Social Protection in Southern Africa: a developmental response to global crisis

30 March 2009

Michael Samsonmsamson@epri.org.za

Economic

Policy

Research

Institute

RHVP’s

Parliamentary Workshop30 – 31 March 2009

Johannesburg

Overview

Why social protection in Southern Africa?Addressing the impact of global crisisCountry examples in Southern Africa

– Tackling poverty

– Addressing risk

– Developing human capital

– Promoting labour market engagement

– Supporting economic growth

– Building the state

Conclusions

Why social protection in Southern Africa?

Protect the poor and vulnerable

Strengthen the short-term economic responses

Long-term development and economic growth

KEY MESAGE: Social protection harnesses the political momentum for crisis response and channels it into long-term development and economic growth

The exuberance associated with the financial bubble contributed to multiple commodity price bubbles

SOURCE: IFPRI (2008), with data from FAO

Food commodity prices (US dollars per ton)

…precipitating a wave of sometimes violent

protests around the world

Source: United Nations World Food Programme

… and eroding the effectiveness of social cash transfer interventions across Africa...

Baseline valuein March 2006

Consumption purchasing power in March 2008

Basic grains purchasing power in March 2008

SOURCE: EPRI based on data provided by Statistics South Africa and SOCPEN

African agricultural productivity growth has

significantly lagged the rest of the world

0

1000

2000

3000

4000

5000

6000

7000

1961 1970 1980 1990 2000 2002 2004 2006

kg/H

a

United States

Latin America & Caribbean

Asia

Africa

Source: United Nations Food and Agriculture Organisation

USA

Africa

WHY?•Risk•Scale•Investment

SOURCE: IFPRI (2008), with data from FAO

Food commodity prices (US dollars per ton)

...but the bursting of the bubble exacerbated price volatility and further dampened production possibilities

Impact of social protection

Insurance-like mechanisms raise investment returns by promoting more productive activities in Tanzania

Without risk mitigation instruments, the poor invest in assets with safer but lower expected returns

With insurance-like mechanisms, the poor take greater risks with much higher expected returns—and can break the poverty trap

Similar evidence in India

Shocks in Zimbabwe exert negative impacts for decades

An earlier study quantifies a 40% reduction in the capital stock of the poor due to unmitigated risk

The impact on children of drought and war in Zimbabwe still exerts a significant negative impact 16 years later

Similar long term negative impacts in Ethiopia and Kenya

Cash transfers in Zambia: entrepreneurial and livelihoods investment

Pilot initiated in 2003 Targets the poorest and

most vulnerable 10% of households

Approximately 30% of the value of cash transfers invested, with high returns multiplying the value of the transfer and promoting growth

Similar to Brazil’s experience

A universal social pension in Lesotho promotes human capital accumulation

The world’s newest universal social pension, started in 2004

Formal evaluations still in progress

Costs 1.4% of GDP Supports human capital

investment, particularly for orphans and vulnerable children

Lesotho

Social transfers in Namibia support labour market participation and 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

Social transfers in South Africa support economic growth along multiple dimensions

Sub-Saharan Africa’s oldest social transfer programme

Costs 3% of GDP Substantial impact on

poverty reduction Extensive studies of

growth outcomes– Human capital– Labour markets– Macroeconomics

Social transfers reduce inequality in Botswana, supporting social stability and growth

A social pension since 1996

Universal take-up Costs 0.4% of GDP Social transfers reduce

inequality in one of the world’s most unequal societies— helping to stabilise conditions that promote economic growth.

The non-contributory pension in Mauritius provides a social contract that lays a foundation for growth

A social pension since 1950

Universal take-up Costs 2% of GDP One of the fastest

growing African countries

Social pensions represent a social contract that lays a foundation for stability, growth and developmentMauritius

Conclusions

For countries in Southern Africa, effective social protection is likely to promote economic growth.

Social protection significantly reduce inequality—supporting social stability and fostering investment and economic growth.

Social protection does not create dependency—but often breaks dependency traps, particularly by nurturing productive high-return risk-taking.

Social protection can restructure the economy to support job creation and economic growth.

Social protection offers a developmental response to the impending impacts of the global crisis.