Social protection expenditure and performance review and social budget
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The ILO-DFID funded project sets out the current situation of existing social transfers within Zanzibar's social protection system. The report builds on this work to provide the foundation for future analysis of policy options and for any supporting social dialogue regarding social protection as a means of reducing poverty in the region. It examines the country's demographic characteristics, economy, the structure of the labour market, poverty, contributory and non-contributory provision and policy options and evaluates the social budget for projected Government social expenditures. Its recommendations form the basis for a social protection strategy.
International Labour Office; January 2010
233 pages; ISBN 9789221228738
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Author: International Labor Office
233 pages; ISBN 9789221228738
, or download in
Author: International Labor Office
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IntroductionThis document is the Executive Summary of the final Social Protection ExpenditurePerformance Review and Social Budget (SPER and SB) of the ILO-DFID projectILO Global Campaign for Social Protection and Coverage for All As a Meansto Reducing Poverty in Africa and Asia for Zanzibar. The main report sets out thecurrent situation of existing social transfers within the social protection system inZanzibar.It will provide the foundation for future analysis of policy options and forany supporting social dialogue. The purpose of this Executive Summary is to highlightkey issues and findings rather than to summarize the main SPER and SB reportchapter by chapter.It is hoped that the project outputs will be a useful contribution to the ongoingwork on social protection now being carried out in Zanzibar within the MKUZAprocess; and to the future reform of the contributory social protection scheme. TheILO supports national development plans such as MKUZA with its Decent WorkCountry Programmes (DWCPs), which seek to promote opportunities for women andmen to obtain decent and productive work in conditions of freedom, equity, securityand human dignity. The report also contributes to the ILO Global Campaign onextending social protection.The ILO is promoting the reform of national social security systems based onprogressive universalism with benefit levels increasing as economic development andfiscal space emerge for the implementation of redistributive policies. Importantly, anew concept of a social protection floor has been endorsed as part of the Global JobsPact adopted at the International Labour Conference in June 2009. In addition, at anILO Tripartite Meeting of Experts on Strategies for the Extension of Social SecurityCoverage, held in Geneva between 2 and 4 September 2009, there was a consensus onthe need for an international standard to underpin a social protection floor. The socialfloor has been defined by the UN Chief Executives as having two elements: the firstbeing access to services and the second a basic set of social transfers in cash and in kindpaid to the poor and the vulnerable to provide a minimum level of income securityand access to essential services such as health care. The SPER and SB address both ofthese elements.The main objective of undertaking the analytical work in Zanzibar was to builda comprehensive baseline of contributory and non-contributory public social security/social protection provisions; and to project on a status quo basis overall social securityexpenditure incorporating social insurance, social assistance, education and healthcare i.e., a countrys social budget for a 15-year period. These baseline projectionsare expected to be the foundation of any future policy options analysis supportingthe process of a national policy debate on the future of social protection in Zanzibar.The overall aim of the project is to be able to identify the amount of fiscalspace1 needed to begin to implement a minimum social protection package. Thispackage would include affordable universal access to essential health care services;targeted social assistance; basic cash and in-kind benefits for children (mothers andcarers); and a basic universal pension for the elderly and for persons with disabilities.This minimum package would be implemented gradually according to nationalpriorities and available funding. The package would help to reduce substantially the1 The availability of budgetary room that allows a government to provide resources for a desired purposewithout any prejudice to the sustainability of a governments financial position. Peter Heller, IMF, 2005.4 Zanzibar Social Protection Expenditure and Performance Review and Social Budgetincidence and depth of poverty and vulnerability and, as a consequence, improveproductivity and thus growth.The main finding is that neither existing contributory (social insurance) nornon-contributory (social assistance excluding education and health care) provisions areadequate in terms of the numbers of the population covered, the scope of coverage andthe adequacy of benefits/payments received in relation to poverty alleviation. There isa need to reform the existing social insurance scheme to make it financially sustainablein the long term, with special studies looking at health care and maternity. There is aneed to look at the adequacy of financial control and management systems as well asthe viability of financing government policy plans for education and health care, whichare highly dependent on donor funding. Finally, there is a need to consider policyoptions for cash benefits for the elderly and the most vulnerable.The policy costings show that a minimum package including a universal old agepension, a child benefit and targeted social assistance would cost less than 2.5 per centof GDP in the long term and would have a significant impact on poverty alleviation.Social protection is an important part of economic development, especially incountries such as Zanzibar where around half of the population live below the basicneeds poverty line (HBS 2004/05).Executive Summary 5Extension of coverage: The problemsThe labour marketA key issue is how to extend social protection coverage in a highly informal labourmarket environment. As with the findings in Tanzania Mainland and Zambia, thepredominantly informal nature of the labour market presents a major challenge tothe extension of social protection coverage. This is because contributory/formal/mandatorysocial protection schemes are based on the contractual relationship betweenworker and employer. New solutions have to be found where there is high informalizationof the labour market and no employment contractual relationship. The Reportconcentrates on the issue of informality of employment, a multidimensional conceptthat enlarges the previous concept of the informal sector and seeks to take intoaccount precarious or unprotected forms of employment, including those of employeesin formal-sector enterprises in both the formal and the informal economy.In order to find solutions, it is necessary to have a good understanding of theinformality of employment in Zanzibar. In particular, the Report looks at the employmentstatus of a person and where he/she is employed. Analysis of the 2006 ILFS wasundertaken using a set of criteria to characterize employment in formal or informalenterprises on the one hand (formal recognition, size and location of enterprises);and on the other hand another set that relates to workers employment conditions (i) the existence (or awareness) of a formal contract (permanent or fixed-term) withan employer; (ii) the existence (or awareness) of entitlement to paid leave; and (iii) thatthe employer contributes to social security.According to the 2006 ILFS, using the methodology developed by the ILO(which has also been used for comparable analysis in Tanzania Mainland and Zambia),the percentage of people working in the informal sector represents 84.3 per cent(including agriculture) of total employment. Figures 2.12 and 2.13 (all figures presentedin this Executive Summary follow the numbering in the main report) show the distributionof all persons in employment and according to various employment statusesalong a degree-scale for informality, resulting from the combination of the above criteria.Interestingly, the composition of employment in Zanzibar is different from thatof Tanzania Mainland. In Tanzania Mainland, the largest sector in terms of employmentis agriculture, but it represents only 41 per cent of total employment in Zanzibarcompared to 74 per cent in Tanzania Mainland.Similar to the Mainland, the employment to population ratios are high: almost80 per cent of those aged 15 years and over were employed. The ratios were higher formen than women (82 per cent and 72 per cent respectively), and in rural areas comparedto urban areas (86 per cent compared to 66 per cent respectively.) Despite suchhigh employment to population ratios, half of employed women, and four-tenths ofemployed men aged 15 years and over were employed as unpaid family workers. Onequarter of children aged 15 years and under were employed, with the large majority ofthis employment being unpaid family work. Employment rates of older people aged 60years and above were high, with two-thirds of all older people found to be in employment,of whom more men (approximately 80 per cent) were in employment comparedto women (approximately 50 per cent of all older women were in employment.) Thisfinding indicates a lack of income security in old age. Poverty and vulnerability in ZanzibarThe development of social protection policies needs to be based on a thorough understandingof how all citizens are able to function in a society. A good starting-point fora country such as Zanzibar is to look at poverty and vulnerability, focussing on themajority of the population that is officially classified as poor, and also on the poorestand most vulnerable. This needs to be put into a demographic envelope in order to seehow the structure of the population will change over time and what this does to policypriorities. There is a strong body of evidence that poverty and vulnerability are majorissues in Sub-Saharan and Eastern Africa.The Office of Chief Government Statistician (OCGS), using the 2004/05Household Budget Survey (HBS), has done a great deal of useful analysis on theseissues. Two poverty lines have been calculated: 1) a food poverty line; and 2) a basicneeds poverty line.Those who fall below the food poverty line can be thought of as being unableto meet minimum food needs, whilst those who fall below the basic needs povertyline are those who fail to meet minimum food and other basic (e.g. clothing, shelter)needs. A person is defined as being in food poverty if his/her consumption is less than12,573 TZS over a 28-day period. The basic needs poverty threshold is consumptionof less than 20,185 TZS per 28-day period. The basic needs poverty line is the mainmeasure of poverty in Zanzibar (those formally defined as being the poor).At the point in time of the survey (2004/05):? Just under one-half of the Zanzibar population lived below the basic needs povertyline.? Splitting the poverty analysis by area, around 55 per cent of the rural populationlived below the basic needs poverty line compared to 40 per cent of the urban population.There were considerable variations by district, with a small number of districtsscoring badly on a number of poverty and vulnerability indicators.? More seriously, approximately 13 per cent of the Zanzibar population were foodpoor, which is also significantly higher in rural (16 per cent) compared to urban(9 per cent) areas.In terms of other identifiable measures of poverty, the main Report looks at housingconditions in Zanzibar, access to education and importantly educational attainment,and some other measures of the degree of vulnerability meeting food needs,accessing health services, HIV/AIDS prevalence and extent of orphanhood. The analysisshows that:? General living conditions in Zanzibar are good, with those living in urban areasbeing more likely to live in better-quality housing. Very few people appear to haveproblems accessing drinking water, or have problems with sanitation.? Regarding educational attainment, a high proportion of the population can read orwrite in at least one language; however, around a third of the whole population havenot received any education. This statistic needs to improve markedly for the countryto progress and grow in an equitable manner.? In addition, too few people are receiving tertiary-level education. This is likely tolimit Zanzibars economic development prospects.? There appears to be some correlation between low levels of school enrolment, subsequentlow levels of educational attainment, and poverty, particularly in Micheweni.8 Zanzibar Social Protection Expenditure and Performance Review and Social Budget? Similarly, a small proportion of the population have problems accessing health caredue to cost or distance of travel.? HIV/AIDS prevalence is low, as is the number of orphans in Zanzibar.Contributory schemesThere are problems concerning the extent of coverage, the scope and levels of benefitsof the Zanzibar Social Security Fund (ZSSF) which is the only public pension schemein Zanzibar. There is the additional problem of the interaction of the ZSSF pensionscheme with the five social security schemes operating on the Mainland in relation tocomparability of contribution and benefit levels and portability of benefits betweenschemes, which impacts on labour market flexibility.ZSSF is a young scheme as it was established in 1998 and as such the levels ofbenefit paid out are low. This situation will improve over time as the scheme matures.However, it is a generous scheme and the most recent actuarial valuation has identifiedthe need to undertake a number of reforms if the scheme is to be financially viable inthe longer term. There is sufficient time in which to put in place such reforms and todo so in consultation with all stakeholders.Pension protection in Zanzibar is provided as follows:? ZSSF for the public and private sectors for service after July 1998;? Service accrued by civilian employees under the Pensions Act No. 2 of 1990 (pre-July 1998) is paid by the Government from the Consolidated Fund;? Old age pensioners on July 1998 received a pension from the Government from theConsolidated Fund.For the year 2007/08 there were 9,965 people receiving a pension from the Governmentcompared to 1,590 people receiving a ZSSF pension in June 2006. These figuresshow the importance of the role of the Government in providing pensions to civilservants.Table 4.1 shows the low coverage of the social insurance schemes in Zanzibar(and Tanzania Mainland).Table 4.6 shows the differences in numbers of pensioners and levels of benefitbetween the differThe low level of pension benefit is not a problem in itself for government employeesas they are eligible for the government pension for pre-June 1998 service, but it is foremployees working in the private sector.In addition there are problems with the inadequate provisions for survivors,as well as medical care and maternity benefits schemes which come under theadministrationof ZSSF.Thus coverage and adequacy of contributory social protection are low inZanzibar,which contributes to the number of elderly persons living in poverty. The10 Zanzibar Social Protection Expenditure and Performance Review and Social Budgetintroduction of a universal old age pension would reduce the numbers of elderly personsliving in poverty regardless of whether they have been employed in the formal orthe informal economy. The social insurance scheme needs to be reformed in accordancewith the recommendations in the last actuarial valuation. A special study needsto be carried out for medical and maternity benefits. Jurisdictional issues arising fromMainland schemes operating in Zanzibar need to be resolved.Non-contributory schemesEducationEducation has always been a priority for the people of Zanzibar. However, in recentyears, it has moved to centre stage as a tool for long-term economic development andpoverty alleviation. There is an acknowledged problem with data concerning educationin Zanzibar, which inhibits strategic planning. Steps have been taken to improve thesituation with a new education management information system (EMIS), which is notfully operational.Zanzibar has relatively high literacy rates, with the 2004/05 HBS showing thatthree-quarters of the population aged 15 years and over are able to read and write inat least one language (Swahili), and just under 30 per cent of the population are alsoable to read and write in English. Literacy rates are lower in rural areas, particularlyfor females, with 40 per cent of females aged 15 years and over in rural areas unable toread or write.Just over 40 per cent of school-age children (5-14 years) were found not to havereceived an education (HBS 2004/05). This equates to around a quarter of the totalpopulation not receiving an education, and this correlates with the literacy rates. Thus,it appears that the vast majority of the population who have received some form of educationare able to read and write in at least one language as a result of their education.A quarter of the population aged 15 years and over has achieved a Standard 5-8 leveleducation, with nearly 40 per cent of those aged 15 and over attaining an OSC-Form4level education. Very small proportions (less than 5 per cent) of the population haveachieved post-school level qualifications (Figure 3.11).Historically the MoEVT has struggled to raise sufficient money for the operationand maintenance of the education system and for investment in infrastructure.Domestic budget transfers have just about covered salaries and personnel costs anddonors have provided important additional resources. The Government has a clearset of policy changes it wishes to introduce but this requires a considerable increasein resources for both recurrent and capital expenditures. The Government hasshown a commitment to change by announcing a 50 per cent increase in expenditurefor 2007/08. Local communities have a high commitment to education andare major investors and there is an expectation that donors will increase their support.Indeed, the World Bank agreement Zanzibar Basic Education ImprovementProject will make considerable additional funds available for physical infrastructure:ent pension schemes and types of benefit.