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1. Universal Basic Income: A Primer for Poverty Reduction in Africa

Author:
Bin Joachem Meh, Ntoubia Larissa, and Ondoua Herve
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
The Nkafu Policy Institute
Abstract:
Universal basic income (UBI) scheme provides regular payment in cash to everyone in the economy irrespective of their social, economic, financial, and political status. UBI has a direct effect on poverty reduction; this implies that providing cash to everyone in the society irrespective of their financial status will reduce the rate of poverty as citizens will be able to meet basic needs such as food, housing, and clothing especially if this basic income amount is above the poverty line. For others, UBI will only increase inequality and poverty especially in developing countries who lack finances to provide such income to everyone in the society (Robert, 2019). UBI is a simple and practical solution to eradicating poverty, by giving everyone a minimum income, regardless of whether they are young, old, employed or unemployed, the government can tackle poverty reduction (Centre for Social Justice, 2018). More recently UBI has been a major issue of concern and it is seen as the answer to wider problems of technological unemployment, wealth inequality, mental health stability and social mobility. In India, UBI improved mental and physical health and in Namibia UBI program reduced household poverty from 76% to 37% in one year (Johanna, 2014). The high poverty rate and the scanty nature of the UBI literature in Africa makes this study an important contribution to the body of knowledge and further enable policy makers to reflect on the implementation of UBI principle. The objective of this paper is to analyze the effects of universal basic income on narrowing the poverty gap in Africa. The rest of the paper will bring out the role of UBI in poverty reduction, and propose some policy recommendations for the introduction of the UBI in Africa.
Topic:
Poverty, Universal Basic Income, Humanitarian Crisis, Wages, and Income
Political Geography:
Africa

2. Differential bunching impacts across the income distribution: Evidence from Zambian tax administrative data

Author:
Samuel Bryson, Kwabena Adu-Ababio, Evaristo Mwale, and John Rand
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We investigate the behavioural responses of individual taxpayers to changes in marginal personal income tax rates applying empirical bunching methodology to tax administrative data from Zambia over the period from 2014 to 2021. We find evidence for excess bunching at the first kink in the tax schedule for all years but less evidence of bunching at the second and third thresholds. While bunching is considerable and behavioural responses are observed to changes in the location of the kinks over time, bunching at reference points (‘round-number bunching’) also appears large. Implied elasticities of taxable income are however not remarkable, and comparing actual and estimated counterfactual wage distributions reveal that missed tax revenue arising from the excess bunching is limited. This is consistent with the observed bunching reacting sharply and immediately to changes in the location of the kink points over time, suggesting that observed behavioural change is driven by reporting behaviour rather than real economic responses.
Topic:
Economics, Tax Systems, Income, and Income Distribution
Political Geography:
Africa and Zambia

3. The dynamics of formal employment during and after the COVID-19 pandemic in Uganda

Author:
Kyle McNabb, Tina Kaidu Barugahara, and Susan Namirembe Kavuma
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper studies the impact of the COVID-19 pandemic on formal sector employment in Uganda. Utilizing employee-level administrative tax data from the Uganda Revenue Authority, we describe the dynamics of employment as the pandemic evolved, seeking to better understand the various coping strategies undertaken by firms in the face of reduced sales and business activity. We find that over one in ten formally employed workers fully lost their incomes in the immediate aftermath of the onset of the pandemic and associated lockdown restrictions. Of those that remained employed, some 14% saw their salaries fall in the short term (to June 2020), and by March 2021 (a full year after the onset of the pandemic) over 9% of the formal workforce were still earning less than pre-pandemic. We subsequently match these pay-as-you-earn records with firms’ income tax returns to better understand how characteristics such as firm size, sector, and profitability affected the likelihood that different coping strategies were undertaken. We find that firms which were larger and more profitable pre-pandemic were more likely to retain their workforce and less likely to cut salaries throughout the course of the pandemic.
Topic:
Employment, Economy, COVID-19, and Income
Political Geography:
Uganda and Africa

4. The effectiveness of social protection in five African countries through normal times and times of crisis

Author:
Katrin Gasior, Iva V. Tasseva, and Gemma Wright
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We study the effectiveness of social protection benefits in reducing income and consumption poverty in five sub-Saharan African countries—Ghana, Mozambique, Tanzania, Uganda, and Zambia—in normal times and times of widespread economic crisis. Using tax–benefit microsimulation models with representative household survey data, first we estimate the coverage of benefits and their poverty-reducing effects in each country. Second, we study the ability of benefit automatic stabilizers to reduce losses in incomes and consumption in times of crisis, by simulating hypothetical reductions to earnings and employment. Although the coverage of benefits is fairly high in Ghana and Zambia, the poverty-reducing impact of benefits in all five countries is low in normal times. The effectiveness of benefits to stabilize income and consumption in times of crisis is also limited because many benefits are linked to proxies of income, not income itself, or have tight eligibility criteria. Social assistance programmes are typically unresponsive to losses in household earnings and employment and provide limited support for unemployed people.
Topic:
Poverty, Crisis Management, Economic Crisis, and Income
Political Geography:
Uganda, Africa, Mozambique, Tanzania, Zambia, and Ghana

5. The determinants of domestic saving in Kenya

Author:
Rodgers Musamali, Cecilia Mutia, and Rose Ngugi
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The savings–growth nexus is widely acknowledged, both in policy and in the literature. But Kenya’s numerous policy initiatives to encourage savings mobilization are yet to yield the expected outcomes. This paper identifies the key drivers of domestic saving in Kenya, exploiting fintech as an alternative channel for savings mobilization, and drawing lessons from the Kenyan experience so far. Using data from various sources, and employing an autoregressive distributive lag estimation model, we find that in the long run, private saving is positively and significantly influenced by the per capita income growth rate, inflation, and age dependency ratio, and negatively influenced by the public saving rate and terms of trade. National saving is positively and significantly influenced by the per capita income growth rate, inflation, and private sector credit growth rates in the long run. Wealth and deposit rates negatively influence national saving. Based on these findings, we recommend the following interventions to grow savings in Kenya: creating decent employment opportunities to enhance income growth; providing sustained financial development with a focus on savings mobilization; creating an enabling environment for the private sector; taking advantage of Kenya’s young population; exploiting mobile money platforms to boost savings. Moreover, households show targeted saving behaviour where they accumulate financial savings and then transform them into savings in kind. Therefore, accounting for savings should go beyond the traditional focus on bank deposits and incorporate savings held in other forms. Households also use non-formal platforms for saving, and we suggest that existing barriers to formal saving platforms be removed to direct more saving into formal channels.
Topic:
Economic Growth, Saving, Income, and Fintech
Political Geography:
Kenya and Africa

6. Unravelling Africa’s raw material footprints and their drivers

Author:
Albert Kwame Osei-Owusu, Michael Danquah, and Edgar Towa
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper applies an environmentally extended input–output analysis, leveraging the Eora database, to estimate the global raw material footprints of 51 African nations from 1995 to 2015. It employs least absolute shrinkage and selection operator and panel regression models to quantify the effects of diverse variables on Africa’s raw material footprints. The findings show that the raw material footprints of Africa’s production and consumption soared by 41 per cent and 38 per cent, respectively, from 1995 to 2015, mainly driven by biomass and construction materials. They show that Africa outsources 25 per cent of its raw material footprints from consumption, while over 60 per cent of its footprints from production arise from its exports. Our findings beckon African governments to reduce the excessive focus on exploitation and concentrate on combatting corruption and extreme rent-seeking while decoupling Africa’s raw material footprints from rising public debt, carbon emissions, income levels, and population.
Topic:
Economics, Carbon Emissions, Public Debt, Income, Raw Materials, and Input-Output Analysis
Political Geography:
Africa

7. Stokvels: An Instrument for Income Generation and Wealth Creation?

Author:
Ntando Nkambule and Mangaliso Mohammed
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
Eswatini Economic Policy Analysis and Research Centre (ESEPARC)
Abstract:
Stokvels are increasingly being recognised as a solution to contribute to income generation and wealth creation, especially amongst low-income earners who are excluded from the formal financial markets. This study investigates the contribution of stokvels to income generation and wealth creation in Eswatini focusing on the poorest region, Lubombo. The study uses 436 stokvel participants which were accessible through NGOs (Joyful-heart, Bantwana Initiative, Imbita Women Finance Trust, and World Vision) which promote savings groups in the country, Lubombo region. The study employs Principal Component-based asset index as a proxy for assets accumulation (wealth creation). The findings from the descriptive statistics indicate that women are dominating stokvels participation in households. In support of income generation, the participants in the study are capable of saving up to E796,123 per annum, and the total loan amount issued increases the total contributions by 6.7%. The generated revenue results for a total of E0.8m. Even though the prominent goals for most of the participants are consumptive, still members can acquire assets and accumulate wealth through borrowing before the cycle matures, thus significantly increasing their socioeconomic status. The study recommends an establishment of a stokvel representative body (such as Eswatini National Association of Stokvels) to capture the Lilangeni value of stokvels that generate in the informal economy, as well as assist in promoting stokvels campaigns for information exchange platform, deal with other stokvels issues of interest, and create and monitor a stokvel data base in the country.
Topic:
Poverty, NGOs, Unemployment, Wealth, and Income
Political Geography:
Africa and Eswatini

8. Determinants of Household Welfare and Poverty in Botswana, 2002/03 and 2009/10

Author:
Khaufelo R. Lekobane and Tebogo B. Seleka
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
Botswana Institute for Development Policy Analysis
Abstract:
This paper investigates household determinants of welfare and poverty in Botswana. Using the 2002/03 Household Income and Expenditure Survey (HIES) and the 2009/10 Botswana Core Welfare Indicator Survey (BCWIS), and employing regression analysis, we identify education level and employment status of the household head, as some of the key determinants of household welfare and poverty in Botswana. Moreover, we find that residing in rural areas increases the likelihood of being poor and negatively relates to welfare. Therefore, public policy must continue to emphasize on education and job creation amongst the strategies for poverty reduction in Botswana. Still, initiatives for rural development are also critical for poverty reduction.
Topic:
Development, Poverty, Welfare, Consumption, and Income
Political Geography:
Africa and Botswana