Photo: Gates Foundation

In a recent report ( 1), the International Labour Office (ILO) stated that “universalizing old-age pensions and child benefits for school children and orphans could reduce poverty by as much as 40 per cent” in Africa. And such cash transfers offer a mechanism to raise disposable income in support of local economic growth.

Millennium Development Goals

This confirms the role of social security as not only a reactive instrument that responds to needs but a proactive mechanism for social and economic development.

Coverage has improved dramatically in a number of countries

The challenge in many countries is how to put into place a social security system when resources are limited and infrastructure is under-developed. In Mozambique, where over 50 per cent of the elderly population is considered to be in poverty, improving social security coverage is now a priority as witnessed by the adoption in 2010 of a five-year National Strategy for Basic Social Security. The number of beneficiaries under certain programmes has doubled in less than five years, with two-thirds of all recipients being women. With benefits making a real difference to the lives of beneficiaries, the Mozambique experience shows that with efficient operational and administrative measures in place, an effective social protection system can be built. Other recent examples of effective extension of coverage include:

• In Malawi , a new universal pension system was approved by Parliament in March 2011, which will cover all salaried employees and be financed jointly by employer and employee contributions. The scheme should lead to a reduction in pensioner poverty.
• South Africa  extended coverage to an additional 4 million beneficiaries under its Child Grants system between 2000 and 2010. This provides further support to the country’s education system and to meeting child poverty reduction goals.
• In Nigeria , a reformed universal employees’ compensation scheme was signed into law in December 2010. This scheme covers all public- and private-sector employees (and their survivors) for income replacement in the event of injury or disability (or death) and rehabilitation and counselling services after injury.

Where health systems have been formalized and coverage improved, there have been significant reductions in out-of-pocket (OOP) health expenses, which weigh particularly heavily on the poor and vulnerable. Not only do OOP expenses create barriers to access but delayed access to care can exacerbate health problems and increase the eventual cost of treatment. Formalizing coverage through a social security framework has led to a large reduction in OOP expenses, an improvement in health outcomes and a strengthening of the functioning capacity of an economy. For example, Ghana’s National Health Insurance Scheme covers two-thirds of the population and has cut OOP expenses by some 50 per cent.

Extending coverage is cost effective and enhances the productive capacity of the economy

The ILO estimates that extending old-age pensions and child benefits to reach universal coverage would cost just 3.5 per cent of GDP in many African countries.

Indeed the net cost may be much lower; a number of studies have shown how the introduction or extension of coverage has led to positive economic effects. In a survey of the effect of social transfer schemes in 30 countries, the ILO found that 40 studies showed a positive link between the introduction or extension of schemes and subsequent increased entrepreneurial activity.

Namibia old-age pension coverage

The future

There are a still a number of challenges. In a sample of 25 African countries studied by the ILO, less than 20 per cent of the elderly population receive a pension. However, many countries on the continent are now putting in place innovative measures to extend effective and sustainable coverage and recent history shows that through the coherent use of multiple financing mechanisms, coverage can be extended rapidly. The Yaoundé Declaration (see Box) has also provided a road map for putting in place a Social Protection Floor – i.e. a minimum level of social security – in Africa.

The “Social Protection Floor”

The putting in place of an effective administration and operational structure is a common feature of recent positive developments in coverage extension in Africa. The ISSA recognizes this and has selected the extension of coverage, alongside enhancing the adequacy and quality of benefits, furthering operational and administrative efficiency and effectiveness, and supporting proactive and preventive approaches in social security, as one of the four key priorities for the triennium 2011-2013. The ISSA project on coverage extension includes the publication of an extension handbook with good practice examples and an associated training module for its member organizations.

(1) See ILO, 2011: Success Africa III. Realising a New Era of Social Justice through Decent Work: Success Stories from Africa . Geneva, International Labour Office. < http://www.ilo.org/wcmsp5/groups/public/---africa/---ro-addis_ababa/documents/genericdocument/wcms_166733.pdf> (accessed on 14.12.2011).