Social Policy As Tool For Reducing Poverty In Africa: Exploring Ways And Mechanisms

Oct 13, 2021 • 20 min read

Social Policy As Tool For Reducing Poverty In Africa: Exploring Ways And Mechanisms

Social Policy is generally considered as an issue of the developed or the developing nations. This paper attempted to explore the applicability of social policy mechanisms in Africa with special emphasis on the role of social policy in reducing poverty. In other words, it is argued that social policy is affordable in even lower-income economies like Sub-Saharan Africa by presenting the mechanisms that could be employed in levying the finance needed for sustainable social policy. In this regard, the potential revenue sources like taxation, aid, remittance are discussed. From a theoretical perspective, social policy is taken within its broader context of production, redistribution, protection, reproduction, social cohesion or nation-building. Thus, in the paper, social security measures, as part of social policy, are not presented as a sufficient tool in reducing poverty. Other aspects of social policy like reducing inequality and promoting social justice are also given importance.

* Graduate Student at Anadolu University, Eskisehir, Turkey.

Introduction

The social policy is accepted with its instruments and the areas in which it is applied (e.g. education, health, labour, housing) as an important vehicle for social and sustainable economic development. In the context of Africa, the economic reform programmes suggested by IMF and World Bank or as known structural adjustment programs(SAPs), which were applied in the continent in the 1980s to 1990s, has left a tremendous negative effect on the social sphere of the African countries. These policies, which were inspired by the neo-liberal economic outlook, have led to entrenchment in social investments, especially the investments in social protection programmes (Harrigan and El-Said 2009). As a result of this, the problem of poverty became more extreme as these policies were carried out. For instance, international organisations like UNICEF had raised the problem these policies caused for vulnerable segments of society like children, with the slogan ‘’ ‘adjustment with a human face’’. UNICEF was drawing attention to the deteriorating situation of the children living in many SAPs-implementing countries, who were suffering from malnutrition (Kawamura, 2015)
This experience of the SAPs has shown that although the countries could achieve a degree of economic ‘’success’’, these do not necessarily translate into social development, and in the long run, may not provide the prospect of sustainable economic development. According to a study carried out by World Bank, the countries that were implementing structural adjustment programmes performed better in economic growth than their non-adjusting counterparts( World Bank, 1994). But, unfortunately, in the social sphere, it is observed that it has a devastating effect on the poor and vulnerable groups of the society, as well as precipitating social and political upheavals (Helleiner, 1987). This social failure of SAPs has led to the rediscovery of the importance of social policy in the development context and alleviating poverty (Mkandawire, 2004). In this paper, we are considering the role of social policy in reducing poverty and the measures that can be taken in order to achieve this goal. The social policy was regarded within the neo-liberal economic outlook, which SAPs were part of it, as a residual approach intended to mitigate the negative social effect caused by the economic policies as they were implemented. Departing from this paradigm, we present social policy in this paper as indispensable for both sustainable economic growth and better human development. In the end, we discuss the ways social policy can be financed in lower-income Sub-Saharan African countries and the challenges that surround it.

Overview of Poverty in Africa

This experience of the SAPs has shown that although the countries could achieve a degree of economic ‘’success’’, these do not necessarily translate into social development, and in the long run, may not provide the prospect of sustainable economic development. According to a study carried out by World Bank, the countries that were implementing structural adjustment programmes performed better in economic growth than their non-adjusting counterparts( World Bank, 1994). But, unfortunately, in the social sphere, it is observed that it has a devastating effect on the poor and vulnerable groups of the society, as well as precipitating social and political upheavals (Helleiner, 1987). This social failure of SAPs has led to the rediscovery of the importance of social policy in the development context and alleviating poverty (Mkandawire, 2004). In this paper, we are considering the role of social policy in reducing poverty and the measures that can be taken in order to achieve this goal. The social policy was regarded within the neo-liberal economic outlook, which SAPs were part of it, as a residual approach intended to mitigate the negative social effect caused by the economic policies as they were implemented. Departing from this paradigm, we present social policy in this paper as indispensable for both sustainable economic growth and better human development. In the end, we discuss the ways social policy can be financed in lower-income Sub-Saharan African countries and the challenges that surround it.

Social Policy and Reduction of Poverty

Social policy is a broad policy area that encompasses many different policy areas, but here we are going to shed light on to immediate mechanisms of social policy when it comes to reducing poverty. In this respect, one of the most important mechanisms of social policy is social protection. Social protection is rapidly becoming an important component of development policy, especially in the context of developing countries. It is generally described to include ‘’ public actions taken in response to levels of vulnerability, risk and deprivation which are deemed socially unacceptable within a given polity or society’ (Norton, Conway & Foster, 2001, p. 7). Social protection is categorised within three broad groups of programmes, namely social insurance, social assistance and labour regulation.

Social insurance consists of programmes that aim to protect against contingencies such as maternity, old age, sickness or unemployment. On the other hand, social assistance programmes aim to support those in poverty, while labour market regulations ensure basic work standards and minimum wages for work, etc. (Barrientos & Hulme, 2008). Social insurance is generally contributory, while social assistance is tax-financed.

The state of social protection in many low-income countries(LICs) is at a very low level. Basic social protection remains a pipedream for the people of these countries (Chitonge, 2012). When it comes to Africa, especially Sub-Saharan Africa(SSA), nine in every ten people are estimated to have no basic social protection (Chitonge, 2012; ILO 2008). This becomes more challenging when it is taken into account the magnitude of the poverty in these countries. More than half of the population live in extreme poverty. Apart from poverty, there are other factors that hinder the prospect of social protection in these countries, including low-quality employment, low level of access to social services such as health, water, sanitation and high prevalence of HIV/AIDS in some countries and the absence of interventions to support vulnerable groups ( Chitonge, 2012).

Despite all the challenges, social protection as a tool for reducing poverty and vulnerability occupy a central position in the development policies of African countries. For instance, in the development policy milieu of countries like Nigeria, there is a developmental plan that wants to reduce poverty from 65 per cent to 50 per cent by 2013 by using multiple programs for social protection. The objectives of the social protection of Nigeria is included assisting people who are poor to get out of poverty, providing income support to the poorest, especially the sick and retirees; increase enrollment and attendance rates of students in public schools; address short-term employment needs by developing skills and competencies, and reduction of damages to properties arising from natural and man-made disasters (Umukoro 2013). Nevertheless, the vast majority of African countries still lack effective and universal social protection, except for countries like South Africa, where advanced social protection programmes are in place. This is sometimes explained as a South Africa ‘’exceptionalism’’, referring to the higher economic development in the country in accordance with the rest of the poor countries in Africa (Devereux, 2013).

Apart from social protection, the policy areas of the social policy included education and health care. Education as a social investment directly affects the economic development and the rate of poverty of the countries. The higher the education is, the lower the poverty rate becomes. In relation to this fact, the countries that implemented their education policies as part and parcel of larger social policy agenda has realised an important degree of poverty reduction (Levy, S; Schady, N 2013). When it comes to healthcare, inclusive and universal healthcare that includes into scope all the citizens regardless of their socioeconomic status will reduce poverty and increase living standards of the population. Ill-health is one of the causes that trap people into the poverty cycle. As Bloom and Cunning rightly put it, ‘’ill-health not only affects the poor disproportionately, it also causes poverty. A family struggling to survive economically cannot afford to be ill; not only because they cannot afford medicine and health care, but because of the loss of earning power that illness causes’’ (2003; p, 52)

Also, there is an important link between health and success in education. Healthy children do better in education in comparison to their peers from poor families. Also, at the family level, the education of the child from a healthy family is less likely to be interrupted by the ill-health of family members (Bloom & Cunning, 2003).

In this context, the provision of basic healthcare that is accessible to all populations is of paramount importance to poor countries included African countries, in order to lift their population out of poverty.

Financing Social Policy

Social policy measure like social security has generally been seen as a luxury that only rich countries can afford. But the evidence provided by research carried out by ILO has shown that social policy is affordable, even for countries with low levels of income (Behrendt & Hagemejer, 2009). The study covered seven countries in Africa: Burkina Faso, Cameroon, Ethiopia, Guinea, Kenya, Senegal and Tanzania and five countries in Asia: Bangladesh, India, Nepal, Pakistan and Viet Nam. The study estimated the cost of a basic social security package containing universal basic old-age and disability pensions, basic child benefits, universal access to essential health care, and social assistance. The cost was estimated to cost around 10 per cent of the GDP of the respective countries.

Furthermore, a recent UN study of 18 countries in Latin America and the Caribbean has provided the prospect that the Millennium Development Goals (MDGs) would be achievable for all countries in the region if they mobilised additional MDG–related public spending of between 0.9 and 6.1 per cent of GDP per year until 2015( UNRISD, 2010). However, the question that comes naturally is: how and from which sources can low-income countries mobilise the needed cost for social policy? Here we are going to explore three potential sources taxation, mineral rent, aid and remittance.

Taxation

Taxation may be defined according to its functions as ‘‘ raising revenue to finance public goods and services and redistributing income, with other additional objectives, such as correcting externalities or stabilising the economy’’ ( Sindzingre, 2009, p. 116). Taxation is a sine qua non for state existence. It is the mechanism that allows states to exist and persist ( Tilly 1990). Basically, there are six different taxes when it comes to financing social policy: self-provision, user fees, generalised insurance, indirect tax, earmarked tax, and direct tax. These different taxes can be categorised into two groups in relation to whether they are pro-poor or not.

The self-provision and user fees are categorised as regressive when assessed from a redistributive perspective. Self-provision means when the individual takes the responsibility to provide themselves with basic social services like health care or education. This happens when the state fails in its responsibilities to cater for the well-being of the population. On the other hand, user fees are fees charged to the people when using a particular public service. In countries like the Republic of Korea, Thailand, Singapore, this policy of user charge coexists with national or partial social insurance (Delamonica, & Mehrotra 2009).

The rationale behind the implementation of user fees is the argument that this increases the quality of the service and improve access and inequity. However, there is no consensus on this issue. Other researchers have argued that the use of a user fee system neither promotes quality nor efficiency (Delamonica & Mehrotra 2009). Generalised insurance is promoted as an alternative to user fees. Generalised insurance is a mandatory system of insurance that covers all citizens. This system involves a mechanism of risk pooling. But it cannot be said to be truly pro-poor, although it ensures a degree of income redistribution.
Another important source of revenue of social policy is indirect taxes. Indirect taxes are comprised of two taxes: value-added tax (VAT) and excise taxes. The value-added tax is still a recent trend in developing countries. In low-income countries like Africa, it is not still a viable taxation system. On the other hand, excise taxes could be viable revenue for low-income countries as it levied on products like alcohol, tobacco, petroleum, vehicles and spare parts. At this time, excise taxes amount to less than 2 per cent of GDP in low-income countries. However, VAT and excise taxes are pro-poor as they are not involved in the redistribution of income from the rich to the poor (Delamonica & Mehrotra 2009).

Furthermore, the rest of the import taxes in regard to social policy are earmarked taxes and indirect taxes. Earmarked taxes come in a variety of forms like taxes on property, taxes on business, taxes on certain commodities like intoxicants or cigarettes, taxes on imports and taxes on interest or dividends. These forms of taxes are allocated by the governments for specific purposes like education or health care. This form of earmarking specific taxes for development purposes is common in developing countries. For instance, in 1982, South Korea had a budget deficit in the education sector, so the government introduced a five-year education tax on spirits, tobacco, interest and dividend income, the banking and the insurance industry. Five years later, the government covered its budget deficit in education, and the tax amounted to 15 per cent of the education ministry’s budget (Delamonica & Mehrotra 2009). This kind of earmarked taxes for education is also used in other countries in Africa, Latin America, and Asia. From the redistributive function, the earmarked taxes could be categorised as progressive, especially the earmarked taxes on interest, assets and the other forms that involve taxing the wealthy.

Direct taxes are taxes levied on personal income and within the scope of social security programs. In low-income countries, social security taxes amount to a small proportion of revenues, and this restricts their use as an instrument for redistribution ( Burgess 1997). When it comes to personal income, IMF holds that ‘’in view of the high share of agriculture and informal economic activity in many countries, corporate and personal income taxes are unlikely to be a major source of domestic revenues in the short- to medium-term ‘’ (2004: 5). But other researchers like Burgess & Stern(1993) and Delamonica & Mehrotra (2009) disagree with the IMF pessimism and hold that income tax could be a major revenue for low-income countries and also could contribute to greater income equality, thus reducing poverty, expanding social development and also promoting macroeconomic growth.

Lastly, there are major challenges that face low-income countries in relation to taxation. The taxation in the low-income countries is hindered by factors like weak mutual and contractual obligations between the state and citizens, massive economic informality, a tax system that concentrates on trade, higher dependence on aid, etc. ( Sindzingre 2009).

Aid, Mineral Rent and Remittance

Aid is important revenue for social development projects in low-income countries. Several studies have shown that aid contributes to governmental social spending in health and education, although this effect of aid is small in accordance with tax revenue. Besides contributing to government social spending, aid also increases aggregate welfare –by creating income-earning opportunities and providing services on the one hand and contributing to growth on the other. However, the likelihood that this will have an effect on the aggregate welfare of low-income countries is very low due to the low quality of public service and low levels of social spending (UNRISD 2010). In addition, aid poses several political and economic challenges included conditionality, accountability and the effects of Dutch disease. These problems must also be addressed in order to make aid more effective in the context of low-income countries (UNRISD 2010).

The mineral rent which comes next in our grouping is the revenue generated from the minerals. This is specifically relevant to the mineral-rich countries which many of them located in Sub-Saharan Africa. The mineral endowment was generally perceived as the potential that leads to development, but it is lately seen as a curse in the light of pervasive poverty, dictatorships and civil wars in mineral-rich countries. However, this correlation between the mineral abundance and negative economic, political and social outcomes may be mitigated with the help of effective institutions, good economic and social policies, and strong democratic governance. For instance, countries like Bolivia, Botswana, and Malaysia has utilised mineral revenues for social development and the promotion of the aggregate welfare of their respective societies (UNRISD 2010).

The last one in this group of our social policy revenues is remittance. Although remittance is a private social protection mechanism, it proved effective in areas where public social protection is low or non-existent. In many poor countries (such as Haiti, Lesotho, Moldova, Tonga, Somalia), remittance is the lifeline for their societies. It is observed that many of the remittances in these countries is spent on social services such as health and education. For instance, in Guatemala, households receiving remittances use them to finance more than half of their expenditures on health and education (UNRISD 2010). As a result, there are growing studies that argue that international remittances have reduced poverty directly or indirectly (Adams and Page 2005).

Conclusion

Social policy in Africa is still underdeveloped and needs more enhancement in terms of capacity. The continent suffered in the long term from economic policies that gave peripheral importance to social policy. This first came out as a measure of the ‘’safety net’’ which were aimed to mitigate the negative effects of the neo-liberal economic policies. Although the continent diverted from that path, yet there is no comprehensive social policy that replaced it. The form of social protection in many African countries is far from universal and exists as targeted social services whose impact on poverty is still restricted (Mkandawire 2006; Ortiz 2007). It is always argued that low-income countries like those in Africa are unable to afford the cost of universal social protection, but there are several studies that showed the affordability of basic health care and primary education in the context of low-income countries in Africa. However, due to the lack of democracy and weak institutions in most of the low-income countries in Africa, universal social protection may still seem a pipe dream.

Finally, in the light of all these circumstances, one fact surfaces: low-income countries included those in Sub-Saharan Africa, are in need of wholesale political and economic reform, which would ultimately address the problems we have discussed in our paper.

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