Tackling Poverty with Social
Transfers to Vulnerable Groups:
Evidence from Africa
15 November 2006
Michael Samson
msamson@epri.org.za
Economic
Policy
Research
Institute
International Forum
on the Eradication of Poverty
New York City
15-16 November 2006
UNICEF session on
“Children in Poverty”
Overview
 THE PROBLEM: Poverty disproportionately affects
children and older people
 THE INSTRUMENT: Social transfers provide regular
cash payments to poor households
 THE OUTCOMES:
– children’s health, education and nutrition
– break the inter-generational cycle of disadvantage
– labor market participation
– broad economic and developmental impacts
 KEY ISSUES: dependency, conditionality, affordability
South Africa’s cash transfers produce remarkable
social outcomes while supporting economic
growth and broad developmental impacts
 Sub-Saharan Africa’s
oldest social transfer
program
 Costs 3% of GDP
 Substantial impact on
poverty reduction
 Extensive studies of
growth outcomes
– Human capital
– Labor markets
– Development
South Africa
South Africa’s social grants reduce poverty and
destitution substantially
80%
60%
40%
20%
48%
reduction
67%
reduction
Poverty
gap
Destitution
gap
0%
The universal social pension in Lesotho mainly
protects children and promotes human capital
accumulation
 The world’s newest
Lesotho
universal social
pension, started in
2004
 Costs 1.4% of GDP
 65% of the cash is
spent on children
cared for by older
people
 Supports human
capital investment,
particularly for OVCs
Social transfers in Namibia protect children and older
people, support labour market participation and
promote local economic activity
 A transformed
Namibia
pension system since
democracy in 1990
 Near-universal takeup (85%)
 Costs 0.7% of GDP
 Supports labour
market participation,
particularly for
women
 Stimulates local
markets
Do social transfers create dependency?
 A major concern of policy-makers
 Evidence in many developing countries suggests that
social grants support labor market participation
 Robust evidence from South Africa
– Ability to search for employment
– Ability to find a job
 Bolster economic power in negotiating decent work
Impact of South Africa’s Child Support Grant on
adult labor force participation
Household
does not
receive
child grant
in 2004
Household
receives
child grant
in 2004
Improvement
associated
with child
grant
Find employment
13%
15%
2%
Actively look for work
17%
20%
3%
Probability that a poor adult
of working age in 2005 will:
NOTE: Sample includes working age adults (older than 16) in households in the lowest income
quintile but with no working individuals in September 2004.
SOURCE: Statistics South Africa Labor Force Surveys and EPRI calculations
Impact of South Africa’s Child Support Grant on
women’s labor force participation
Household
does not
receive
child grant
in 2004
Household
receives
child grant
in 2004
Improvement
associated
with child
grant
Find employment
12%
15%
3%
Actively look for work
14%
20%
6%
Probability that a poor women
of working age in 2005 will:
NOTE: Sample includes women (older than 16) in households in the lowest income quintile with
older people but with no working individuals.
SOURCE: Statistics South Africa Labor Force Surveys and EPRI calculations
Are conditionalities necessary?
Rationale: long term poverty reduction
Philosophical underpinnings
Risks
– compromise the poverty reduction objective
– deprive the poor of freedom to choose appropriate
services — and to freely make decisions to
improve household welfare
– can be expensive, inflexible, and inefficient — in
the worst of cases, screen out the poorest
Are social transfers affordable?
 Social transfers must be financed, and the costs can
be substantial — up to 3% of national income.
 Economic growth and the government’s available
budget depend on each other.
 Social transfers conserve fiscal resources in
important ways.
 Social transfers can support a virtuous circle of
growth, greater affordability and sustainability.
Conclusions
 For countries in Africa, social transfers have
demonstrated considerable success in supporting
children’s health, education and nutrition.
 In many countries they are the most effective
government program for reducing poverty.
 They help to break the cycle of inter-generational
transmission of disadvantage.
 Social transfers do not create dependency—they
often break dependency traps, particularly by
nurturing productive high-return risk-taking.
 Social transfers support economic growth and
development and are affordable.