Social Protection in Southern Africa: a developmental response to global crisis
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Social Protection in Southern Africa: a developmental response to global crisis
30 March 2009
Michael [email protected]
Economic
Policy
Research
Institute
RHVP’s
Parliamentary Workshop30 – 31 March 2009
Johannesburg
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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
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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
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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)
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…precipitating a wave of sometimes violent
protests around the world
Source: United Nations World Food Programme
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… 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
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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
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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
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Impact of social protection
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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
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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
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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
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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
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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
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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
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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.
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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
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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.