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

1. Social Protection in Southern Africa: a developmental response to global crisis 30 March 2009 Michael Samson msamson@epri.org.za RHVP’s Parliamentary Workshop 30 – 31 March 2009 Johannesburg

2. Overview • Why social protection in Southern Africa? • Addressing the impact of global crisis • Country examples in Southern Africa • Tackling poverty • Addressing risk • Developing human capital • Promoting labour market engagement • Supporting economic growth • Building the state • Conclusions

3. 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

4. The exuberance associated with the financial bubble contributed to multiple commodity price bubbles Food commodity prices (US dollars per ton) SOURCE: IFPRI (2008), with data from FAO

5. …precipitating a wave of sometimes violent protests around the world Source: United Nations World Food Programme

6. … and eroding the effectiveness of social cash transfer interventions across Africa... Baseline value in 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

7. African agricultural productivity growth has significantly lagged the rest of the world • WHY? • Risk • Scale • Investment USA Africa Source: United Nations Food and Agriculture Organisation

8. ...but the bursting of the bubble exacerbated price volatility and further dampened production possibilities Food commodity prices (US dollars per ton) SOURCE: IFPRI (2008), with data from FAO

9. Impact of social protection

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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.

17. 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 development Mauritius

18. 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.