The developmental impact of

social pensions in Southern Africa

4 October 2006, Lisbon

Michael Samsonmsamson@epri.org.za

Economic

Policy

Research

Institute

EU/ILO/Government of Portugal

World conference: Social Protection and Inclusion

HelpAge International and Save the Children UK side event

“Breaking the poverty cycle: Securing rights to cash benefits for older people

and children through national commitments and community action”

Five countries in Africa have non-contributory social pensions

MauritiusLesotho

Botswana

Namibia

South Africa

Universal or means-tested pensions to older people

Non-contributory

Protects against age-related poverty

Successes in Latin America, Asia and Africa

Growth lessons from Mauritius

Mauritius

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 development

Lessons from Botswana

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.

Botswana

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

South Africa

South Africa’s social pension reduces poverty and destitution substantially

96%

54%

21%

98%

71%

32%

0% 20% 40% 60% 80% 100%

Householdsonly with

older people

Householdsincluding

older people

Allhouseholds

Poverty gap reduction Destitution gap reduction

Impact of the social pension on employment and labour force participation

corrected data

Household receives

social pension in 2004

Household does not receive social pension

in 2004

Improvement associated with social pension

Probability that a poor working age adult will: Find employment in 2005 9% 7% 2% Be actively looking for work in 2005 15% 13% 2% Not participate in the labour force in 2005 76% 80% 4%

NOTE: Sample includes working age adults (older than 16) in households in the lowest income quintile with older people but with no working individuals in September 2004.

SOURCE: Statistics South Africa Labour Force Surveys and EPRI calculations

Spending shares vary by income group—and social transfers redistribute income and restructure the composition of spending

Food

0%

10%

20%

30%

40%

50%

1 2 3 4 5 6 7 8 9 10

Income Decile

Ex

pe

nd

itu

re S

ha

re

Transport

0%

2%

4%

6%

8%

10%

12%

14%

1 2 3 4 5 6 7 8 9 10

Income Decile

Ex

pe

nd

itu

re S

ha

re

Source: Statistics South Africa Income and Expenditure Survey 2000

An illustration from South Africa

Labour market lessons from Namibia

A transformed pension system since democracy in 1990

Near-universal take-up (85%)

Costs 0.7% of GDP Supports local

economic activity and labour market participation, particularly for women

Namibia

Composition of rural households in Namibia which include older people receiving pensions

SOURCE: Devereux 2005

Male head

Female head/ spouse

Son

Daughter

Grandson

Granddaughter

Lessons from Lesotho

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

Formal evaluations still in progress

Costs 1.4% of GDP Supports children

increasing living with older people

Lesotho

Social protection and growth: the transmission mechanisms

Social Transfers

human capital

assets

risk

equity

employment

macro-economy

humanwell-being

economicgrowth

Fiscalsustainability