact on food consumption, as was found in a recent rapid assessment of the programme (TWG, 2011).

Furthermore, in 2005 the Lesotho government adopted a policy framework to deal with the plight of OVCs (MHSW, 2005). In accordance with the provisions of the national policy, both cash and non-cash benefits, and services and facilities are provided to these children and their families. These include a regular stipend, free primary education (as is also the case with other non-vulnerable children) and related benefits, and payment of fees for post-primary studies and access (like anybody else) to the Loan Bursary from the Manpower Development Secretariat for the purpose of tertiary study (Bitso, 2009; TWG, 2011). In the meantime, a dedicated legislative framework that affects OVCs has been introduced in the form of the Children's Protection and Welfare Act, 2011. While this law does not specifically regulate the social transfers, it provides for a rights basis for the protection of children's rights, as aligned with international instruments and standards, in particular the UN Convention on the Rights of the Child and the Africa Charter on the Rights and the Welfare of the Child. Despite its shortcomings, it is evident that, given the nature and magnitude of the problems facing OVCs and the households in which they live, support to OVCs is a major programme of huge importance within the social assistance and social protection constellation provided by the Lesotho government.

Since there is an obvious overlap between the CGP and other social protection floor initiatives, such as food security programmes and cash transfers, care should be taken to ensure that an integrated approach aimed at maximum impact but avoiding unnecessary duplication is followed. Also, there is a need to ensure inter-governmental synergy and links with other (potential) service providers. Different ministries – including for example the ministries of Education, Health and Social Welfare, and Finance and Development Planning – are responsible for different parts of the support rolled out to OVCs. It is important that steps be taken to deal with the fragmentation in policy-making and service delivery and to develop integrated approaches and mechanisms for a coordinated roll-out of support to OVCs. Furthermore, it might be prudent and cost effective to develop closer links with government institutions at a lower level and with a range of NGOs that could be of assistance in rendering the range of services. Finally, as is the case with several other social assistance and social protection floor programmes, there is clearly a need to undertake a proper and overall evaluation of the forms and level of support rolled out to OVCs, as well as the supporting strategy and mode of roll-out (Olivier, 2010).

It has to be acknowledged that some of the programmes initiated by the Lesotho government have thus far achieved impressive results. One of these programmes, in addition to the above, is the Free Primary Education programme, which provides universal primary education to children of school-going age on a no-fee basis. This programme, which commenced in 2000, has already achieved a net enrolment of close to 84%, one of the highest in sub-Saharan Africa; it also encompasses other elements of support, such as school feeding schemes (UNDP, 2011a).

There is, of course, room for further policy development in order to address poverty and vulnerability. Apart from the need for integrated and coordinated programmes that include a holistic approach to the needs, circumstances and conditions of beneficiaries, it also appears necessary to adopt well-targeted issue-specific policies. One such issue is food insecurity. The 2008 Annual Report of the UNDP Resident Coordinator noted that there was not yet a clear, well-resourced government strategy to tackle food insecurity in the long term (UNDP, 2009). In fact, the need for appropriate interventions is emphasised by the increasing prevalence of malnourishment (said to have affected 25% of the population by 2009) and stunting, which has increased from about 30% in 2002 to 39% in 2009. Clearly, Lesotho is not on track to achieve the target for part of the first MDG, the eradication of extreme hunger (UNDP, 2011b). This is an area where an evident need exists for the adoption of a dedicated integrated policy framework and legislative basis, which should together ensure the rolling out of an appropriate programme aimed at addressing food insecurity in the short, medium and long term. Ideally, the policy and accompanying legislation should be aligned with international standards relating to adequate food and the right to be free from hunger – standards as embedded in article 11(2) of the International Covenant on Economic, Social and Cultural Rights to which Lesotho formally ascribed.

3.2 Social insurance framework

The contributory dimension of social security is extremely weak in Lesotho. One would expect that coverage should be extended to workers (and their dependants) on the basis of payment of contributions. That being the case, the assumption is that there would be a reasonable relationship between contributions paid and benefits made available, and that the benefits would provide a sufficient level of income maintenance to beneficiaries, rather than minimum income protection.

To this general picture there are, in the case of Lesotho, two important exceptions. The first is that in certain cases – in particular relating to the position of parliamentarians, politicians, judges and public servants still covered by the Pensions Proclamation of 1964 – social security benefits, and especially retirement benefits, are non-contributory, as these are paid out of the Consolidated Fund. The implication is that social security benefits for these categories of persons are effectively a public purse liability (Olivier, 2010). The second exception is that in the absence of a comprehensive national social security scheme, the burden of providing certain social security benefits is placed on the employer. This applies in particular to maternity benefits, sickness benefits, redundancy pay (in principle payable also in the event of retirement of a worker) and workmen's compensation, where the principle of employer liability, for which the employer must take out compulsory insurance, applies. This raises, among others, the question of affordability, in particular in an environment of general socioeconomic deprivation, where many employers, especially small and medium-sized employers, face severe financial constraints (Olivier, 2010).

Furthermore, placing the burden for paying benefits solely on the employer is (in certain cases) prone to disadvantage women and thus distort gender representation in the labour market. This applies in particular to maternity benefits and, to some extent, severance benefits. For example, in the case of maternity benefits, the ILO is of the opinion that these benefits should be provided through a mandatory social insurance system or public fund. The rationale for this provision is that employer liability acts as a ‘disincentive for the employment of women of a child-bearing age’, as it is likely to influence employer hiring policies (ILO, 2000:172). Similarly, burdening the employer with the sole responsibility for paying sickness benefits and individual liability for workmen's compensation may encourage discrimination against incapacitated employees, and hence be a source of disability discrimination.

Three of the core contingencies, besides occupational injuries and diseases, affected by insufficient provision and regulation in Lesotho are maternity, sickness and retirement. As far as maternity is concerned, the position in the private sector in Lesotho appears to be as follows – with specific reference to the provisions of the Labour Code of 1992 and the Labour Code Wages (Amendment) Order, 2009:

•	female workers are entitled to a total of 12 weeks' paid maternity leave – payment of maternity benefits is an individual employer liability (restricted to two confinements per employee);
•	however, in the textile, clothing and leather manufacturing industry the period of paid maternity benefits is two weeks; and
•	the dismissal of a female employee during the period of statutory maternity leave automatically constitutes an unfair dismissal.

Full details of maternity protection available to public servants have not been gazetted, although the period of maternity leave is reportedly determined to be two months (Regulation 81 of the Public Service Regulations, 2008, provides for ministerial determination). It needs to be noted that the payment of maternity benefits in Lesotho is an employer liability. In the case of public servants, this implies a fiscal liability, to be provided for from the annual budget.

While some provision is made for maternity protection in the Lesotho legal framework and practice, it is evident that the current scope and level of protection disadvantages working women, is insufficient and inconsistent, and that consideration should be given to making the payment of maternity benefits a public scheme, rather than an individual employer liability. The main shortcomings appear to be the following (Olivier, 2010:24–5):

•	The failure to regulate the adjustment of working conditions of women who are or have recently been pregnant.
•	The absence of appropriate medical care arrangements. Ante-natal and post-natal facilities are apparently available at government clinics at subsidised rates, while public medical aid, special medical care or health insurance coverage for expectant and nursing mothers is not available (Bitso, 2009).
•	The general failure to regulate the various forms of maternity protection available to women in the public service.
•	The insufficiency of the period of paid maternity leave and the inconsistent treatment of this matter in the private and public sector.
•	The restricted period of paid maternity benefits available to workers in the textile, clothing and leather manufacturing industry and the inconsistent treatment of their position vis-à-vis workers in other industries.
•	The failure to include maternity as a specific non-discrimination ground in the Labour Code – the current provision is of a general nature and merely includes prohibition on the basis of the sex of a person.
•	Potential negative employer hiring practices are not sufficiently covered by the current dismissal and anti-discrimination provisions of the Labour Code. For example, it would be possible for an employer not to hire a woman because she is pregnant or may have the intention, or potential, to become pregnant.
•	Increased family care responsibilities flowing from the absence of appropriate paternity leave provisions.

In the light of the above, there is need to align maternity protection in Lesotho to appropriate international and regional standards – embedded in the provisions of the ILO Maternity Protection Convention 183 of 2000 and the Code on Social Security in the SADC (Southern African Development Community) of 2007. In particular, consideration should be given to including the payment of maternity benefits in a public scheme framework, to which both employees and employers contribute. In the event that the public service were to be included in a public scheme framework indicated above, the liability for paying maternity benefits would require the state as employer to pay regular contributions towards the scheme, instead of the state paying the benefits in full. Given the fact that public servants would also contribute to the scheme, and in view of the insurance principles applicable to the operation of a public scheme, it might well be that this will result in a saving for the public purse.

An analysis of the payment of sickness benefits in Lesotho leaves one with the following impressions (Olivier, 2010:27–8):

•	The period during which sickness benefits have to be paid is wholly inadequate, from the perspective of international (see ILO Social Security (Minimum Standards) Convention 102 of 1952) and regional standards, in particular in the private sector in Lesotho.
•	The Labour Code does not regulate the provision of leave for purposes of family responsibilities. Since the Labour Code is silent on the issue, the Labour Court of Lesotho relied on the provisions of Section 4(c) of the Code to invoke the application of ILO Convention 156 of 1981 concerning Workers with Family Responsibilities and ILO Recommendation 165 of 1981 concerning Workers with Family Responsibilities to find that a worker has an entitlement to obtain leave of absence in the case of illness of a dependent child (Palesa Peko v The National University of Lesotho Case no. LC/33/95 –judgment of 1 August 1995).
•	There seems to be insufficient justification for the inconsistent treatment of sickness benefits in the private and public sector, in particular concerning the period of sick leave and entitlement to paid benefits.
•	The practice, in terms of the current legal framework, of providing cash sickness benefit under labour law only and in line with the principle of employer liability is unduly burdensome on employers and may even promote discrimination against workers with poor health. Therefore, consideration should be given to including the payment of sickness benefits in a public scheme framework, to which both employees and employers contribute. Alternatively, employers might provide benefits for the initial period of sickness, in terms of the provisions of the relevant labour laws and/or collective agreements; the envisaged public scheme would then be responsible for paying a cash sickness benefit for the subsequent period of sickness.

The area of retirement and related benefits is complex, confusing and fragmented. Different arrangements exist in the public and private sector in Lesotho. Private and occupation-based schemes cover some private sector employees, but by far the minority. Different laws provide for various categories of employees in the public sector. Recently, through the establishment of a contributory retirement (pension) scheme for all public officers, some of the applicable arrangements were consolidated.

There are about 250 private retirement schemes in Lesotho. Some of them operate as employer-initiated (i.e. occupational) schemes. There is no universally applicable framework of conditions, contributory arrangements, qualification or eligibility criteria and benefit regimes as far as these schemes are concerned. In essence, unlike the public sector framework discussed below, there is no general legal obligation to belong to a private or occupational scheme, nor is an employer legally obliged to establish a new scheme or to affiliate with an existing one. As a result, the position is that private and occupational schemes are effectively restricted to middle-income and high-income earning employees in certain companies. The bulk of the workforce in Lesotho, including those working for most small and medium-sized enterprises, is therefore not covered by a contributory retirement scheme.

Retirement schemes for public servants are provided for in a range of laws in Lesotho, some of which overlap. The general framework is provided for in the Pensions Proclamation of 1964. In terms of Section 4 of the Proclamation, benefits are paid on a DB (defined benefit) and non-contributory basis; they constitute a charge against Lesotho's public revenue. In terms of legislation adopted in 2008, i.e. the Public Officers' Defined Contribution Pension Fund Act, all public officers or public servants employed on pensionable and permanent terms who are 45 years of age and below (including new entrants to the public service), are covered by a new DC (defined contribution) scheme to which both government and public servants contribute and which pays out an extensive range of benefits; older public servants could continue in the existing DB scheme described above. Separate legislation still regulates other aspects, not covered by this Act, of the retirement of particular categories of public servants, in differing fashion. These different laws lack a uniform approach, for example in the area of retirement age. The generally prescribed retirement age for those employed in the armed forces is 55, for those in local government it is 60, for those in the public service it is 60, and for those in the public teaching profession it is 65 (Olivier, 2010).

The area of retirement, including benefits available under the various retirement regimes, displays a number of deficiencies and shortcomings in addition to those mentioned above (Olivier, 2010:40–4):

•	In a country like Lesotho it may not be possible or appropriate to require small and medium-sized employers who struggle in weak economic conditions to establish retirement schemes. Inclusion of such enterprises in a suitable national or public retirement framework, situated within a more comprehensive contributory social security scheme, may be more appropriate.
•	Similarly, it may be necessary to consider including small employers in a public or national retirement framework, as they are not likely to be able to arrange for or otherwise contribute to their own retirement provision.
•	There is no legal or policy framework requiring mandatory preservation of the contributions (employee's fund credit) of members who resign, retire early, or are retrenched. In fact, premature labour market exit will entitle a public servant, for example, to access their fund credit in the form of a withdrawal benefit. There is scope for introducing the principle of mandatory preservation in Lesotho, as this will help to protect the employee's retirement benefit until they are due to retire.
•	Similarly, there is no legal or policy framework requiring or regulating inter-scheme and/or cross-border transfer of contributions or fund credits, should the employee: • ○ move between one formal sector job to another, or • ○ from a private sector job to a public service job or vice versa, or • ○ from working in Lesotho to working outside the borders of the country given the prevalence of cross-border employment in South Africa of many Basotho, or • ○ be a foreign worker who commences working in Lesotho after having been a member of a retirement scheme in another country, such as South Africa.
•	There is need to provide specifically for breaks in employment for family-related reasons such as in the case of temporary labour market exit caused by maternity and childrearing responsibilities. In the absence of specific provision in this regard, which would at least guarantee the continued membership of a scheme, women in particular may be negatively affected, as they would not be able to build up a sufficient retirement benefit.
•	With some exception (e.g. in the event of a retirement benefit payable under the new DC contributory pension scheme for public servants), almost no provision is made in the legislative and policy framework for the payment of a regular pension. Lump sum payments have the obvious disadvantage that beneficiaries and dependants would soon exhaust such benefits, and thereafter become reliant on state support.

The above deficiencies and shortcomings can be dealt with within the framework of an appropriate comprehensive national or public contribution-based social security scheme, which also provides for retirement benefits. In this way economies of scale can be achieved and disparities in treatment addressed. There will of course be a need to make transitional arrangements and to address the fears of the private pension industry in the event that a national scheme is established.

4. Strengthening and reforming social protection in Lesotho: Some conclusions and recommendations

Internationally, Lesotho has been hailed as a true example of what an LDC (least developed country) can achieve in terms of developing a social protection floor (EC, 2010; ILO 2011b). The record is indeed impressive and the lessons instructive. As an LDC Lesotho has been able to set up and administer near universal schemes operating at scale with fairly low transaction costs, addressing core areas and serving highly vulnerable constituencies in need of social protection – in particular, the aged, OVCs and children of school-going age. This has been made possible through relatively effective institutional and operational arrangements, including an effective system of revenue and tax collection, centralised payment modalities (especially via the post office) and appropriate central registry and programme monitoring systems (EC, 2010; ILO, 2011b). What has made the achievement even more significant is the fact that some of these programmes, in particular the OAP, are self-funded, and not dependent on donor support. Government's commitment to upholding social protection as a key area of social and human investment through deliberate budget reorientation and reprioritisation is further indicated by a 7% increase of total social benefit payments in 2011/12 (TWG, 2011), during a period of constricted economic performance due to the global economic crisis and reduced revenue income from, among others, SACU payments. Widely appropriated by the Basotho, these governmental initiatives can indeed be regarded as constituting a social contract, ‘with the state expected to deliver on its end of the contract by providing a minimum level of protection to its citizens’ (EC, 2010:82).

And yet the task of transforming social protection to provide adequate coverage to everybody, whether employed or not and irrespective of the life-cycle contingency involved, remains formidable. The reform challenges are daunting, including:

•	Extending the personal sphere of coverage, as several vulnerable categories of persons are either legally or factually excluded from access to social assistance and social protection floor interventions and the employee benefits regime, while inconsistent treatment, also of different categories of workers, is evident. There is a clear need to extend coverage incrementally and innovatively to, among others, persons with disabilities, old persons in the 60 to 70 age bracket, and those who work outside the context of a formal employment relationship.
•	Improving the adequacy of cash and non-cash transfers, for example by providing regular income instead of lump-sum payments in the contributory part of the system.
•	Streamlining conflicting and unequal provisioning to different categories of persons, also in the employee benefits regime, and building a social protection structure that logically links provisioning via the non-contributory and contributory parts of the system to address particular life-cycle contingencies effectively – for example, an integrated retirement benefits model should incorporate and combine the OAP and contributory arrangements, both of a mandatory and voluntary nature.
•	Undertaking an impact assessment of current cash and non-cash transfers to evaluate their effect and to adjust these to achieve the desired policy outcomes.
•	Creating exit and graduation modalities as far as possible for those dependent on social transfers.
•	Aligning the non-compliant different elements of the social protection system to core international (UN, ILO, African Union) and regional (SADC) standards.
•	Strengthening the policy basis (including the development of an overarching national social protection policy that encapsulates the different parts of the system, contributory and non-contributory) and introducing a rights-based framework to ensure consistency and clarity of treatment and entitlement.
•	Simplifying, coordinating and consolidating policy-making, institutional, organisational and service delivery components in view of the large-scale present fragmentation.
•	Building institutional, human, systems and organisational capacity to cope with the expanding social protection edifice, in particular when a national social security (insurance) scheme is introduced.

The current social and macroeconomic context raises legitimate questions about Lesotho's ability to address the various social protection challenges. As I have pointed out, despite discernible improvements in certain areas, several human development indicators have worsened, while achieving the MDGs is for the most part not on track. In fact, this has prompted Lesotho's adoption in 2011, with UN assistance, of the MDG Accelerated Framework, which is designed to provide a ‘systematic way of identifying bottlenecks and solutions to address them’ and to enhance efforts to ‘focus and coordinate efforts and resources of the Government and other stakeholders in bringing the MDGs back on track’ (UNDP, 2011a:1). Significant donor support and involvement in the provisioning of social protection, at least in the short to medium term, appears inevitable. And yet it is also evident that there is scope for creating greater fiscal space to enable government to undertake crucial social protection interventions. This can be achieved by accelerating coordination, streamlining and linking at the different levels indicated above, as well as enhancing the efficacy of the programmes and strengthening the capacity to deliver them. In particular, significant fiscal space could be created by establishing a compulsory national contributory scheme, designed so as to reduce the burden on the fiscus.

Notes

²The term ‘social protection floor’ refers to access to essential services (such as health, education, housing, water and sanitation, and others, as defined nationally) and social transfers, in cash or in kind, to guarantee income security, food security, adequate nutrition and access to essential services (ILO–UN, 2010).

³ Section 2 of this paper has been adapted from Olivier (2010:para. 4).

⁴The 1977 law covers in some detail the circumstances under which an injury or disease would constitute an occupational injury or disease; the range of benefits available, in particular in the event of partial and total incapacity, as well as medical benefits; benefits payable to dependants; the rate at which benefits are calculated; applicable procedures; employer and employee obligations; and appeals. Determining who is covered by a particular workmen's compensation legal instrument could be complicated, if not confusing: different legal regimes, provided for in a range of laws, are applicable to different categories of workers. Provisions in relation to workmen's compensation are contained in at least six legal instruments, namely the Labour Code of 1992, the Public Service Regulations, 2008, the Workmen's Compensation Act, 1977, the Pensions Proclamation of 1964 and the Regulations made in terms of the Proclamation, and the Public Officers' Defined Contribution Pension Fund Act, 2008.

Legislation

Children's Protection and Welfare Act, 2011.Education Act, 2010.Labour Code Order No. 24 of 1992.Labour Code Wages (Amendment) Order, 2009.Old Age Pension Act, 2005.Old Age Pension Regulations, 2007.Pensions Proclamation, 1964.Public Officers' Defined Contribution Pension Fund Act, 2008.Workmen's Compensation Act, 1977.

Case law

Palesa Peko v The National University of Lesotho Case no. LC/33/95 (judgment of 1 August 1995).