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

1. Tackling Poverty with Social Transfers to Vulnerable Groups: Evidence from Africa International Forum on the Eradication of Poverty New York City 15-16 November 2006 UNICEF session on “Children in Poverty” 15 November 2006 Michael Samson msamson@epri.org.za

2. Overview • THE PROBLEM: Poverty disproportionately affects children and older people • THE INSTRUMENT: Social transfers provide regular cash payments to poor households • THE OUTCOMES: • children’s 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 Africa’s cash transfers produce remarkable social outcomes while supporting economic growth and broad developmental impacts • Sub-Saharan Africa’s 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 Africa’s 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 world’s 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 Africa’s Child Support Grant on adult labor force participation SOURCE: Statistics South Africa Labor Force Surveys and EPRI calculations

9. Impact of South Africa’s Child Support Grant on women’s 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 government’s 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 children’s 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 dependency—they often break dependency traps, particularly by nurturing productive high-return risk-taking. • Social transfers support economic growth and development and are affordable.