Cash transfers and political economy in sub-Saharan Africa

Report
from Overseas Development Institute
Published on 20 Nov 2009 View Original
Anna McCord

Key points

- Donor enthusiasm, rather than government impetus, drives the growth of cash transfer programming in some countries

- Government concerns about fiscal prudence and the risk of dependency are limiting national demand for cash transfer programmes

- Government commitment to cash transfer programmes may be greater where there is a need for social stabilisation and state legitimisation

The provision of cash transfers to alleviate poverty may not be a policy priority for low-income countries, despite donor enthusiasm to promote such interventions as a cost effective social protection mechanism. This Project Briefing looks at cash transfers and political economy issues, drawing on case studies from Kenya, Malawi and Zambia, low-income countries which have started to implement cash transfer programmes in recent years. The research was carried out as part of a wider, three-year study by ODI on cash transfers, funded by the Swiss Agency for Development Cooperation. In all three countries, cash transfers were generally perceived as an acceptable and appropriate response to poverty by key national stakeholders. However, there was little evidence of political will to provide cash transfers to the poor as a whole, and a strong preference for cash transfers that reach only particular sub-categories of the poor. Even within these categories, however, coverage is low in all three countries. It is only in middle-income countries - such as Brazil, Mexico, South Africa - that higher levels of coverage of target groups are achieved.

Many low-income countries cannot afford cash transfer programmes funded from domestic resources, except on an extremely limited basis, and for this reason governments are often willing to accept donor funds for such programmes. Even the limited programmes currently in operation rely on significant donor support. Governments are concerned that programmes that are too 'generous' or reach too many people, would create dependency, welfare traps and distort the domestic labour market. They also fear the significant long-term fiscal liability that would be implied if cash transfer programmes were extended beyond a limited sub-section of the poor.

These fundamental concerns with cost and dependency are mediated by issues relating to the social contract between a state and its citizens in a given context, and the extent to which cash transfers contribute to social and political stabilisation.