The challenges of extending social security to the poor: An African perspective

Edwin Kaseke
School of Social Work, University of Zimbabwe

This paper argues that social security is often viewed from a Western perspective and that African countries' approaches to social security have been informed by this Western perspective. This paper notes that the poor in Africa have no access to formal social security and that there is need to find innovative ways of extending and strengthening social security for the benefit of the poor. The paper begins by conceptualising social security before analysing the African situation in so far as the provision of social security is concerned. The author draws examples from countries in Eastern and Southern Africa. Strategies for enhancing access to social security are explored.

Introduction

When the subject of social security is mentioned, what comes to the minds of many social security administrators and academics is conventional social security. This is not withstanding the fact that conventional social security only responds to the needs of a small percentage of the African population. Conventional social security is a recent phenomenon in many African countries, particularly in Eastern and Southern Africa. This helps to explain why conventional social security systems are not well developed in the majority of African countries. Conventional social security refers to modern or western concept of social security based on the experiences and circumstances of developed countries. The ILO has developed a standard definition of social security which is largely informed by Western experiences and concept of social protection. The ILO (2000:29) defines social security "as the protection which society provides for its members through a series of public measures:
to offset the absence or substantial reduction of income from work resulting from various contingencies (notably sickness, maternity, employment injury, unemployment, invalidity, old age and death of the breadwinner); to provide people with health care; and to provide benefits for families with children."

This definition encompasses benefits provided under three different forms of social security, namely social insurance, social assistance and social allowances. It should be noted, however, that social insurance is the most dominant form of social security in developed countries. Social insurance refers to schemes that provide social protection to workers and their families against future contingencies. The contingencies include unemployment, employment injury, invalidity, sickness, maternity, old age and death. Social insurance schemes are contributory as both employers and employees contribute to the schemes. There is therefore entitlement to benefits based on the record of contribution.

Social assistance schemes, on the other hand, are non contributory and are wholly financed from government revenue. The ILO (2000:179) conceptualises social assistance "as benefits for poor and needy groups that are financed by tax revenues." Unlike social insurance benefits, social assistance benefits are means-tested to ensure that only those whose incomes are inadequate to meet their basic needs are assisted. The ILO (2000:179) further observes that "in most countries social assistance plays a residual role; it provides benefits to people in needy who receive either no benefits at all or inadequate benefits from other schemes of social protection." Lastly, social allowances provide universal but non means-tested benefits to families in order to help them to meet their obligations, particularly in terms of raising children. Like social assistance, social allowances are financed from tax revenues. These schemes are not common in Eastern and Southern Africa.

The objective of social security is to guarantee income security as a line of defence against poverty. Income security enables individuals to have access to life sustaining goods and services. The ILO (2000) observes that the sources of income security also include the family and local solidarity networks, institutions of civil society such as self-help groups and mutual benefit societies, the commercial market and public institutions.

The African Situation

The ILO conceptualisation of social security revolves around the protection of persons employed in the formal sector. While this may be appropriate for developed countries where unemployment levels are low, it is not appropriate for African countries because of their high unemployment levels. Those employed in the formal sector usually constitute less than 20% of the labour force. Consequently, formal social security schemes only reach a small percentage of the population and are therefore contributing to the growing income disparities between the rich and the poor or between the urban and rural people. As Mukuka et al (2000:6) writing on the situation in Zambia observe; "The public organised forms of social security are not only inadequate but also reach small groups of urban industrial workers and cover an insignificant part of the demand needed for social security in the country." Kasente (1997) observes that in Uganda formal social security schemes only reach 18 per cent of the population.

Formal social security schemes were introduced in Africa during the colonial era as a response to the social security needs of expatriate white workers. The first social security schemes to be introduced were workers compensation schemes. Workers compensation schemes are based on the principle of employer liability and consequently, the schemes provide protection against injuries or deaths occurring at the work place. Depending on the nature of injuries, workers receive short term or long term benefits. The common practice is to exclude domestic workers and workers in the informal sector. These categories of workers constitute part of the poor and excluding them only serve to exacerbate their marginalisation.

Another form of social security that was introduced during the colonial era is the provident fund. Provident funds were the dominant form of social security in countries such as Tanzania, Uganda and Zambia but these have since been converted into social insurance schemes. The provident funds are compulsory saving schemes funded through the contributions of both the employer and employees. They provided protection mainly against old age. Upon reaching retirement, a member receives a lump sum payment representing contributions in his/her account plus the interest accrued. Unfortunately, provident funds do not offer income security as the value of the lump sum payment is eroded by inflation. The conversion of the provident funds into proper social insurance schemes will therefore enhance income security.

Social insurance schemes are not common in Eastern and Southern Africa and where they exist, they only provide protection against a limited range of contingencies. Mozambique introduced a social insurance scheme in 1990 which provides protection against the contingencies of old age and invalidity. Zimbabwe introduced its scheme in 1994 and it provides protection against old age, invalidity and death. Namibia also introduced its scheme in 1994 following the enactment of the Social Security Act of 1994. The Namibian system provides protection against a wide range of contingencies which include old age, sickness, invalidity, maternity employment, injury and death (Coetzee, 1997).

A major problem with social insurance is that it is oriented towards meeting future needs and therefore ignores the immediate needs of the poor. Because of the prevalence of poverty in Africa, the majority of the people are struggling to survive on a daily basis. Thus their priorities are centred around meeting their immediate needs such as food, clothing, shelter, education and health. In such circumstances, it makes little sense to focus exclusively on future contingencies. The low wages also make it extremely burdensome for workers to contribute to any social insurance scheme as the contributions take away income meant for meeting immediate needs. Consequently, workers may be reluctant to participate in social insurance schemes.

It can also be noted that low wages force the government and social security administrators to keep the rates of contributions low. Unrealistically low contribution rates often result in inadequate benefits. The harsh economic climate also makes governments reluctant to review the contribution rates not necessarily out of concern for the negative impact on disposable incomes but out of consideration of possible political ramifications. Furthermore, in some countries such as Zimbabwe, the ceiling for insurable earnings is very low. It has remained pegged at Z$4 000 per month since the inception of the scheme in 1994. This is despite the fact that a state of hyper inflation has been pushing up salaries on a yearly basis. Consequently, the contributions will not purchase any meaningful benefits and this is likely to condemn many of the beneficiaries to a life of poverty.

In most African countries occupational pensions are the major source of social protection at old age. Contributions for occupational pensions come from both the employer and employees. These pension schemes are often underwritten by private insurance companies. Like social insurance, those covered by occupational pensions constitute a very small percentage of the population as coverage is restricted to workers in formal employment. Furthermore in some countries e.g. Zimbabwe, occupational pensions are not mandatory and as a result some workers often retire into poverty. For countries that have recently introduced social insurance schemes such as Mozambique, Zambia and Zimbabwe, there is a danger that these new schemes can be seen as undermining or threatening the viability of the old schemes. Since the new schemes are mandatory, employers find it burdensome to contribute to two pension schemes. Under such circumstances, it is the optional schemes that suffer. In Zimbabwe, for instance, some employers reduced the contribution rates for their occupational pension schemes as these had become burdensome. Consequently, this reduces the cover provided by occupational pensions and given the fact that many of the workers above 50 will not realise much from the new social insurance schemes, many will struggle to meet their basic needs upon retirement.

A few countries in Southern Africa provide non contributory pension schemes. These are Mauritius, Namibia and South Africa. It is noted that Namibia and South Africa provides means-tested old age pensions whilst Mauritius provide universal old age pensions (ILO, 2000). These non contributory old age pension schemes are more responsive to the needs of the poor. However, sometimes the poor find it difficult to access the benefits owing to a number of factors which include lack of awareness, procedures which are not poor-friendly and long distances that potential beneficiaries have to travel in order to have their applications processed.

Social assistance schemes are prevalent in Southern Africa. For instance, Botswana, Malawi, Swaziland, Zambia and Zimbabwe administer public assistance schemes for the benefit of needy individuals. However, because of severe resource constraints, these schemes only target the most needy groups in society. These needy groups include widows, the elderly, persons with disabilities, the chronically ill and orphans. A strict means-test is applied in order to avoid leakages to the non poor.

The trends in the provision of social assistance in Southern Africa suggest that social assistance is used as a poverty alleviation measure. This is typical of social assistance in developing countries and has led the ILO (2000:180) to remark that; "Social assistance schemes in developing countries are predominantly contingency - based, as they limit means-tested support in cash or in kind to specific needy groups without income and family support.

The problem of resources, however, means that even the most needy groups in society may fail to get assistance. The benefits received by those who are lucky to get assistance are often inadequate as they fall hopelessly below the poverty datum line. Thus, the availability of limited resources reduces the number of beneficiaries to a trickle. Kutengule (1995) echoes this when he observes that the poor coverage of social assistance in Malawi can be attributed to serious resource constraints. The impact of social assistance on poverty alleviation is therefore very minimal.

During the colonial era, the problem of poverty was seen as an urban phenomenon. It is therefore, not surprising that when social assistance schemes were first introduced in Southern Africa they were intended to alleviate poverty among urban dwellers (Kaseke, 1997). The urban bias is still evident today in the region, perhaps with the exception of countries such as Namibia and South Africa. Such a state of affairs continues to marginalise the rural population.

Structural adjustment programmes being implemented in many African countries have had a negative impact on social security. Although structural adjustment programmes are intended to create conditions for achieving sustainable levels of economic growth, they have transitory social costs which undermine social security schemes. The major transitory social cost is the retrenchment of workers in both the private and public sectors. Retrenchment of workers result in workers withdrawing from the social security schemes, a situation which reduces the revenue base of social security schemes. A dwindling revenue base therefore, threatens the viability or sustainability of social security schemes.

One of the critical issues in the implementation of structural adjustment programmes is the reduction of the budget deficit. This is achieved through, among other things, a reduction in social spending. As a result, there is a deliberate thrust towards reducing resource allocation to the social sector. Social assistance schemes have also fallen victim to these funding constraints resulting in them becoming severely under funded and thereby rendering them unable to meet their objectives. This is also occurring in the face of an upsurge in the problem of poverty which means there are more and more people engulfed in absolute poverty and expecting to be cushioned by social assistance schemes. The failure of social assistance schemes to respond to this demand has also served to exacerbate poverty and undermine the capacity of the poor to meet their food and health requirements. The African experience shows that the so called transitory social costs of structural adjustment are not in anyway transitory but a permanent feature. Consequently, the prospects of improving the revenue base of social security are not bright.

It is also noted that the AIDS pandemic has added a new dimension to the problem of sustainability of social security schemes. Those most affected by HIV/AIDS are in the most economically active age groups. As a result, there is a serious outflow of resources from social security schemes which is threatening the sustainability of these schemes. Furthermore, there has been an alarming increase in the number of orphans resulting in an unprecedented demand for social assistance. This has undoubtedly put pressure on social assistance schemes.

Because formal social security systems in Africa are poorly developed and cater for a small percentage of the population, the majority of the African people, particularly in rural areas rely on non-formal social security systems for their social protection. These are based either on kinship ties or mutual aid arrangements. Although kinship ties are weakening as a result of urbanisation, the extended family system still plays an important social security function. The extended family system provides social protection against such contingencies as sickness, invalidity, old age and death. There are also traditional arrangements far dealing with the problem of food insecurity based on the notion of community solidarity. These arrangements enable households to meet their food requirements in times of drought. Mutual aid societies allow the poor to share their risks and pool their resources and once a member has been exposed to a defined risk, the resources of the mutual aid society are mobilised in support of the member. Examples of these mutual aid societies include burial societies and rotating credit and savings schemes.

Strategies for Extending Social Security to the Poor

The starting point in locating strategies that can be used to enhance social protection in Africa is reconceptualizing social security so that it encompasses different set of systems which provide social protection to persons not only in formal employment but outside the wage sector as well. As Kaseke (1999:2) observes, "social security can be seen to comprise of a complex and interrelated set of set of systems (e.g. governmental, non governmental, semi-formal, traditional etc.) which operate and are mobilised to provide in varying degrees, for the social security needs of people in various contingencies." Reconceptualisation allows the contextualisation of social security so that it is relevant to the circumstances of African countries. This reconceptualisation allows policy makers to focus on both formal and non formal social security systems.

Although the poor are largely dependent on non-formal social security systems for their social protection, they would, however, welcome an opportunity to be covered by formal social security systems. Thus one of the major challenges is how to create conditions that would make it possible for the poor to participate in formal social security systems at least in the medium to long term. Extending coverage of formal social security to the poor should be a goal that every African country should seek to achieve despite the constraints that exist. There should therefore be a gradual increase in the number of poor people covered by formal social security systems.

It is appreciated that the reason why formal social security schemes are poorly developed in Africa is because the formal sector is very small. In view of this, only a small percentage of the labour force can be absorbed in formal employment. Consequently, the majority of the people are completely shut out of formal social security schemes. The poor can only participate if the economy generates more jobs for the unemployed. It is therefore critical to improve the performance of the economies so that they can realise sustainable levels of growth. This also requires countries to improve the investment climate. A favourable investment climate is likely to impact positively on economic growth and ultimately this will lead to the creation of employment which is necessary for widening the base for social insurance.

One of the reasons why the coverage of formal social security systems is low is that the self-employed, domestic workers and those employed in the informal sector are not participating in the schemes. Therefore, one strategy for extending social security to the poor is to enhance social protection by extending coverage to these groups that are currently excluded. Even though incomes in these sectors are usually low, it is nonetheless necessary that they enjoy some level of social protection. Existing social security schemes can be specially adapted to allow these groups to participate, perhaps with subsidy from government or the main stream membership. The ILO (2000:226) observes that; "Given the small size of the formal sector in low-income developing countries, it is imperative to give priority to schemes specially designed to meet the needs of informal sector workers." The ILO therefore, suggests the use of micro insurance schemes to provide social protection to informal sector workers, domestic workers and the self-employed. In order to reduce the administrative costs, the potential beneficiaries can organise themselves into groups which will be used as the medium through which contributions are collected from the membership. This would prevent the insurance company from incurring unduly heavy administrative costs. Initially, the scheme can be made optional but could be made compulsory later after public awareness has been created. In order for this to work effectively, governments need to create an enabling environment. Non governmental organisations can also play a part by providing financial and technical assistance.

The participation of the poor in social insurance schemes reduces the demand for social assistance. Thus the existence of effective social insurance schemes makes social assistance manageable and enhances its effectiveness. This is based on the recognition that resource constraints make it impossible to spread the coverage of social assistance. It is therefore essential that social assistance be targetted at the most needy groups in society. Even though it is appreciated that there are serious resource constraints, African governments have an obligation to ensure that their people do not fall below an agreed minimum standard of living. The limited resources available should be used to improve the quality of life of the people. This also means setting the priorities right. For instance, many African governments allocate huge resources to their defence budgets while many of the people are unable to meet their basic needs. It is also necessary to ensure that the beneficiaries receive benefits that are adequate or benefits that are linked to the cost of living. In order to enhance access to social assistance, it is also necessary to decentralise the administration of social assistance as this will bring the services closer to the people. This is critical given the fact that most rural communities are not only far away from administrative centres but live in scattered settlements as well.

Other African countries can also learn from the experiences of Mauritius, Namibia and South Africa in the provision of non-contributory old age pension schemes. They should be encouraged to introduce old age pensions which are either means-tested or universal. This will go a long way in addressing the problem of income insecurity at old age. The ILO (2000) observes that in countries where the majority of the elderly have little income from other savings a universal old age pension scheme is preferable as it reduces the administration costs involved in assessing applicants. The ILO further observes that universal pensions "are much more feasible from an administrative point of view, particularly in developing countries where it is often difficult to obtain reliable details about people's incomes and assets" (p.118).

Given the fact that the prospects for extending formal social security to the poor are not very bright owing to the many constraints faced by African governments, it is necessary to strengthen non formal social security systems for the immediate benefit of the poor. Traditional social security arrangements based on the notion of reciprocity, particularly those that address the problem of food insecurity should be strengthened. These can be strengthened through the provision of supportive infrastructure by government, local government and non governmental organisations. For instance, communities can be assisted to build community granaries whose in flows come from the entire community and to be accessed in the event of drought or other natural disasters (Kaseke, 1998). As a parallel process, the rural poor should be assisted to become more productive on their land so that they are able not only to feed themselves but to produce surplus for sale. They should also be educated on and assisted to maintain strategic reserves at household level. These measures are necessary as they enable the rural poor to meet both their immediate and future needs. Supportive policies on land reform, access to credit facilities and extension services and pricing and marketing are critical for the realisation of this objective.

As many of the poor people are members of mutual aid societies, their social protection can be greatly enhanced by strengthening these mutual aid societies. These mutual aid societies can start by focussing on a limited range of contingencies but these can be gradually expanded as the schemes mature. The advantage of mutual aid societies is that they can focus on meeting immediate as well as future needs. For instance, savings clubs provide an opportunity for members to accumulate assets which can enhance the members' productive capacity. This, however, does not detract members from saving as a protection against income insecurity. The money can be withdrawn in times of need. Both the government and non governmental organisations can be involved not only in creating awareness about the role of the mutual aid societies but in providing financial support and training as well. Well established mutual aid societies can be linked to micro insurance schemes as a way of strengthening the capacity to provide meaningful social protection to the members. Mutual aid societies can also be linked to existing formal social security schemes on an optional basis. Ultimately, this will pave way for the integration of mutual aid societies with formal social security schemes.

Conclusion

It is clear from the discussion that conventional social security systems do not reach the majority of the poor. This is mainly due to the design of conventional social security schemes which makes them to respond only to the needs of persons employed in the formal sector. The few conventional social security schemes in existence and with their limited coverage have their viability or sustainability threatened by structural adjustment programmes and the AIDS pandemic. Whilst there is scope for extending formal social security to the poor there is greater potential in strengthening non formal social security systems for the benefit of the poor. Thus extending social security to the poor requires that African governments focus on both formal and non formal social security systems. If African governments confine themselves to formal social security systems only then many of the poor will remain without any meaningful social protection.

References

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