Giorgia Giovannetti Marco Sanfilippo: 23 January 2011
Can developing countries afford large social-protection programmes, such as unemployment benefits or medical insurance? Summarising studies from across Africa, this column finds that such programmes are politically, fiscally, and administratively feasible – even for low-income Sub-Saharan African countries – and on a scale and scope previously thought out of reach.
Social protection is often considered as something exclusive to developed countries, even though some forms of it, often unstructured, have been in place in every society, also in developing countries. Recently, on the waves of successful implementation in Latin America, social-protection programmes have spread to Sub-Saharan Africa. Some programmes, such as pensions in Namibia and South Africa, have taken systems already in place prior to independence and expanded them to populations previously excluded or marginalised. Others, meanwhile, have been newly developed to protect targeted populations from poverty and vulnerability.
Some common and peculiar features characterise social protection in Sub-Saharan Africa (Ellis and Devereux 2009, Townsend 2009).
First, social protection continues to have limited formalisation, and its expansion is constrained by the lack of formal wage employment among the poor. Most low-income Sub-Saharan African countries have long had contribution-based social insurance schemes, often modelled on systems developed in colonial times. Their key feature is that very few people are covered by formal social insurance: not more than 5% to 10% of the workforce – principally in the form of pensions for civil servants and employees of large (formal) private enterprises (see ILO 2010).
Second, safety nets remain important, as a response to emergencies, and are widespread.
Third, there has been a considerable expansion of the number of specific targeted programmes, aimed at particularly poor and vulnerable groups, though many still remain in the pilot stage.
Fourth, in some countries, especially in southern Africa, schemes based on universality, or broadly defined target groups, are rapidly spreading.
The need and potential for expanding social protection in Sub-Saharan Africa, as well as the feasibility and the likely development outcome, have been recently examined by the European Report on Development (ERD 2010). While the programmes in Latin America have been widely described, evaluated and discussed in the economic and political literature (see, for instance, Grosh et al. 2008), there is much less on those prevailing in Sub-Saharan Africa. However, functioning social protection programmes are crucial for Sub-Saharan Africa, especially in the aftermath of the global financial crisis (see also Gerecke and Prasad 2010). The European Report on Development therefore provides a useful start, analysing the most relevant experiences of social protection in Sub-Saharan Africa, to investigate whether there are preconditions necessary for success, as well as which factors could contribute to scaling up social protection in the continent.
Some African examples on the road to social protection
In some low-middle income Sub-Saharan African countries, different examples of Social Protection are in place:
Ghana’s National Health Insurance Scheme is an intermediate form of health insurance involving social insurance financed by contributions from formal (and to a lesser extent informal) sector employees and by government coverage for those unable to contribute. This programme helped improve the efficiency of the country’s health system and reduce out-of-pocket expenditure on health;
Lesotho’s Old Age Pension is a universal non-contributory scheme including all registered citizens over 70-years-old not receiving any other form of pension benefit. There is no clear evidence on the impact of this programme on poverty, but similar schemes in South Africa had substantial effects for the elderly and their households. Furthermore, this programme has been central for its role in the political elections.
Rwanda’s Vision 2020 Umurenge Programme consists of three core initiatives to redirect social protection programmes to vulnerable populations: (1) public works; (2) the Ubudehe credit scheme; and (3) direct support through an unconditional cash transfer. Payments from the programme are used to satisfy basic consumption needs and stimulate savings. Preliminary evaluations have shown a huge reduction of extreme poor among beneficiaries (from 40.6% to 9%);
Ethiopia’s Productivity Safety Net Programme is probably the most known programme in Sub-Saharan Africa. It is a conditional transfer in cash and/or in kind based on public works. It also includes a small component of unconditional direct transfers to those unable to work. The programme reports a modest but relevant average impact, improving food security (by 11%), livestock holdings (by about 7%) and households’ ability to cope with emergency.
Kenya’s Home Grown School Feeding programme is a conditional cash transfer to schools for local purchase of food, involving half a million children of primary school age. The programme has showed a positive impact on children’s diet quality, health, learning capability and performance, school attendance. Furthermore, has had a positive impact on the economy of communities, because the food provided to the school is locally produced.
Such examples, and many others in different developing countries described in the European Report on Development (2010), allow us to identify some necessary preconditions for success, even though these programs are not necessarily suited to all countries. They also help to illustrate what is feasible in moving towards more comprehensive social protection systems in Africa.
The main message arising from the analysis of the existing cases is that it is politically, fiscally, and administratively feasible, even for low-income Sub-Saharan African countries, to put in place social protection programmes on a scale and scope previously thought out of reach.
The need for political commitment
Specific country conditions, including political commitment and prior experience, however, dictate the scope for tailored solutions. Political will is not only crucial for initially triggering the programme but also for committing to sustainable social protection schemes and to scale them up in the long term. In some cases, the government’s commitment is driven primarily by the need to address the main vulnerabilities affecting the population, in view of achieving long-term resilience. In Lesotho, the Old Age Pension was introduced to reduce the elderly burden, while indirectly supporting their households. In Ethiopia, the Productivity Safety Net Programme is aimed at overcoming dependence on emergency relief, providing predictable support to reduce chronic poverty and protect assets by promoting agriculture as the backbone of growth.
Putting social protection at the heart of the national development agenda can also affirm the social contract between the state and its citizens, thus bolstering the government’s legitimacy. In Ghana, the health insurance programme rose from an electoral promise to a rights-based entitlement, protecting the vulnerable while enforcing government accountability. The political benefits of commitment to social protection can provide significant results: in Lesotho the Old Age Pension contributed to the government’s re-election.
Such political commitment should be complemented by adequate institutional and administrative capacity. In Rwanda the Vision 2020 Umurenge Programme is embedded in a system based on subsidiarity. That is, policies are formulated at the centre, administered by sub-districts and implemented by the villages. The community-based approach – where communities take primary responsibility for identifying eligible beneficiaries – can be a valid alternative to top-down targeting that might not meet local needs, wasting resources. The Ubudehe credit scheme approach in Rwanda shows that decentralisation can contribute to the overall efficiency of interventions and avoid resources’ mismanagement. The Ghana example points in the same direction: taking advantage of the pre-existing community-based health insurance system contributed to a successful targeting and consequent extension of the scheme to the informal sector.
A starting point for social protection programmes
Affordability is often perceived as the greatest obstacle by governments. For many low-income countries in Sub-Saharan Africa, the complete package in the UN social protection floor (ILO 2008) might not be affordable, especially to the extent that revenue-raising capacity remains low and administrative costs are high. But elements of the social protection floor are fiscally affordable in most low-income Sub-Saharan African countries. Social pensions in Lesotho, with a cost of approximately 2% of domestic GDP, have been entirely covered by tax-based resources, quite high in the country (African Economic Outlook 2010). Ghana’s National Health Insurance Scheme, now covering a large part of the population, relies on different domestic sources of finance.
Hence, a good entry point for a social protection programme could be starting with non-contributory old age pensions, child grants or public works. More would be feasible in the longer run, if governments raised their tax to GDP ratios (itself desirable), reallocated resources within their budgets or obtained reliable and long-lasting external support.
Donor support can still be crucial, even when domestic political commitment and ownership of social protection are strong, since domestic resource mobilisation remains low in many Sub-Saharan Africa countries. In Ethiopia, for instance, the government provides only 8% of the total budget for the Productivity Safety Net Programme, while donors provide the rest.
In sum, political commitment, and domestic control over social protection programmes, has been the key to most, if not all, successful schemes. However, there is room for social protection to be an integral part of donors’ development policy. It is important that social protection does not crowd out markets, but forms the kind of social protection needed to enhance social cohesion.
http://www.voxeu.org/index.php?q=node/6041
Can developing countries afford large social-protection programmes, such as unemployment benefits or medical insurance? Summarising studies from across Africa, this column finds that such programmes are politically, fiscally, and administratively feasible – even for low-income Sub-Saharan African countries – and on a scale and scope previously thought out of reach.
Social protection is often considered as something exclusive to developed countries, even though some forms of it, often unstructured, have been in place in every society, also in developing countries. Recently, on the waves of successful implementation in Latin America, social-protection programmes have spread to Sub-Saharan Africa. Some programmes, such as pensions in Namibia and South Africa, have taken systems already in place prior to independence and expanded them to populations previously excluded or marginalised. Others, meanwhile, have been newly developed to protect targeted populations from poverty and vulnerability.
Some common and peculiar features characterise social protection in Sub-Saharan Africa (Ellis and Devereux 2009, Townsend 2009).
First, social protection continues to have limited formalisation, and its expansion is constrained by the lack of formal wage employment among the poor. Most low-income Sub-Saharan African countries have long had contribution-based social insurance schemes, often modelled on systems developed in colonial times. Their key feature is that very few people are covered by formal social insurance: not more than 5% to 10% of the workforce – principally in the form of pensions for civil servants and employees of large (formal) private enterprises (see ILO 2010).
Second, safety nets remain important, as a response to emergencies, and are widespread.
Third, there has been a considerable expansion of the number of specific targeted programmes, aimed at particularly poor and vulnerable groups, though many still remain in the pilot stage.
Fourth, in some countries, especially in southern Africa, schemes based on universality, or broadly defined target groups, are rapidly spreading.
The need and potential for expanding social protection in Sub-Saharan Africa, as well as the feasibility and the likely development outcome, have been recently examined by the European Report on Development (ERD 2010). While the programmes in Latin America have been widely described, evaluated and discussed in the economic and political literature (see, for instance, Grosh et al. 2008), there is much less on those prevailing in Sub-Saharan Africa. However, functioning social protection programmes are crucial for Sub-Saharan Africa, especially in the aftermath of the global financial crisis (see also Gerecke and Prasad 2010). The European Report on Development therefore provides a useful start, analysing the most relevant experiences of social protection in Sub-Saharan Africa, to investigate whether there are preconditions necessary for success, as well as which factors could contribute to scaling up social protection in the continent.
Some African examples on the road to social protection
In some low-middle income Sub-Saharan African countries, different examples of Social Protection are in place:
Ghana’s National Health Insurance Scheme is an intermediate form of health insurance involving social insurance financed by contributions from formal (and to a lesser extent informal) sector employees and by government coverage for those unable to contribute. This programme helped improve the efficiency of the country’s health system and reduce out-of-pocket expenditure on health;
Lesotho’s Old Age Pension is a universal non-contributory scheme including all registered citizens over 70-years-old not receiving any other form of pension benefit. There is no clear evidence on the impact of this programme on poverty, but similar schemes in South Africa had substantial effects for the elderly and their households. Furthermore, this programme has been central for its role in the political elections.
Rwanda’s Vision 2020 Umurenge Programme consists of three core initiatives to redirect social protection programmes to vulnerable populations: (1) public works; (2) the Ubudehe credit scheme; and (3) direct support through an unconditional cash transfer. Payments from the programme are used to satisfy basic consumption needs and stimulate savings. Preliminary evaluations have shown a huge reduction of extreme poor among beneficiaries (from 40.6% to 9%);
Ethiopia’s Productivity Safety Net Programme is probably the most known programme in Sub-Saharan Africa. It is a conditional transfer in cash and/or in kind based on public works. It also includes a small component of unconditional direct transfers to those unable to work. The programme reports a modest but relevant average impact, improving food security (by 11%), livestock holdings (by about 7%) and households’ ability to cope with emergency.
Kenya’s Home Grown School Feeding programme is a conditional cash transfer to schools for local purchase of food, involving half a million children of primary school age. The programme has showed a positive impact on children’s diet quality, health, learning capability and performance, school attendance. Furthermore, has had a positive impact on the economy of communities, because the food provided to the school is locally produced.
Such examples, and many others in different developing countries described in the European Report on Development (2010), allow us to identify some necessary preconditions for success, even though these programs are not necessarily suited to all countries. They also help to illustrate what is feasible in moving towards more comprehensive social protection systems in Africa.
The main message arising from the analysis of the existing cases is that it is politically, fiscally, and administratively feasible, even for low-income Sub-Saharan African countries, to put in place social protection programmes on a scale and scope previously thought out of reach.
The need for political commitment
Specific country conditions, including political commitment and prior experience, however, dictate the scope for tailored solutions. Political will is not only crucial for initially triggering the programme but also for committing to sustainable social protection schemes and to scale them up in the long term. In some cases, the government’s commitment is driven primarily by the need to address the main vulnerabilities affecting the population, in view of achieving long-term resilience. In Lesotho, the Old Age Pension was introduced to reduce the elderly burden, while indirectly supporting their households. In Ethiopia, the Productivity Safety Net Programme is aimed at overcoming dependence on emergency relief, providing predictable support to reduce chronic poverty and protect assets by promoting agriculture as the backbone of growth.
Putting social protection at the heart of the national development agenda can also affirm the social contract between the state and its citizens, thus bolstering the government’s legitimacy. In Ghana, the health insurance programme rose from an electoral promise to a rights-based entitlement, protecting the vulnerable while enforcing government accountability. The political benefits of commitment to social protection can provide significant results: in Lesotho the Old Age Pension contributed to the government’s re-election.
Such political commitment should be complemented by adequate institutional and administrative capacity. In Rwanda the Vision 2020 Umurenge Programme is embedded in a system based on subsidiarity. That is, policies are formulated at the centre, administered by sub-districts and implemented by the villages. The community-based approach – where communities take primary responsibility for identifying eligible beneficiaries – can be a valid alternative to top-down targeting that might not meet local needs, wasting resources. The Ubudehe credit scheme approach in Rwanda shows that decentralisation can contribute to the overall efficiency of interventions and avoid resources’ mismanagement. The Ghana example points in the same direction: taking advantage of the pre-existing community-based health insurance system contributed to a successful targeting and consequent extension of the scheme to the informal sector.
A starting point for social protection programmes
Affordability is often perceived as the greatest obstacle by governments. For many low-income countries in Sub-Saharan Africa, the complete package in the UN social protection floor (ILO 2008) might not be affordable, especially to the extent that revenue-raising capacity remains low and administrative costs are high. But elements of the social protection floor are fiscally affordable in most low-income Sub-Saharan African countries. Social pensions in Lesotho, with a cost of approximately 2% of domestic GDP, have been entirely covered by tax-based resources, quite high in the country (African Economic Outlook 2010). Ghana’s National Health Insurance Scheme, now covering a large part of the population, relies on different domestic sources of finance.
Hence, a good entry point for a social protection programme could be starting with non-contributory old age pensions, child grants or public works. More would be feasible in the longer run, if governments raised their tax to GDP ratios (itself desirable), reallocated resources within their budgets or obtained reliable and long-lasting external support.
Donor support can still be crucial, even when domestic political commitment and ownership of social protection are strong, since domestic resource mobilisation remains low in many Sub-Saharan Africa countries. In Ethiopia, for instance, the government provides only 8% of the total budget for the Productivity Safety Net Programme, while donors provide the rest.
In sum, political commitment, and domestic control over social protection programmes, has been the key to most, if not all, successful schemes. However, there is room for social protection to be an integral part of donors’ development policy. It is important that social protection does not crowd out markets, but forms the kind of social protection needed to enhance social cohesion.
http://www.voxeu.org/index.php?q=node/6041
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