They Worked for Decades, Now They Struggle to Survive

May 4 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER ) , RUTH BERHANU ( FORTUNE STAFF WRITER )

A fraction of senior citizens received pensions, mirroring a skewed system where nine-tenths of beneficiaries were men. A formal scheme for the private sector only began contributions in 2012, with the maximum benefit pegged to a worker's last three years' average salary. Yet, retirees say that their pensions fall short of covering necessities as consumer prices remain relentlessly high, report BEZAWIT HULUAGER & RUTH BERHANU, Fortune Staff Writers.

Key Takeaways:

• Many Ethiopian retirees live on pensions that barely cover the increasing costs of living.
• Only a small fraction of the elderly population receives pensions, exposing systemic inequalities.
• Inflation and runaway prices further erode the purchasing power of pensioners, with severe ramifications for health and well-being.
• Though challenges persist, the pension system is undergoing gradual diversification with investments in real estate and beyond.

In Addis Abeba's crowded southern quarter, the hum of traffic fades behind SarisAboChurch, where a narrow alley leads to a mud-plastered compound. Inside, 68-year-old Welesh Gessese tucks her belongings into a single room her relatives let her use without rent. For 25 years, she filed documents in the record office of the Federal Prison Administration, drawing a wage of 1,800Br, about 14 dollars at last week's NBE's buying rate.

Two years ago, Welesh retired and began collecting a pension initially set at 2,000Br and recently raised to 3,000Br, following the state's inflation adjustment for pensioners. Prices for teff, cooking oil, and medicine have doubled or tripled since the government floated the Birr last year, and the extra cash barely covers bus fare and utilities. With no children to support her, she is scraping by.

“Our income doesn’t even cover a quarter of what we spend,” she told Fortune.

Welesh’s story is increasingly common across the country. Citizens older than 60 comprise roughly six percent of the population, yet only a sliver receives old-age support. A 2024 report by Human Rights Watch estimates that in 2017/18 barely 7.4pc of the country’s 4.3 million seniors collected a pension, and nine out of 10 of those beneficiaries were men.

A formal scheme for private-sector employees did not begin deducting contributions until 2012. The minimum monthly benefit reached 3,013Br, and the maximum is tied to the worker’s final three-year average salary. In theory, employees can retire at 55 after 25 years of service, and heirs are entitled to benefits if the deceased logged at least a decade on the payroll. The Fund expects to collect about 40 billion Br this fiscal year. However, participants say payouts fall far short of covering staples.

Across town, in Bole District’s Wereda 04, Likinesh Abregn lies on a foam mattress laid directly on a concrete floor. At 68, the former midwife wheezes in the damp air.

Her husband, a laboratory technician at the defunct Borchele Clinic, on Tito Road in the Casanchis neighbourhood, drew a pension of 600Br before he passed away. She inherited half of that. The couple once managed a cluster of single-room rentals that brought in as much as 4,000 Br a month, but their adult children gradually took control and pushed her aside. Now she lives on 1,600Br a month — after the latest increase — and occasional remittances from relatives abroad. An unpaid property tax bill of 50,000Br looms over the house she no longer controls.

“My children left me to raise their kids,” she said. “The neighbours call me the woman who raises her grandchildren.”

Getachew Kiflu, vice president of the Ethiopian Elderly & Pensioners National Association, has seen cases like these arrive in stacks. Most pensioners struggle to afford food, housing and healthcare. A survey in Arba Minch found severe food insecurity among retirees. National estimates suggest that 80pc to 84pc of pensioners skip meals. Chronic illnesses such as diabetes and hypertension go untreated, while isolation and abuse compound the hardship.

“There're alarming reports of financial exploitation where elderly individuals are cheated out of their inheritance,” Getachew told Fortune.

Runaway prices deepen the strain. The IMF projects consumer inflation at about 21pc for this year, down from recent peaks but still high enough to erode any nominal raise. Rural districts face an even sharper squeeze. A 2022 Ethiopian Economic Association study concluded that more than 60pc of pensioners in the countryside live below the poverty line and often cannot reach an agency office to claim benefits.

Two hundred fifty-seven kilometres north of the capital, in Debub Wollo Zone of the Amhara Regional State, lives 83-year-old Getachew Mengesha. He served 25 years as principal of an adult education school in Kombolcha, retiring in August 1999, with a salary of 790Br. His first pension check came to 400Br. To keep afloat, he ran a primary school for another seven years and later rented out a room in his house.

Adjustments have raised his monthly benefit to 3,700Br, yet he still rations vegetables and kerosene.

“The increases never catch up with prices,” he said.

Facing such stories, the Pensioners Association stepped up lobbying last December, pledging to push for a United Nations convention on the rights of older persons. In February, it hosted a forum under the global "AgeWithRights" rally, hoping to influence Ethiopia’s position at forthcoming UN talks. Parliament has yet to debate a bill.

Officials admit the math is unforgiving.

“We know it is not enough,” says Zewedenesh Legesse, office manager at the Public Social Security Service Agency, which registers beneficiaries and releases payments.

The law requires a review every three years, yet the Agency pushed through two raises since 2023 to blunt the cost-of-living shock.

Roughly 90pc of annual inflows land in low-risk assets, mainly Treasury bills (T-bills) that yield between 12pc and 15pc. The system mobilised 58.6 billion Br from July through March, including 27 billion Br from public funds. Pension investors bought 157.8 billion Br in Tbills during that span.

Government budgets long leaned on pension money. The new auction system has lifted yields to double digits, but the real return remains negative, with headline inflation running higher. That raises pressure on administrators to chase property deals despite displaying little experience in commercial real estate.

A 2022 amendment relaxed rules that had forced pensions to keep at least 60pc of holdings in government paper. Now the Board may approve any project deemed safe and profitable.

“We're investing in properties,” Zewdinesh said.

The Agency recently acquired a newly built property on African Avenue near Olympia Roundabout, an office block off Piassa and branch buildings in Hawassa, Bahir Dar, Jimma and Harar. She hopes rent from these assets will flow back to beneficiaries.

Ethiopia’s pension funds remain conservative, yet analysts say the shift to real estate marks a first step toward diversification.

Wonishet Zeberga, director of monetary & financial analysis directoriate at the National Bank of Ethiopia (NBE), noted a gradual shift into term deposits and property. Last year, the Public Social Security Service Agency collected 52.9 billion Br in contributions and paid out 21.2 billion Br. In the first nine months of 2023, it earned 10.4 billion Br on investments. The Private Social Security Service Agency, which covers 2.3 million employees and 57,000 retirees, amassed 28.7 billion Br and booked a profit of 9.75 billion Br in 2023/24.

Regulators hope the Ethiopian Securities Exchange (ESX) will broaden the menu. Market turnover is projected to expand 20pc to 25pc annually and could mobilise 20 trillion Br over the next decade. T-bills, historically sold weekly to pension funds, went public in December 2019; the stock outstanding surged from 23.7 billion Br in June 2020 to 317.7 billion Br by June 2022, representing one-fifth of domestic debt.

Pension assets also bulk up national savings. Economists forecast gross savings to rise from 433 billion Br this year to 963 billion Br in 2028 under current policy and to 1.5 trillion Br if reforms take hold. That would lift financial savings from 21pc to 22pc of the total in a baseline case and to 32pc under a reform scenario, easing capital costs and, in theory, raising returns to retirees.

Yet, real yields remain slim once inflation is stripped out.

“They’re better than savings,” said Dakito Alemu (PhD), an associate professor of finance at Addis Abeba University. “But, it's still not profitable.”

He argued that the funds behave more like cash vaults than investors. Property offers longrun gains, yet prices flattened after the macro crunch, and buildings are hard to liquidate. Dakito urged measured moves into corporate bonds and equities.

“They still need diversification,” he said.

Elsewhere on the continent, Ghana loosened its code in 2021 to let retirement schemes buy municipal bonds, while Nigeria licensed infrastructure notes eligible for pension money. Experts say each example rests on rigorous disclosure rules and specialised advisory boards, structures that Ethiopia is still designing.

Meanwhile, contributions keep rolling in. Together, the public and private pension schemes control more than 350 billion Br in assets, on paper, making them the country’s largest institutional investors.

For Welesh, Likinesh and Getachew, policy sketches feel distant. Every first week of the month, they queue at bank windows next to construction labourers wiring cash upcountry. Paper vouchers mark them as pensioners; tellers still record the transactions by hand. The sums may be meagre, but each clutches the receipt like a lifeline once the money clears.

Outside, they blend into the swirl of minibuses and street vendors, an ageing generation hoping that decisions made in boardrooms and cabinet meetings will reach them before the swollen cost of living does.

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PUBLISHED ON May 04,2025 [ VOL 26 , NO 1305]

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