HOW CAN SOCIAL SECURITY SCHEMES BE DESIGNED FOR LOW-INCOME COUNTRIES TO EFFECTIVELY PROVIDE FOR THE POOREST? Presentation to the International Conference” Taking Action for the World’s Poor and Hungry People” Beijing, China 15th – 20th October 2007 Fezile Makiwane

Objectives of social security Protection of the poor and vulnerable; Protection of the poor and vulnerable; Acceptable standard of living; Acceptable standard of living; Ensure consumption smoothing; Ensure consumption smoothing; Reduce risk; and Reduce risk; and Spreading income over a life cycle Spreading income over a life cycle

Social security context in SADC (UNDP Report, 2005) High levels of unemployment High levels of unemployment –50% unemployment High levels of poverty High levels of poverty –Up to 60 % of population live below $1 per day –30 % of population undernourished –72.9 % of population in Zambia live below national poverty line Income inequalities Income inequalities –Income inequality more than 50 in 8 SADC countries

Coverage Over 2 billion people world-wide are not covered by any social security arrangements Over 2 billion people world-wide are not covered by any social security arrangements About 50 million people in low-income countries not covered against basic social risks About 50 million people in low-income countries not covered against basic social risks Mostly contributory social insurance for employees Mostly contributory social insurance for employees Social insurance restricted to those in formal employment (which is as low as 10% in some countries) Social insurance restricted to those in formal employment (which is as low as 10% in some countries)

Modalities for coverage Enhancing general living standards and expanding basic human capacity Enhancing general living standards and expanding basic human capacity –Access to basic services –Housing –Employment generation –Education

South Africa social security transfers The main objective of social assistance transfers is to reduce poverty and promote social development, The main objective of social assistance transfers is to reduce poverty and promote social development, Over 12 million South Africans receive social assistance through some form of income grant. Over 12 million South Africans receive social assistance through some form of income grant.

South Africa- CSG The CSG introduced in 1998 as a poverty alleviation mechanism The CSG introduced in 1998 as a poverty alleviation mechanism Seeks to support income of poor households to enable them to care and provide for basic needs of the child. Seeks to support income of poor households to enable them to care and provide for basic needs of the child. It is a means tested cash transfer program which is paid to a primary care giver (PCG) of a child. It is a means tested cash transfer program which is paid to a primary care giver (PCG) of a child. The grant is weighted to rural areas and informal settlements. The grant is weighted to rural areas and informal settlements. The program currently covers over 8 million children up to the age of 14. The program currently covers over 8 million children up to the age of 14. The CSG transfers are unconditional cash transfers. The CSG transfers are unconditional cash transfers.

South Africa –CSG The average households receiving CSG were found to derive: The average households receiving CSG were found to derive: –one third of their total income from CSG, –a quarter from other transfers and –One third from employment. 18 % eligible households wholly dependent on the CSG, and 36 % depend on the CSG and on other state transfers. 18 % eligible households wholly dependent on the CSG, and 36 % depend on the CSG and on other state transfers.

South Africa- SOAP The State Old Age Grant provides social assistance to over 2 million South Africans. The State Old Age Grant provides social assistance to over 2 million South Africans. Coverage- 70 percent of the total adult population. Coverage- 70 percent of the total adult population. Age of eligibility: 60 for female and 65 for male. Age of eligibility: 60 for female and 65 for male. Means tested program, although presently there is a debate on the need for the means test. Means tested program, although presently there is a debate on the need for the means test. SOAP initially intended to provide a social safety net for aged poor, however, its benefits are distributed more broadly to all members in the household because the majority of households in South Africa live in multi-generational households. SOAP initially intended to provide a social safety net for aged poor, however, its benefits are distributed more broadly to all members in the household because the majority of households in South Africa live in multi-generational households.

South Africa- SOAP The SOAP reduces the poverty gap for pensioners by 94 percent. The SOAP reduces the poverty gap for pensioners by 94 percent. Poor households with pensioners are on average significantly less poor than households without pensioners. (Anne Case, 2000 and Committee of Inquiry into Social Security, 2002) Poor households with pensioners are on average significantly less poor than households without pensioners. (Anne Case, 2000 and Committee of Inquiry into Social Security, 2002)

Social transfers- impact Poverty Measure Household Living Standards Poverty headcount Individual, % reduction 7.2 % Average Poverty Gap % reduction (Median) 22.9 % Poverty Gap Ratio, % point reduction % Rand poverty Gap, % reduction 28.7 %

Uganda- Pilot Cash Transfer Programme The Govt is designing a Pilot Cash Transfer Scheme with support from DFID; The Govt is designing a Pilot Cash Transfer Scheme with support from DFID; Target 20% of the Ugandan population who are in chronic poverty; Target 20% of the Ugandan population who are in chronic poverty; Initially, the scheme to cover 4 districts out of 80 in the country; Initially, the scheme to cover 4 districts out of 80 in the country; Program to cover 9,000 households in the lowest 10% quintile and cost US $ 8.4 million for 3 years. Program to cover 9,000 households in the lowest 10% quintile and cost US $ 8.4 million for 3 years. Monthly cash transfer per HH ranges btn US $ 10 – 15 for one person to maximum five person HH. Monthly cash transfer per HH ranges btn US $ 10 – 15 for one person to maximum five person HH.

Brazil Brazil has non-conditional old-age and disability cash transfers and conditional education and health grants (Bolsa Família). Brazil has non-conditional old-age and disability cash transfers and conditional education and health grants (Bolsa Família). Conditional grants alleviate short-term poverty but also provide incentives for human capital accumulation, thereby alleviating long-term poverty Conditional grants alleviate short-term poverty but also provide incentives for human capital accumulation, thereby alleviating long-term poverty

Brazil - BPC The objective of the program is to eradicate extreme poverty in targeted groups The objective of the program is to eradicate extreme poverty in targeted groups no conditionalities no conditionalities Monthly transfer, non-contributory Monthly transfer, non-contributory Targets extremely poor AND Targets extremely poor AND - Over age of 65 or with severe disability 2,5 million beneficiaries, cost ~=0,4% GDP 2,5 million beneficiaries, cost ~=0,4% GDP

Brazil-Bolsa Família Alleviate short term poverty by transfers and long term poverty by incentives to human capital accumulation Alleviate short term poverty by transfers and long term poverty by incentives to human capital accumulation Conditional: Education and health Conditional: Education and health Targeted at Poor - Differentiation of values according to number of school age children Targeted at Poor - Differentiation of values according to number of school age children Supplement incomes – assumes families can have other sources of income Supplement incomes – assumes families can have other sources of income 11 million beneficiaries 11 million beneficiaries

Mexico- Oportunidades The program is targeted to poor households through a mix of geographical and proxy means test targeting. The program is targeted to poor households through a mix of geographical and proxy means test targeting. Is the main social assistance program of the Mexican government. Is the main social assistance program of the Mexican government. Covers over 5 million beneficiary households in extreme poverty in 2005 in both urban and rural areas Covers over 5 million beneficiary households in extreme poverty in 2005 in both urban and rural areas

Mexico - oportunidades provides currently four types of monetary grants: (i) education grants; (ii) health/nutrition grants; (iii) “energy” grants; and (iv) a “pension” or income support for the elderly (above 70 years of age) provides currently four types of monetary grants: (i) education grants; (ii) health/nutrition grants; (iii) “energy” grants; and (iv) a “pension” or income support for the elderly (above 70 years of age)

Oportunidades-Impacts Decreased morbidity in children, youth and adults (around 20%); Decreased morbidity in children, youth and adults (around 20%); Reduced stunting in young (2-6 months old) girls by 39.3% and boys by 19.4%; Reduced stunting in young (2-6 months old) girls by 39.3% and boys by 19.4%; 11% lower maternal mortality in beneficiary municipalities (15% in municipalities with more than 35% of the resident population in the program); 11% lower maternal mortality in beneficiary municipalities (15% in municipalities with more than 35% of the resident population in the program); 2% decrease in infant mortality in beneficiary municipalities (6% in municipalities with more than 35% of resident population in the program); 2% decrease in infant mortality in beneficiary municipalities (6% in municipalities with more than 35% of resident population in the program); Increases school enrollment for children who enter secondary school, with percentage increases in enrollment over 20% for girls and 10% for boys. Increases school enrollment for children who enter secondary school, with percentage increases in enrollment over 20% for girls and 10% for boys.

Oportunidades - Impacts Headcount poverty rate declined by 17% in rural areas Headcount poverty rate declined by 17% in rural areas Poverty gap and the severity of poverty measures declined by 36% and 46% Poverty gap and the severity of poverty measures declined by 36% and 46%

Other means of social protection Targeted employment creation programmes, e.g.: Targeted employment creation programmes, e.g.: –Public works programmes (although with limited effect) –Employment guarantee schemes (India) Community-based social insurance (with possible government co-funding – e.g. Community Health Insurance in Tanzania) Community-based social insurance (with possible government co-funding – e.g. Community Health Insurance in Tanzania) Micro-lending and micro-insurance Micro-lending and micro-insurance

Other social protection Welfare funds (e.g. tax/cess imposed on aggregate output of industry, and used for social protection of workers in the industry, and their dependants) (India) Welfare funds (e.g. tax/cess imposed on aggregate output of industry, and used for social protection of workers in the industry, and their dependants) (India) State-created contributory-based social protection schemes for informal economy workers (possible government co-funding) (India) State-created contributory-based social protection schemes for informal economy workers (possible government co-funding) (India)

Conclusion Integrated approach that have objectives relating to alleviation of both short-term and long-term poverty Integrated approach that have objectives relating to alleviation of both short-term and long-term poverty Development of human capacity Development of human capacity Administrative efficiency Administrative efficiency Good governance Good governance Multi-actor responsibility Multi-actor responsibility