6/16/2007
1
Social protection and growth:
the agriculture case
Rachel Slater, Rebecca Holmes, John FarringtonRural Policy and Governance Group, ODI
1st Annual Conference: Charlotte Manye Maxeke Collaboation, Research and Capacity Building in the Economics of Social Protection
12 – 15th June 2007, Pilansberg, South Africa
Background
• Risk and vulnerability prevent take-up of new opportunities in agriculture
• Risk management interventions in agriculture focus on productive sector activities
• Risk management under social protection focuses on domestic domain
6/16/2007
2
• Agricultural policies and social protection policies dealt with by separate Institutions
• Trade-off between expenditure on SP and agricultural growth programmes: more for growth or more for social protection?
• Links between two remain poorly conceptualised leading to sub-optimal growth and pro-poor strategies
Alternative or complimentary?
Shocks and stresses
• Narrow view of shocks underestimates importance of stresses on households
• Shocks and stresses differ between the productive and domestic spheres
• if there is no safety net in the domestic sphere, substantial resource flows out of agriculture can occur
• strengthening or protection of individually owned assets, and the guaranteeing of rights of access to those not owned, is crucial to build long-term resilience to shocks and stresses
6/16/2007
3
Emerging Lessons (1)
• Scope of social protection:
- Institution responsibilities – single department / ministry? Multiple ministries?
- Scope of instruments – Welfare-enhancing? Productivity-enhancing?
- Dealing with disasters
Social Programmes
Health, Education,
Social Protection
Direct welfare transfers and
Productivity enhancing activities
EconomicProgrammes
Macro-economic management, trade,
agriculture
Market-based instruments: e.g. inputs subsidies; maize options; weather-based risk insurance, integrated SP programmes
Social-sector instruments: e.g. nutrition programmes; school feeding, integrated SP programmes
Cash and inputs transfers
Disaster Management and Risk Reduction
Cash and in-kind donations and relocations
Source: Slater and Tsoka 2007
6/16/2007
4
Emerging lessons (2)
• Different poverty groups• Problem-focused vs. instrument-focused• Type of transfer
Rural HH Domestic shocksand stresses
Production shocks andstresses
Financial interventions potentially complementary to agricultural growth:
to address ShocksRisk reduction through:
to address Stresses andchronic poverty
Large-scalefarmers
IllnessInjuryDisabilityDeathCosts of weddingsand other rituals
Collapse in prices resultingfrom globalisationExtreme weather events(drought, hail, flooding)Degradation of soil, water andother NRInadequate access to input,finance and output marketsowing in part to failedliberalisation
Price hedging; crop insuranceFacilitate and regulate market-basedfarm asset insurance and domesticinsurances (health; life; assets) toprevent flight of capital out of agriculture
Not necessary – assets adequate
Marginalfarmers
IllnessInjuryDisabilityDeathCosts of weddingsand other rituals
Extreme weather events(drought, hail, flooding)Degradation of soil, water andother NRInadequate access to input,finance and output marketsowing in part to failedliberalisation(Possibly) collapse in pricesresulting from globalisation
Crop insurance Promotion of private sector inputs supply and marketing may have to be accompanied by measures to reduce market segmentation and interlockingInsurance and savings schemes may require a strong public or community-based leadership Employment assurance schemes of some importance
Promote asset accumulation by savingsschemes, possibly including “matchingfunds”Targeted transfers to cope with stress of oldage, prevent (and possibly reverse) outflowof capital from agriculture and enhanceconsumption of agricultural products;Promote micro-savings, micro-credit, micro-insurance
Farmlabourers
IllnessInjuryDisabilityDeathCosts of weddingsand other rituals
Loss of rural employmentopportunities and/or reductionin real wages attributable to theaboveLoss of opportunities forseasonal/permanent migrationattributable to same or othercauses
Indirectly via interventions to stabiliseprices and promoting and (perhapsinitially) subsidising farm asset anddomestic insurances insofar as theyimpact on food prices and jobopportunities; domestic insurances likelyto be particularly importantPublic works programmesSupport for seasonal migration throughimproved information, accommodation,education provision for children, easiermeans of making remittances etc
Promote asset accumulation by savingsschemes, possibly including “matchingfunds”Targeted transfers to cope with stress of oldage, prevent (and possibly reverse) outflowof capital from agriculture and enhanceconsumption of agricultural products;Promote micro-savings, micro-credit, micro-insuranceInvestigate possibilities of occupation-linkedinsurance and pensions
Unable toengage ineconomicactivity
IllnessInjuryDisabilityDeathCosts of weddingsand other rituals
Reduction in informal intra-household transfers resultingfrom above shocks/stresses inagricultureReduction in opportunities forgathering fodder/fuel fromcommons owning to NRdegradation
Indirectly through keeping food pricesstableEmployment assurance irrelevant
Targeted transfers such as social pensionsfor the elderly, widows and disabled; schoolfeeding programmes; promotion of infanthealth and nutrition; distribution of free orsubsidised food.Schemes to rehabilitate the commons andensure equitable access
6/16/2007
5
Poverty, Risk and Vulnerability Profile for Malawi
Poverty rate: 52%Ultra-poverty rate: 22%
Ultra-poor:• Few assets. Little or no land.•Income < food needs•Chronic illness, female headed, elderly headed, high dependency ratios•Vulnerability – low because of low-risk, low-return livelihood strategy•Pathway out of poverty: Long-term investment in human capital, utilising existing labour and other assets•Objective of social protection: Ensure consumption and maintain assets; Access to social services (health and education)•Options for social protection: Direct transfers, inputs support
Poor:•Some land or labour and other assets but vulnerable to further impoverishment•Income < food and non-food needs•Heavily dependent on a single activity – usually agriculture –•Vulnerable to climate / weather shocks / crop failure, chronic illness.•Net consumers of food•Little resilience to shocks•Pathway out of poverty: Increase capacity to deal with shocks•Objective of social protection: Asset building, reducing or mitigating risks that households face; Access to social services; Agricultural credit•Options for social protection: Direct transfers, inputs support, subsidies to support investment in risky activities
Poorer
Transient Poor / At risk:•Land and labour assets •Some resilience but face a broad range of shocks•Objective of social protection: Prevent slide into poverty during times of shock or stress•Options for social protection: Social insurance; Micro-finance, especially credit
Richer
Heavily dependent on single livelihood activity
Increasing diversification of livelihoods
Destitute: as ultra-poor but fewer assets, no labour, often female/child/elderly headed
Source: Slater and Tsoka 2007
Type of instrument: Malawi
• Targeted Inputs Programme - use and benefits of different household groups
• Fertiliser voucher subsidy programme (2006-2007) – use and benefits of different household groups
6/16/2007
6
Emerging lessons (3)
• Timing and predictability of transfers• Scale of transfer• Need for additional investment and access
to complementary services
Ethiopia’s PSNP
• Ethiopia trapped in cycle of emergency appeals• Need for predictable resources for a predictable
problem (10m + in chronic hunger every year)• 6 months of food rations or equivalent cash• 80% public works / 20% direct support: overcoming
or creating dependency?
• Even small transfers can be used for productive investment, if transfers are timely and predictable
• But cash requires additional investments (e.g. in marketing)
6/16/2007
7
Next steps (1)
• More work on graduation – beyond anecdotal evidencee.g. asset-based strategiese.g. logic of graduation - Zambia
Logic of graduation - Zambia
• Incapacitated & Low-capacity households
PWAS / Cash Transfers↓
Food Security Pack↓
Fertiliser Support Programme
• Implementation and institutional challenges
6/16/2007
8
Next steps (2)
• More work on impacts on growth- CGE modelling in Cambodia (raises
concerns about the impact of of cash transfers on growth and poverty)
- micro-simulations and CGE modelling in Malawi
• How much growth will we get from a US$ X million investment in social protection?
Thank you!