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The development impact of social transfers: Lessons from the South African experience

Date
Time (GMT +01) 17:30 19:00

Speakers:
Dr Zola Skweyiya
, Minister of Social Development, Republic of South Africa
Prof Charlotte du Toit, University of Pretoria
Dr Michael Samson, Economic Policy Research Institute (EPRI), Cape Town

Chair:

Rachel Slater, Research Fellow, Rural Policy and Governance group (RPGG), ODI

Meeting Report

1. Angela Penrose, the chair, welcomed the panel, and stated the importance of tonight's meeting for learning valuable lessons from South Africa's experience of implementing social transfers.


Dr Zola Skweyiya

2. Dr Zola Skweyiya started by emphasizing the bold and important steps taken in developing a social protection system in post-apartheid South Africa to address the multidimensional aspects of poverty found in the country.

3. He went on to say that in his presentation he will talk about South Africa's history and society, the issue of social protection, and future challenges.

4. Poverty presents a significant challenge for South Africa. Many of the poor suffer different kinds of deprivation. The nature of the poverty challenge in South Africa is manifested in low level weight among children, stunted growth of children, millions of unemployed youth who are unable to support and sustain themselves now and in the future, and in mothers and fathers being unable to support children.

5. The Minister outlined the development of politics in which a vision for an inclusive South Africa was desired, highlighting the Freedom Charter (1955). In 1992 when negotiations for a new constitution were underway, the principles of the Freedom Charter were continued. The end result was a constitution which was based on principles on equality for all. Similarly, equality is central to social protection: social protection has to be there for everyone and to treat everyone equally.

6. The Minister stated that there are a lot of economic constraints to delivering social protection. Currently, as many people as possible are covered by social protection, but at the same time, this also has to be justified economically. In order to pursue social protection, a country needs economic growth. This applies to South Africa, the region and the developing world in general.

7. The Minister went on to say that there is a need to build the social protection and economic agenda so that economic policy relates to poverty reduction. As GDP rises so must human development and household prosperity. A responsive government must provide facilities, for example, investing in youth, as a certain and proven way for investing in the future of the country.


Prof Charlotte de Toit

8. Prof Charlotte de Toit provided a framework presenting a business case for deepening the role of social protection in South Africa. She stated that the country has shown notable successes in fiscal and monetary policies. However, she emphasised that this is also the time to move on and embrace existing challenges in the country.

9. In her presentation Professor de Toit fundamentally challenged the existing model of economic growth in South Africa, arguing that the current model of accelerated growth does not necessarily equate to poverty reduction.

10. She argued that although the South African economy is growing, many households are not sharing the benefits of economic growth. Using the example of employment, she identified that the trend in employment creation was in decline and stabilising, but not following the economic growth rate. Therefore South Africa has been sliding on human development achievements relative to the growth rate. Furthermore she demonstrated that the gap between South Africa's ranking of GDP per capita performance versus its human development capital performance is declining. Therefore GDP performance is not turning into shared wellbeing.

11. Professor de Toit went on to show that increased economic growth has also not resulted in higher income for many households. In fact households' share of income generated has been declining over time. Also, households' share of total expenditure in the economy has been increasing. Therefore, she argues, a bubble is being created which is unsustainable, and sooner or later inflation and negative balance of payments will kick in.

12. So, what went wrong? And what can the government do to improve the situation? Professor de Toit states that although firms would like to increase supply and employ more people on higher wages, they cannot find qualified people. 40% of the active population between 16 and 65 are unemployed and cannot find jobs. She therefore argues policy focusing on growth will not work as a development policy because of the nature of impediments to employment. Initial findings show that these impediments are socio-economic in nature and include lack of human capital, health issues, crime, lack of quality education, housing, infrastructure etc.

13. In conclusion, Professor de Toit argues that if 40% of the active economic population do not engage in the labour market, this means that they don't contribute to economic growth and South Africa is underutilising its own resources. Evidence demands that a new paradigm is needed to identify the 40% as an engine of growth. The policy implications of this are that South Africa needs to target the well being of all the population, not just the most marginalised and most vulnerable, for employment creation, and to see human capital investment as part of economic growth. South Africa cannot afford to perceive this as expense item on the budget and cannot continue with the same programmes: South Africa needs an integrated programme with a bottom up approach.


Dr Michael Samson

14. Dr Michael Samson discussed four issues which reflect lessons from South Africa as it has scaled up social transfers. These are:

o Should we target the poor?
o Do we need conditionality?
o Do social transfers create dependency?
o Are they sustainable?

15. Should we target the poor? Michael Samson argued that targeting and administrative requirements exclude the poorest from the programme because of identification requirements, information gaps etc. Whilst the purpose of targeting is to efficiently use the available resources, it screens out the poorest. In South Africa many of these administrative targeting burdens have been progressively reduced. Evaluations show that social grants have reduced the poverty gap by 48% thereby reducing inequality. Additionally, exclusion and inclusion errors of targeting have reduced even though the government has made it easier to access the grants.

15. Do we need conditionality? Evidence from Mexico's conditional cash transfer programme, Progresa/Oportunidades has shown positive results. However, Michael Samson questions the ideology that the poor are responsible for their poverty as reflected in the design of conditional cash transfers. Sometimes the poor are poor for structural reasons - lack of services, social exclusion. South Africa's social protection system is based on a Rights Based Approach, where people are entitled to receive transfers. Social grants in South Africa have the same positive impacts on children's education, health care and nutrition. Pensions also show that hunger amongst children falls more than older people themselves. Therefore, he argues, condionalities are not necessary. The poor don't need incentives, they need resources.

16. Do social transfers create dependency? Some people believe that if you give poor people small amounts of money, they will become lazy and not want to work. However, evidence in SA shows that social transfers do not create unemployment or stop people looking for work.

17. Are social transfers sustainable? Spending has increased on social transfers in South Africa. In the face of massive expansion and investment over 5 years in social protection, the economy continues to grow. There is no evidence that investment in people has undermined economic growth. Evidence shows that social grant spending reduces the poverty gap, and that investment in people promotes growth. Michael Samson argued that the temporary increase in investment on social transfers is necessary, but as growth increases, investment in social assistance is less of a burden on the economy over time.


Discussion

18. Growth Path
Currently the growth path in South Africa is more capital than labour intensive. But challenges also exist in mobilising vehicles to capacitate individuals in rural and informal sectors, not just focusing on the formal sector. There is opportunity to do more in South Africa in terms of investment in public works and small and medium enterprises.

19. Disability issues
Social protection has reached disabled people and the numbers of disabled people receiving social transfers has increased. However, there are still many challenges in ensuring that disabled people have equal access to social protection, for example public works programmes.

20. Basic income grant
The question of the basic income grant continues to be a big issue in South Africa: one of the main challenges is whether the country can afford it. The Minister noted that they are currently trying to justify the potential implementation of the grant.

21. African Economic Empowerment
Can African economic empowerment be included in a social development system? Charlotte de Toit replied that at the moment African economic empowerment was targeting a more privileged group and so wasn't successfully redistributing income from the rich to the poor.

22. Social protection from the bottom up
One participant recounted the bottom up approach of a social transfer programme in Kenya. A cash transfer was given to a community and the community decided how the money was spent. Learning about the process of community participation and identifying the problems within the community was important. Social capital was a key factor.

23. Provision of services
The government is aware of the need for health and education service provision to all the population. Whilst there has been some improvement in the number of children going to school, challenges still remain over the quality of services. More infrastructure is necessary as well as investment in more teachers and health care facilities.


Reaching the very poorest and excluded is also still a big challenge. It is difficult to reach, for example, disabled children in deep rural and township areas. The government is starting to address this with campaigns to reach as many children as possible.

Description

Evidence from South Africa suggests that social protection contributes to the achievement of larger development objectives, including economic growth and the MDGs. As many African countries consider introducing social transfer programmes, learning from the South African experience is essential.

At this ODI and Grow Up Free From Poverty Coalition event, Dr Zola Skweyiya, South African Minister of Social Development spoke about how protecting vulnerable groups produces development outcomes; Prof Charlotte de Toit from the University of Pretoria presented on the effectiveness of economic growth policy in meeting the challenges of poverty; and Dr Michael Samson from EPRI in Cape Town spoke about targeting versus universalism and other key questions in the implementation of social transfer programmes.


The Grow Up Free From Poverty Coalition is made up of 24 NGOs, faith groups and civil society organisations. Its work currently focuses on the role of cash transfers in both the reduction of poverty and facilitating access to other essential services.