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Should Government Give Money to Tanzania’s Poor?

Jacques Morisset's picture

Men tilling a rice paddie on an irrigation project When confronted with financial distress or some other difficulty, over 80 percent of Tanzanian families say they count on relatives and friends for the support needed to get through it. This is to be expected in African culture which is shaped by a strong sense of affinity with family and tribal ties. 

However, in a poll conducted by the World Bank and Twaweza by phone in November, almost half of Tanzanian households also expressed that they expect to receive some help from their Government (see details in the fourth Tanzania Economic Update). In a world characterized by rapid urbanization and structural changes, government assistance is increasingly viewed as critical. In cities, especially, traditional ties and safety nets are generally losing their force. With economic progress, income disparities tend to widen. For example, the proportion of people living in extreme poverty (i.e. with barely enough resources to afford a 2,000 calorie diet) is only one percent in Dar es Salaam but over 15 percent in most rural areas.

An expanded role of the state as the provider of social protection becomes a logical consequence of economic development. Although disparities exist across countries, a robust positive trend has been found between the levels of social protection provided by states versus capita incomes. OECD countries are spending approximately 16 percent of their GDP on social protection, while sub-Saharan African countries allocate only six percent.

Nevertheless, Tanzania appears as an outlier even by regional standards, which is also surprising given its socialist tradition under Julius Nyerere. This year, the Tanzanian Government allocates only one percent of its budget, or the equivalent of 0.3 percent of GDP, to social protection programs. By contrast, Ethiopia and Malawi – both poorer than Tanzania – spend four percent of their GDP.

Change under way

For the first time in recent history, the Tanzanian Government is considering the introduction of a comprehensive social protection program for its citizens. This would entail scaling up the successful conditional cash transfer program piloted by the Tanzania Social Action Fund (TASAF) since 2009. Under the pilot program, approximately 20,000 households received regular cash grants from Government. The amount, depending on the size and composition of the household, averages around Tsh 30,000 (or USD 20) every two months. Scaling up to nationwide coverage could result in real, significant improvements in the quality of life of most of Tanzania's poorest citizens, potentially facilitating transformations in their lives that could allow them to escape the poverty trap.

These programs can work. As the well documented successes of Brazil and Mexico and in other parts of the world have shown, well managed cash transfers can cause a substantial dent in poverty (see Shanta’s recent piece Let Them Eat Cash). The TASAF pilot too has delivered equally strong results. It has allowed families to buy more and better food and to pay for the education requirements of their children. Local communities also demonstrated commitment as they participated in identifying the poorest families amongst them and in making sure that the cash payments got to the right people in a timely manner.

Scaling up the TASAF cash transfer program would cost approximately USD 250 million per year, which is equivalent to approximately 2.5 percent of the Government’s budget. This is a significant expenditure, but one that would be justified for a program that is potentially transformative. Yet, there are risks associated with the implementation of such a program on a large scale. It will be essential, for instance, to preserve the effective targeting and sound monitoring that have become the hallmarks of TASAF’s success. Furthermore, the decision to scale up needs to be embedded in the medium-term fiscal framework as well as the country’s comprehensive strategy to reduce poverty.

Today there are some 4.2 million Tanzanians living in extreme poverty – despite rapid and sustained economic growth. Excluded from the growth mechanisms, these are unable to secure a decent job or to send their children to school to guarantee them a better future. They are also extremely vulnerable in the face of disaster. Providing them with social protection would not only spread the prosperity that is being experienced in other parts of Tanzanian society, it would also promote social justice.