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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

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• 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

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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

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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

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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

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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)

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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

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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!