State must increase child support grant as cash is cheaper to distribute than food
There is strong academic evidence in favour of using cash, not food, as the primary delivery vehicle for emergency aid
Informal workers and the unemployed are not covered by our Covid-19 response, except for food parcels, which are hard to get. Without any intervention, leading academics estimate the extreme poverty rate will almost triple.
The government should heed the call of civil society and academics to increase the amount of the child support grant. Cash is cheaper to distribute than food, even when you are starting a system from scratch. We aren’t: our grants system reaches 18-million people. Cash might be more fungible and possible to divert.
We already have everything the World Bank recommends to prevent “leakage”: direct beneficiary payments with biometric identity verification and a clear payment schedule. Grants are already well-targeted at poor households. And the SA Social Security Agency card system is better for social distancing than food parcel queues: it enables withdrawals at many locations with capability to stagger collection dates.
There is also strong academic evidence in favour of using cash, not food, as the primary delivery vehicle for emergency aid. Most cash transfers are spent on food anyway: a 165-study review by the Overseas Development Institute finds that grants improve dietary diversity and food security. Another World Bank review finds they improve growth and cognitive development in small children.
But cash has the added benefit that it gives people autonomy to spend on what they need most. There is little evidence of waste: cash grant recipients did not increase spending on alcohol or cigarettes in all but two of 19 studies in a different World Bank review.
There are old arguments that women are given perverse incentives to have children, but no rigorous evidence of this. As well as SA studies, international studies find women in households receiving transfers are less likely to fall pregnant in two randomised trials in Nicaragua and Malawi; one trial in Mexico found no effects.
Recently, pension recipients have been argued to be more responsible than young mothers. But there is also no evidence of big differences by age in spending. Even teenage girls in Malawi receiving cash transfers used them well: they reduced pregnancy rates and spent longer in school.
Assume government increases existing grants. What do we do for those not receiving them? We need to get cash to them, quickly. For a few months, this should be through whatever infrastructure we have, even if targeting is imperfect. Emergency, fast cash is a smart investment in long term poverty alleviation.
Numerous studies, from China to India and Ethiopia to Malawi, show that economic shocks of this scale have severe long-term consequences. Poor households faced with shocks often take short-term decisions that leave them in deeper long-term poverty. The most feared is that households reduce nutritional intake for small children.
Even setting aside moral arguments, stunted children have lower schooling attainment and lower earnings over their whole lives. Women may enter into transactional sexual relationships: during ebola, a study by BRAC found young women had older partners, higher rates of pregnancy and didn’t return to school. Both effects will be somewhat mitigated by an increased child grant.
But studies also show that when facing a short, deep shock, desperate households “dissave”: they sell productive assets — cows, vehicles or phones — or dip into meagre savings they usually use to search for work. Losing the means of earning can lead to many additional years of poverty. Temporary cash grants can help. Studies in Bangladesh and Malawi find recipients are less likely to sell assets when they face shocks. One SA study finds youngsters in households with a pension recipient are more likely to find jobs.
How do we get money to those who don’t currently receive a grant? Other countries are using a patchwork of different existing programmes and infrastructure. First, the government should open grants offices or register new mothers through other means, instead of closing Sassa offices.
Second, we could increase all available social grants, as Kenya and India have, rather than trying to choose one. Third, many governments are using other registries of beneficiaries to pay one-off grants. Ethiopia is paying all public works beneficiaries in urban areas without requiring them to work. We could pay transfers for mothers whose children have recently aged out of receiving the child grant; current and past participants in public works; anyone we have reason to think is poor whose bank account details we have.
The government and citizens will need to live with the fact that this temporary response will be imperfectly targeted, with inclusion and exclusion errors. But transfers are often shared. SA grandparents share pensions with whole households. Households ineligible for cash transfers targeted at the poor in Mexico still got loans and gifts from eligible households in the same village and had higher food consumption. The government could even encourage beneficiaries to share with others in need: “labelling” is often effective in influencing how transfers are used.
It is possible to develop new grants and enrol new recipients. India has sent money to Jan Dhan accounts linked to the Adhaar ID system, which were created to promote financial inclusion among the poor. The Peruvian programme Bono Yo Me Quedo en Casa (Bonus I stay at home) has given a one-off payment to households normally deemed too wealthy for their transfer programme. Brazil is allowing households enrolled in the census of the poor to sign up for emergency assistance. In Pakistan, people who self-identify as vulnerable sign up by texting the existing social programme Ehsass with their national identification number.
But right now, this week, we need to get money out quickly to stop people falling into extreme poverty. Decades of research tell us that we have no time to lose.
• Orkin is senior research fellow at Oxford University's Centre for Study of African Economies and Blavatnik School of Government.
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