74
Existing Safety Net Policies and Programs
Cameroon, Kenya, and Rwanda all have a plethora of microcredits or grants. Although they are not necessarily safety net programs, they complement safety nets by providing small amounts of financing to individuals or groups (usually of women, youths, or farmers) in marginalized communities to enable them to undertake income-generating activities. However, how these programs have affected poverty has not been evaluated, and no evidence exists of their cost-effectiveness. In Rwanda, microcredit programs and other programs that promote income generation and productive activities play a large role in the social protection strategy. Agricultural input vouchers and schemes are also important risk reduction programs. They provide smallholder farmers or farmers’ groups either with agricultural inputs or with vouchers and subsidies to purchase inputs at a reduced cost. The National Agriculture Input Voucher Scheme in Tanzania provides vouchers to be used to buy fertilizer and improved seeds at reduced prices for 1.5 million households that engage in rice or maize farming. In Ethiopia, the Household Asset Building Program provides agricultural households a one-time highly subsidized credit to rebuild their asset base or to purchase “household extension packages.” Similarly, the Malawi Farm Input Subsidy Program subsidizes the prices of fertilizer and seeds. The large Food Security Pack program and Farmer Input Support Program in Zambia are meant to reduce food insecurity among small farmers. This strong focus on providing inputs for agricultural production in Zambia makes sense because the consumption levels of most of the poor depend largely on how much food they are able to produce on their own small plots of land. However, providing in-kind supplies generally involves high administrative costs, and price subsidies tend to be regressive. In Lesotho, selected farmers are provided input vouchers to use at agriculture fairs. Other innovative approaches that complement safety nets exist in several countries, ranging from giving small grants to nomadic populations to providing backyard gardens. A few countries, including Botswana and Mozambique, have small social care services, such as community homes or home-based care for the elderly and terminally ill.
General Price Subsidies In addition to targeted safety nets, general price subsidies are purported to play a safety net role in many countries. The most common subsidies consist of price reductions on energy products such as petrol, liquefied petroleum gas, butane, and kerosene and of lower value added tax and export tariffs or import bans on certain food staples such as maize and rice. Fuel subsidies have been in place in several countries since the early 2000s and account for a substantial portion of government spending. In 2011, energy subsidies amounted to 1.5 percent of regional GDP, or 5.5 percent of total government revenues in Sub-Saharan Africa (IMF 2013). Total subsidies exceeded 4 percent of GDP in three countries (Mozambique, Zambia, and Zimbabwe). Fuel subsidies in Burkina Faso and Cameroon cost 0.8 and 2.6 percent of GDP, respectively. Food subsidies are substantially less costly and were put in place in response to the rising food prices in 2007 and 2008 in Benin, Burkina Faso, Reducing Poverty and Investing in People • http://dx.doi.org/10.1596/978-1-4648-0094-8