Saturday, December 3, 2022

Welfare system should target families not individuals ÔÇô World Bank

Courtesy of an in-store bush-telegraph, it soon becomes apparent that the loud pack clogging the check-out aisle and holding up a long queue at a Block 9 grocery store in Gaborone is a middle class family collecting monthly food rations for a “destitute” relative. Heaving plastic bags full to bursting, the pack files out of the store and packs the grocery in the boot of gleaming UKong (a fong kong from the United Kingdom) car backed up within some two or so metres of the entrance.

This true-life anecdote illustrates the costly absurdity of Botswana’s social protection system and is tame by comparison because the government continues to pay for the education of children from rich families at tertiary education institutions both here at home and abroad. Having concluded a study on Botswana’s poverty, the World Bank has just released a report that says that the country’s social welfare programmes overlap and are implemented in a fragmented way. It believes it has a solution.

“These overlaps are a direct consequence of how the programmes define target group and eligibility criteria as well as the fragmented approach to social protection. Focusing on the family rather than individuals could eliminate unjustified overlaps and make programmes more effective,” the Bank says.

Despite being “excessively generous”, Botswana’s welfare system doesn’t protect all families because its targeting system is inefficient.

Upon his promotion to the presidency in 2008, President Ian Khama expressed intention to eradicate absolute poverty. That notwithstanding, the World Bank notes that  existing programmes focus on helping vulnerable individuals leading to overlapping assistance for some families, while others are not be covered at all. In particular, most families with orphans, destitute persons, elderly over 65 years old, or breadwinners in Ipelegeng receive enough cash assistance to bring their total income or consumption above the absolute poverty line while the rest of the families in absolute poverty are left out. The Bank says that to eradicate poverty in an efficient way, Botswana would need to put in place a good targeting system to identify the poor and grant them benefits that are adequate to fill their consumption deficits. It proposes as a good targeting mechanism, a proxy means test that identifies the households’ characteristics that explain most of the changes in consumption.

“Selecting only those characteristics that are easily observed and hard to manipulate will ensure effective targeting. It is important to acknowledge that even a well-targeted programme would have some inherent leakage toward the non-poor, which will push the actual programme budget above the perfect-targeting scenario,” says the Bank adding that generally all social assistance programmes that target the poor end up including some beneficiaries who are not poor.

In place of a social protection programme that targets individuals – rich ones included, the Bank has proposed that Botswana should adopt one that targets families ÔÇô the Family Support Grant (FSG) as it calls it. It says that this programme would offer a benefit level set around the average consumption gap that would help achieve the country’s objective of eliminating absolute poverty. The (minimum) target group for such a programme would be the number of people in absolute poverty.

To implement the FSG, the government would need to develop a mechanism to

identify (target) families living in absolute poverty. This report recommends the development and use of a targeting system based on a proxy-means test (PMT) described in the Social Protection Report by the Bank itself and the Botswana Institute of Development Policy Analysis of 2013.

“Because a family’s consumption (or income) is difficult to measure, the PMT method determines eligibility with a regression on a set of observable characteristics that are easy to verify and hard to conceal or falsify, such as dwelling characteristics, ownership of large durable items, or household size and composition,” it says.

In gaming a number of scenarios, the Bank says that one way to weave the FSG into the current programmes is to offer it only to those family members who are not receiving other, more generous individual benefits which include food rations for orphans and destitute persons, the Old Age Pension, and the wages earned in Ipelegeng. Those who get these benefits will continue to receive them. Using an administrative definition of “family” that excludes members who receive other benefits, family members who do not get other individual benefits will receive a set FSG sum.

Says the report with respect to one scenario it considered: “For example, a family of seven members that includes a destitute person and an elderly relative on pension would receive the FSG grant only for the remaining five members. Assuming 25 percent of FSG individuals eligible received other individual-level benefits, it would result in an additional FSG cost of P433 million, or 0.35 percent of GDP. This increase in the net budget could be compensated for by the introduction of a 25 percent co-payment for scholarships or sponsorships for tertiary education.”

The Bank says to finance the FSG programme’s additional cost, savings could be obtained in the short term by reducing the generosity of costly programmes. “Scholarships and sponsorships for tertiary students cost P1.674 million in 2012/13, or 1.4 percent of GDP, and absorbs 45 percent of total social-assistance spending. Reallocating a small share of these resources away from this programme and channeling them to the FSG could eradicate absolute poverty. The government could reduce scholarships by about 25 percent for high-income students. More than 42 percent of beneficiaries are from the wealthiest quintile and only 4.7 percent from the poorest fifth.”

Students from high-income families could cover a share of the cost of their tertiary education, while poor students would maintain their merit/need-based scholarships covering the full cost of a tertiary education.

Reducing the generosity of the sponsorship/scholarship programme could pay for a large share of the FSG programme’s budget. A 25 percent reduction would save about P420 million a year. Assuming that all beneficiaries in the poorest 60 percent of the income distribution (almost 38 percent of the total) will continue to receive full payment of their sponsorship and scholarships, the savings from such a measure would amount to P280 million a year.

The Bank makes an interesting conclusion: Botswana can eradicate its poverty in a budget-neutral way.

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