Developmental Evidence Cash Transfers and Basic Income Ingrid van Niekerk (EPRI) BIEN Congress, Brazil 2010 Friday July Emerging global evidence on developmental social protection: implications for basic income in developing countries

Overview 1. Evidence on food security, nutrition and health 2. Evidence on pro-poor and inclusive growth 3. Cash transfers and social protection are developmental 4. Implications for Basic Income in developing countries 2

Cash transfers yield impacts on food security, nutrition and health study of African pilots (IFPRI 2008) South Africa (Samson et al. 2010) Colombia (Ayala et al. 2005) HH receiving cash transfers spend more on food Mozambique (EPRI 2010) South Africa (Samson et al. 2004, 2010) Zambia (MCDSS/GTZ 2007) Ben. receiving cash transfers experience less hunger study of Latin American programmes (IFPRI 2008) South Africa (Duflo 2003) Bangladesh (Devereux et al. 2006) Mexico (Szekely 2001 and Britto 2005) Children receiving social transfers tend to be better nourished social transfers alone are often not sufficient to tackle severe malnutrition, which has multiple causes many studies fail to demonstrate improved health outcomes, in part due to methodological challenges Some results on nutrition and health impacts are perplexing

Most cash transfers buy predominantly food SOURCE: IFPRI 4

The distribution of social benefits in South Africa cumulative proportion of benefits cumulative proportion of sample SOURCE: South African National Treasury and Statistics South Africa

Lesotho demonstrates how social pensions build human capital for children  The world’s newest universal social pension, implemented in 2004  Formal evaluations still in progress  Costs 1.4% of GDP  Supports children increasingly living with older people (OVC)  Qualifying age 70 Lesotho 6

Cash Transfers yield impacts on pro-poor and inclusive economic growth South Africa (EPRI) Mexico (IDS/ODI) Brazil (IPC-IG) Strong evidence for middle-income countries Mozambique (EPRI 2010) Kenya Zambia (MCDSS/GTZ 2007) Anecdotal and emerging evidence for low-income countries Social protection facilitates labour market engagement …and helps to manage social risk Stronger evidence on investment and risk management effects social protection provides the poor and excluded with an economic stake in society facilitating pro-poor economic reforms and increasing the demand for better governance Bigger questions on social cohesion impacts

Social protection promotes better risk management and encourages investment Higher investment and growth Risk Manage -ment Social protectio n

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 9

n=3462 n=1795 Cash transfers improve labour market participation and employment rates

Social pensions support local economies  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 Namibia 11

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 12

Propensity score matching techniques provide ex post evidence on agricultural resilience Propensity score 13% agricultural attrition 8% agricultural attrition

Social protection Poverty and inequality Poverty gaps / headcounts and Gini Human capital Nutrition, education, health Risk management Ex post and ex ante Social cohesion Nation-building, inclusion, equity, peace Macro- economics Crisis response, economic restructuring Social protection is about more than reducing poverty - it is developmental

Mauritius Social protection reinforces social cohesion, facilitating economic reforms that promote pro-poor growth EXAMPLES  Mauritius  Botswana  Nepal  Papua New Guinea 15

Cash 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. 16

SOUTH AFRICA South Africa- progressive realisation of “Comprehensive Social Security System”. Taylor Committee Report in 2002 BIG Campaign – Donation? Move slowly toward a universal approach State Old Age Pension-remove means test? CSG-extension to age 18 Working age adults between 19 and 59? Soft Conditionalities on the CSG 17

Technological Improvements Secure cash machines that hold the cash and use biometric data to determine beneficiary Smart card system-savings card, credit card Bank by phone (popular in Kenya) – Empesa- remittance payment More secure, easier and cheaper 18

What do we need for BI to be successful implemented? Political Will Rights-based approaches State led –political support Taxable capacity – middle income country Institutional capacity on both delivery and administration Integrated provision- cash + complementary services 19

Obrigado Thank you 20

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Namibia: BIG Pilot Project Shows that BI has the desired effects of poverty reduction and economic development Project started in January 2008 Grant administered to 1000 people in town of Omitara- scheduled to run for two years (Large country with small population and very high income inequality) 22

Namibian Basic Income Pilot: First Universal Cash Pilot In January 2008, a Basic Income Grant (BIG) pilot project began in the Otjivero-Omitara area 100 kilometres east of Windhoek. All residents below the age of 60 years receive a Basic Income. Grant of N$100 per person per month, without any conditions being attached. The grant is being given to every person registered as living there in July 2007, whatever their social and economic status. This BIG pilot project is designed and implemented by the Namibian Basic Income Grant Coalition (established in 2004) 23

Main Findings Weight-for-age has improved significantly in just six months from 42% of underweight children to only 17%. There is strong evidence that more people are now able to engage in more productive activities. the BIG fosters local economic growth and development. Several small enterprises started in Otjivero, making use of the BIG money being spent in the community. 24

More than double the number of parents paid school fees. Parents prioritized buying of school uniforms More children are attending school and the stronger financial situation of the school (school fees) has helped the school to buy more school materials Drop out rates at school were 30-40% before the introduction of a BIG, by July 2008 these rates were reduced to a mere 5%. 25

Increased use of the settlement's health clinic since the introduction of the BIG. Residents now pay the N$4 payment for each visit and the income of the clinic has increased fivefold. Several cases document that young women have been freed from having to engage in transactional sex. Economic and poverty-related crime (illegal hunting, theft and trespassing) has fallen by over 20%. The BIG has helped to achieve progress towards all eight Millenium Development Goals. 26