In Africa

In sub-Saharan Africa still around 50 percent of the population live in extreme poverty. Furthermore, in this region coverage for old-age income protection is lower than 10 per cent of the labour force and in majority of the countries limited to formal sector employees.  Africa faces three major sets of problems in social security:

• Problem One: Lack of access to social protection

  Social insecurity characterised by the lack of access to health care, the lack of access to basic education (which permits individuals to participate in a dignified way in a society and labour markets) and the lack of access to income support and income replacement  cash transfers in case of  missing, insufficient or lost income and thus poverty are still endemic in Africa. In many African countries only small minorities have access to social security in case of sickness, disability or old-age and poverty rates there are very high.

• Problem Two : Governance deficiencies

  Many national social security systems in Africa experience severe governance problems due to problems of policy design and to problems of management. As an example, the range of  administrative cost in  six countries where the ILO recently undertook actuarial valuations  is between 25 and 50% of total contribution income. This is a factor 10 higher than the rates that some of the national systems in the OECD face.

• Problem Three: Effective lack of conceptual and normative orientation

  In Europe the European Code of Social Security provides normative standards for a minimum level of social security.   This code provides effective benchmarks and guidance for national policies.  The code was modelled after the ILO Social Security (Minimum Standards) Convention, 1952 (No. 102), which is a global instrument.   Fact is that in Africa only five countries have ratified it (DR Congo, Libya, Mauritania, Niger and Senegal).  In short, there is no widely accepted normative concept of a social security development pattern in an African context.

African countries, like many other developing countries, still have to develop a broad orientation with respect to how social security systems develop in parallel to economic development.  Social security in Africa should first and foremost address the main social problem of the continent: poverty and (related) social and economic exclusion.  Social security transfers in kind and in cash are central tools to combat poverty, social insecurity and social exclusion at all stages of the economic life cycle of a nation.  If managed and governed well, they work immediately. The Social Security Department of the ILO has just shown that many African countries can afford modest levels of universal social protection consisting of at least basic health care, access to schooling and basic universal pensions in case of old age, invalidity and survivorship.  The latter two elements are major instruments in combating the social fall-out of HIV/AIDS.  The following graph shows that such a modest package would cost less than 6% of GDP in a country like Tanzania.  Basically there is almost nobody too poor to share, meaning that most countries can afford some level of domestically-financed social security, although some of them would need additional help from the donor community during a certain period.

Figure 1: Estimated cost of basic social protection in Tanzania

There are basically three sets of instruments for the extension of different forms of social security to the excluded and poor:

• Extending classical social insurance: Limited social insurance schemes exist in most African countries. They are an asset on which one can build.  Social insurance coverage can in principle only be extended to people who are able to contribute or on whose behalf a third party is contributing or can contribute.  The challenge in many developing countries is twofold as firstly many workers could be reached theoretically but are not reached in practice due to non-compliance or non-enforcement of the law; the order of magnitude could easily increase the number of covered persons by 50 %; secondly covering groups on the fringes of the formal economy or in the informal economy (all those without more or less formal employment relationship), particularly the poorer among them and those without regular cash incomes requires either internal subsidies from insured persons or external subsidies from the state.
• Introducing community based social security schemes and linking them to external subsidy mechanisms: The option is only being tested for health benefits. Community based schemes spring up everywhere, but most frequently in Africa. The global coverage of such mutual schemes is estimated to be about 40 million persons at the moment. There is certainly room for further growth, but some key problems remain.  The key one is that most of these schemes will not survive without effective support and subsidies from a national or international sponsor.  They also remain de facto dependent on national administrations.  Most schemes only cover fees in public health care facilities not the full cost of benefits.  The major share of the cost remains with the state owner of health facilities.  Nonetheless the insurance schemes can create an efficiency and quality enhancing payer-provider relationship in the health sector.  In addition financial links (subsidies for the poor and underwriting of bad risks) have to be created with a central national or international agency to ensure the long-term viability of the scheme.  The new health insurance law in Ghana might be the first place where this has been put into legal framework that requires universal adherence while subsidising the premiums for the poor.  It also is, de facto, one way of indirectly "taxing" the informal economy. Or in other words to make the workers in the informal economy contribute to the financing of some state function.  It is thus a step forward to the "formalisation" of the informal economy.
• Extending public schemes financed from general taxes: A set of basic benefits (basic social assistance payments, basic pensions, access to health care, and access to education) can also be provided and financed directly by the state. This can take the form of universal benefits or targeted benefits. Targeting creates administrative cost that may be prohibitive.   The above-mentioned ILO calculations have shown that a number of even poor countries can possibly afford a basic package of universal benefits after a number of years.  Tax financed basic universal pension schemes are operating in many countries (universal pensions in South Africa, Namibia, Botswana, Nepal etc.), innovative targeting schemes are operating for example in Mexico ("oportunidades") and Brazil ("bolsa scholar").  The effect of such benefits on the well being of whole families was demonstrated in many studies. The effect of poverty has also been shown.  The concept is attracting more and more interest in the international community.

The Social Security Department has been and is present in a number of countries in the continent through the provision of advice with respect to the extension of coverage through its Global Campaign on the extension of coverage for All; advice in the implementation of community based social protection schemes; advice in the financial and administrative governance of social protection schemes. The department will support the development of country and region specific approaches to social security which take into account the specific needs and social security provisions of the continent. In doing so it seeks the dialogue with social partners, other stakeholders, national governments and other international institutions.