Tackling Poverty with Social Transfers to Vulnerable Groups: Evidence from Africa

1
Tackling Poverty with Social Transfers to
Vulnerable Groups Evidence from Africa

• 15 November 2006
• Michael Samson
• msamson_at_epri.org.za

International Forum on the Eradication of
Poverty New York City 15-16 November 2006 UNICEF
session on Children in Poverty
2
Overview

• THE PROBLEM Poverty disproportionately affects
  children and older people
• THE INSTRUMENT Social transfers provide regular
  cash payments to poor households
• THE OUTCOMES
• childrens health, education and nutrition
• break the inter-generational cycle of
  disadvantage
• labor market participation
• broad economic and developmental impacts
• KEY ISSUES dependency, conditionality,
  affordability

3
South Africas cash transfers produce remarkable
social outcomes while supporting economic growth
and broad developmental impacts

• Sub-Saharan Africas oldest social transfer
  program
• Costs 3 of GDP
• Substantial impact on poverty reduction
• Extensive studies of growth outcomes
• Human capital
• Labor markets
• Development

South Africa
4
South Africas social grants reduce poverty and
destitution substantially
48 reduction
67 reduction
5
The universal social pension in Lesotho mainly
protects children and promotes human capital
accumulation

• The worlds newest universal social pension,
  started in 2004
• Costs 1.4 of GDP
• 65 of the cash is spent on children cared for by
  older people
• Supports human capital investment, particularly
  for OVCs

Lesotho
6
Social transfers in Namibia protect children and
older people, support labour market participation
and promote local economic activity

• A transformed pension system since democracy in
  1990
• Near-universal take-up (85)
• Costs 0.7 of GDP
• Supports labour market participation,
  particularly for women
• Stimulates local markets

Namibia
7
Do social transfers create dependency?

• A major concern of policy-makers
• Evidence in many developing countries suggests
  that social grants support labor market
  participation
• Robust evidence from South Africa
• Ability to search for employment
• Ability to find a job
• Bolster economic power in negotiating decent work

8
Impact of South Africas Child Support Grant on
adult labor force participation
SOURCE Statistics South Africa Labor Force
Surveys and EPRI calculations
9
Impact of South Africas Child Support Grant on
womens labor force participation
SOURCE Statistics South Africa Labor Force
Surveys and EPRI calculations
10
Are conditionalities necessary?

• Rationale long term poverty reduction
• Philosophical underpinnings
• Risks
• compromise the poverty reduction objective
• deprive the poor of freedom to choose appropriate
  services and to freely make decisions to
  improve household welfare
• can be expensive, inflexible, and inefficient
  in the worst of cases, screen out the poorest

11
Are social transfers affordable?

• Social transfers must be financed, and the costs
  can be substantial up to 3 of national income.
• Economic growth and the governments available
  budget depend on each other.
• Social transfers conserve fiscal resources in
  important ways.
• Social transfers can support a virtuous circle of
  growth, greater affordability and sustainability.

12
Conclusions

• For countries in Africa, social transfers have
  demonstrated considerable success in supporting
  childrens health, education and nutrition.
• In many countries they are the most effective
  government program for reducing poverty.
• They help to break the cycle of
  inter-generational transmission of disadvantage.
• Social transfers do not create dependencythey
  often break dependency traps, particularly by
  nurturing productive high-return risk-taking.
• Social transfers support economic growth and
  development and are affordable.