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Africa’s coronavirus safety nets cannot cover all

African governments moved fast to contain COVID-19, but providing support to those hit hardest among the urban poor is more difficult.

A vendor peels onions as a South African police officer walks past in the Johannesburg suburb of Yeoville. The COVID-19 pandemic could hit those in the informal sector particularly hard. (Dino Lloyd/RealTime Images via REUTERS)

Many African countries moved rapidly to curb the initial spread of coronavirus, but they have been slower to cushion their citizens from its economic impact.

Taking advantage of the lag before cases appeared on the continent, the African Centres for Disease Control and Prevention began ramping up their testing capacity in February, and by March many countries required foreign travellers to self-quarantine upon arrival.

When local cases did begin springing up, countries across Africa responded within days to close their borders and to order curfews and lockdowns to prevent the virus from spreading.

The catch, though, is that the majority of African citizens work in the informal sector and rely on a daily income. The squeeze on working hours and movement restrictions has taken a significant toll on the 41 percent of people who already live below the $2-a-day poverty line.  

After weeks of stay-at-home orders, some governments have begun to tentatively ease restrictions – the latest being Nigeria and South Africa. But they are anxiously watching Ghana – among the first countries to take the plunge – which subsequently suffered a 24 percent spike in coronavirus cases.

The squeeze on working hours and movement restrictions has taken a significant toll on the 41 percent of people who already live below the $2-a-day poverty line.

Economic relief would help ease the pressure on workers and families struggling with the impact of lockdowns. Yet governments – though recognising that hunger is also a threat to public health – have moved slowly to put social protection programmes in place.

Building a safety net

Economic relief efforts have come in two waves so far. The first, implemented in late March and early April, often involved cuts in the fees and taxes citizens must pay to the government or to banks.  

For example, Kenya has cut income tax rates for both the lowest and the highest earning categories, and has cut corporate tax rates from 30 percent to 25 percent. Ghana is providing free water to citizens as long as they don’t have any overdue bills with the national water company. And 18 African countries have lowered interest rates to encourage individuals and businesses to borrow from banks.

These relief efforts are fairly easy for governments to implement, since they only involve changing payment policies. They also primarily benefit the middle class, who are more likely to have formal jobs that pay income taxes, fully paid water bills, and loans from a bank.

The second wave of economic relief efforts is now getting underway as of mid-April. This has involved direct support to poor people who might otherwise go hungry.  

Rwanda and Uganda have already begun providing people in their capital cities with food aid. Kenya and Malawi have started cash transfers, and South Africa has increased its monthly payments to current welfare beneficiaries, and is creating new cash transfer programmes for the newly unemployed. 

Other countries like Botswana, Ghana, and Guinea have announced plans for direct relief, but not yet implemented them.

Notably, the countries that moved relatively quickly on economic relief all had welfare programmes in place already. But these existing schemes are primarily aimed at alleviating rural poverty, while the impact of coronavirus is being felt most heavily in cities. This means many countries are being forced to create new relief programmes rather than scaling up existing ones.  

These new initiatives have been welcomed by some beneficiaries. However, there are concerns about whether they’ll help all vulnerable people meet their basic needs. It’s often unclear how people are selected for the programme, and how long the aid will be provided.  

Experts believe the coronavirus crisis will continue until a vaccine is available in 12-18 months, or even longer. Government budgets will run low before then.

Why the poor miss out

Why did the middle class benefit more than the poor from the first wave of relief efforts? There may be political considerations at play. In countries all over the world, welfare policies are often biased towards the middle and upper classes.  

However, in the case of coronavirus response, it appears that logistics, as well as politics, is playing an important role.

There are two logistical challenges. The first is the informal nature of most African economies. Across the continent, 85 percent of people don’t have access to formal employment, 66 percent don’t have bank accounts, and 41 percent don’t have national IDs.  

In the case of coronavirus response, it appears that logistics, as well as politics, is playing an important role.

Since African governments can’t afford to support all of their citizens, they often wish to make sure this relief is targeted towards the poor and vulnerable. But without employers, banks, or ID systems to share contact information, it’s difficult for governments to figure out where citizens live and which of them need assistance. 

One way around this challenge is to work with local government councils, traditional authorities, religious groups, and other local leaders to identify people who need support. In Uganda, for example, local councils have been enrolling people in the food aid programme.  

However, it takes time to bring in these new local partners, which is why direct relief programmes have often lagged behind tax cuts by several weeks.

Funding the relief effort

The second logistical challenge is funding. Because African governments are resource-constrained, in the short term it’s easier for them to cut revenues – in the form of tax and utility price cuts – than to increase spending: in the form of direct aid to the poor.  

However, there’s a direct trade-off between these two policies: cutting tax revenues means that governments have even less money to distribute to the poor.  

African governments don’t have many options for raising money for relief efforts domestically. Even if tax rates stayed the same, revenues are likely to fall as their economies contract and people pay less in taxes.  

Governments also generally can’t reallocate much money from other parts of their budgets towards coronavirus relief efforts. In countries like Ghana and Kenya, the majority of government spending goes towards debt repayment and civil servant salaries.  

Failing to repay debts may cut countries off from future lending, which they may need to help cover their costs as tax revenues drop. And cutting civil servant salaries would only push more people towards poverty.  

Debt relief versus new loans

Most African countries will require financial support from the international community in order to scale up their pro-poor economic relief efforts. The World Bank and the International Monetary Fund have taken some steps towards this goal by forgiving debt payments for the poorest countries for the next six months, and providing new lines of credit to many additional countries.

Debt relief is a useful tool, as it frees up money that countries already have in their treasuries. It remains to be seen whether future debt relief packages will also offer this benefit to middle-income countries in Africa, which are often heavily indebted, and will extend the relief period beyond the duration of the coronavirus crisis.

Conversely, extending new lines of credit to African countries will increase their overall debt burden. But some experts say this may be justified if it allows countries to take the necessary steps to contain the pandemic.  

At the moment, much of the new credit is meant to support the health sector and the formal financial sector. Additional funding targeted towards vulnerable people in the informal sector could reduce the risk that the pandemic will push millions of people back into poverty.

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