The welfare conundrum

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This article first appeared in my weekly column with the Business Daily on March 28, 2016

As African economies continue to grow and become richer than they have been in modern history, the question of government providing social security or welfare nets for the especially poor and marginalised becomes important. Poverty levels are still dire on the continent; the number of Africans living in extreme poverty, defined as living on $1.25 or less a day, stood at 414 million people in 2010 or 48.5 percent of the African population according to the World Bank.

These high levels of problems pose several problems with regards to the continent’s development. The most obvious is that those living in extreme poverty also tend to be malnourished and are unable to access and afford medical care, education as well as basics such as water and adequate shelter. As a result not only are they unable to live productive and dignified lives, their circumstances make it difficult them to be productive members of society as they are saddled with chronic, debilitating (but often treatable) illnesses, poor living conditions, illiteracy and the lack of opportunity to improve their lot. Clearly those living in extreme poverty need far more support than they are currently getting and frankly the issue of providing more support to this demographic group is one that ought to be front and centre for African governments not only because it is the right thing to do, but is also the smart thing to do.

https://i0.wp.com/i.telegraph.co.uk/multimedia/archive/02226/poverty_2226036b.jpg (source: http://i.telegraph.co.uk/multimedia/archive/02226/poverty_2226036b.jpg)

The consequence of on-going, chronic poverty on the continent creates an additional dynamic; very high levels of dependency on the middle class African. Ask any African in the middle class and I can assure you they will tell you they support friends or family members in paying schools fees, medical bills, funeral costs and monthly stipends for day to day living. Even those who are not among the extreme poor, those who have even attained university degrees for example, are often unemployed and the high levels of unemployment means that otherwise able and capable Africans are relegated to relying on monthly stipends from friends and families. These high levels of poverty and dependency translate into low lived disposable income and savings on the continent. Middle class Africans cannot and do not save sufficiently because they ARE the social security net. They are the unemployment bureau. As a result many Africans do not save adequately which negatively informs economic growth.

There is however, an interesting consequence to Africans relying on each other to the extent on which they do. It creates, amplifies and spreads social capital. Social capital, which can be defined as the networks of relationships among people who live and work in a particular society that often enable society to function more effectively than it otherwise would, is abundant in Africa. The extent to which Africans have to trust friends and family, the levels of generosity in many Africans who give to friends and family even though they too are struggling, is precious social capital. Would Africa lose this social capital if government stepped in with a robust welfare net? Would social capital be eroded where, instead of giving your cousin USD 100 to get through the month, you told him to go and stand in line at the unemployment bureau? Would the generosity of buying your elderly aunt a bale of rice every month disappear if she went to an impersonal government agency and got food stamps instead?

(source: http://www.pocketfullofliberty.com/wp-content/uploads/2013/11/food-stamp-actual.jpg)

In fact it is an interesting question to ponder as to the extent to which government funded welfare nets contributed to the erosion of social capital in developed economies. Of course there are cultural realities that have led to more individualistic societies in developed economies but perhaps impersonal government agencies offering social services means there is no real need for citizens to take care of distant relatives and friends.

I am not suggesting that African governments use such theorising to fail to provide welfare services for their citizens; it is their duty to do so. But the conundrum for Africa will be how to retain high levels of social capital on the continent even if or when governments step in with robust welfare services.

Anzetse Were is a development economist; anzetsew@gmail.com

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