Reducing Poverty and Investing in People: The New Role of Safety Nets in Africa in Nets Safety of Role New The People: in Investing and Poverty Reducing THE WORLD BANK WORLD THE Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Human Development DIRECTIONS IN DEVELOPMENT DIRECTIONS IN The NewRoleofSafetyThe NetsinAfrica and Investing inPeople Reducing Poverty Victoria MonchukVictoria Reducing Poverty and Investing in People DIRECTIONS IN DEVELOPMENT Human Development Reducing Poverty and Investing in People The New Role of Safety Nets in Africa Victoria Monchuk © 2014 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 16 15 14 13 This work is a product of the staff of The World Bank with external contributions. 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Reducing poverty and investing in people : the new role of safety nets in Africa / Victoria Monchuk. pages cm. – (Directions in development) Includes bibliographical references. ISBN 978-1-4648-0094-8 (alk. paper) – ISBN 978-1-4648-0095-5 (ebook) 1. Economic assistance, Domestic—Africa. 2. Poverty—Government policy—Africa. 3. Poor—Government policy—Africa. I. Title. HC800.Z9P6353 2013 362.5’8096—dc23 2013040311 Reducing Poverty and Investing in People • http://dx.doi.org/10.1596/978-1-4648-0094-8 Contents Preface ix Acknowledgments xi Abbreviations xiii Executive Summary 1 Objectives and Methods 2 Conclusions Based on the Experience in the 22 Countries 4 Moving Forward to Strengthen Safety Nets in Africa 8 Implementing the Vision: What Can Other Countries Learn? 9 An Agenda for Learning 12 Notes 13 References 13 Chapter 1 The Changing Landscape: An Introduction 15 The Rise of Safety Nets in Africa 15 The Need for Safety Nets in Africa 17 Objectives, Methodology, and Typology 20 Notes 23 References 24 Chapter 2 Poverty and Risk 27 Growth and Poverty Incidence 27 Vulnerability and Food Insecurity 32 Determinants of Poverty and Vulnerability 35 Summary of Main Messages 37 Notes 38 References 38 Chapter 3 Existing Safety Net Policies and Programs 39 Policies and Strategies 40 Institutions and Implementation Arrangements 43 Existing Safety Net Programs 50 A Look at Each Program Type 56 Reducing Poverty and Investing in People • http://dx.doi.org/10.1596/978-1-4648-0094-8 v vi Contents Summary of Main Messages 75 Notes 76 References 77 Chapter 4 Effectiveness of Existing Safety Net Programs: An Analysis 79 Coverage 80 Generosity 86 Targeting Efficiency 93 Flexibility, Predictability, and Crisis Preparedness 103 The Impacts of African Safety Nets 106 Summary of Main Messages 110 Notes 112 References 113 Chapter 5 Financing, Cost, and Sustainability 115 Spending on Safety Nets 116 Financing by Governments and Donors 121 Sustainability: What Would Be Needed to Meet the Needs in the Medium Term? 122 The Political Economy of Safety Nets in Africa 124 Summary of Main Messages 128 Notes 129 References 129 Chapter 6 Moving Forward: Building Better Safety Nets in Africa 131 The Need for a Systematic Approach to Safety Nets 132 The Way Forward: How to Build Safety Net Systems in Africa 135 Recommendations by Country Context 137 An Agenda for Learning 140 Note 142 References 142 Appendix A Definition of Safety Nets 143 Note 145 Reference 145 Appendix B Country Typologies 147 Notes 150 References 151 Appendix C Poverty Headcount Data 153 Appendix D Targeting Methods and Targeted Groups, by Program 155 Reducing Poverty and Investing in People • http://dx.doi.org/10.1596/978-1-4648-0094-8 Contents vii Boxes ES.1 Definition of Terms 2 ES.2 The Productivity of Cash Transfers in Africa 3 1.1 The Definition of Social Safety Nets 16 1.2 The World Bank’s Africa Social Protection Strategy: Moving toward Systems in Kenya 18 1.3 The Economic Theory: When Markets Fail to Support Investments in the Poor 19 1.4 Country Safety Net Reports Used in This Review 21 2.1 Growth and Poverty Reduction in Tanzania 29 3.1 Evolution of the Social Protection Sector in Rwanda 42 3.2 Ethiopia’s PSNP: Multiministerial Institutional Framework 47 3.3 Harnessing Information and Communication Technology for an Accountable Payment System in Niger 49 3.4 Examples of African Safety Net Programs 54 3.5 Lesotho’s Old-Age Pension: Part of the Safety Net 59 3.6 Ghana’s National Health Insurance Scheme Indigent Exemption 73 4.1 Harmonization of Safety Net Programs in Rwanda 86 4.2 The Effectiveness of Different Targeting Methods in Kenya 96 4.3 The Targeting Effectiveness of Mozambique’s Major Safety Nets 98 4.4 The Role of Safety Nets in Promoting Climate Change Adaptation 105 4.5 Can Cash Transfers Be Productive in Africa? 109 5.1 Moving Forward with Subsidy Reform: What Can Africa Learn from Other Countries? 125 Figures 2.1 Average Annual GDP Growth Rate, 2000–10 28 2.2 Poverty Headcount, Latest Year Available 29 2.3 Poverty Headcount, Early and Late 2000s 29 B2.1.1 Growth Incidence, Tanzania Mainland, 2001–07 30 2.4 Urban and Rural Poverty Headcount, Latest Year Available 31 2.5 Urban Poverty Headcount, Early and Late 2000s 31 2.6 Rural Poverty Headcount, Early and Late 2000s 32 2.7 Percentage of the Population Living in Food Insecurity, Latest Year Available 34 2.8 Malnutrition Prevalence in Children under Five Years of Age, Latest Year Available 35 3.1 Percentage of Countries with a Social Protection Strategy 41 3.2 Donor Involvement in Safety Nets 44 3.3 Percentage of Countries with a Coordinated Safety Net System 46 B3.3.1 Verification of Beneficiary Identity 49 3.4 Types of Safety Net Programs 51 3.5 Short- or Long-Term Focus of Safety Nets 51 Reducing Poverty and Investing in People • http://dx.doi.org/10.1596/978-1-4648-0094-8 viii Contents 3.6 Safety Nets, by Objective 56 3.7 Objectives of Africa’s Public Works Programs 72 4.1 Coverage of Transfer Programs Relative to Poverty Lines in Zambia 83 B4.3.1 Concentration Curves 98 B4.3.2 Concentration Indexes 99 5.1 Safety Net Spending Trends in Selected Countries, 2005–2011 119 A.1 Social Safety Nets in Development Policy 145 C.1 Poverty Headcount at US$1.25 per Day Purchasing Power Parity 153 C.2 Poverty Headcount at US$2 per Day Purchasing Power Parity 154 Map ES.1 The 22 Countries Covered in This Review 4 Tables 1.1 Country Typology Used in This Review 23 2.1 Poverty Covariates 36 3.1 Types of Safety Net Programs in 22 Countries 52 3.2 Core Features of Public Works Programs, Selected Countries and Programs 62 4.1 Coverage of Safety Net Programs, Selected Countries and Programs 81 4.2 Generosity of Cash Transfer Programs in Selected Countries, Excluding Social Pensions 88 4.3 Generosity of Noncontributory Social Pensions in Selected Countries 91 4.4 Frequency of Targeting Methods 94 B4.2.1 Results of Targeting Methods Simulation 97 5.1 Cost and Financing of Safety Nets 117 5.2 Percentage of Social Safety Net Spending, by Program Type, Selected Countries 120 B.1 Countries Classified by Income Level 148 B.2 Country Typology Based on Their Crisis Preparedness and Safety Net Capacity 149 B.3 Country Typology Based on the Extent of Development of the Safety Net System 150 B.4 Country Typology Used in This Review 150 Reducing Poverty and Investing in People • http://dx.doi.org/10.1596/978-1-4648-0094-8 Preface Over the past two decades, Africa’s strong economic growth has paved the way for poverty reduction.