Prioritise protection of social welfare


Prioritise protection of social welfare

We are learning illuminating lessons on the conduct of fiscal policy during a pandemic.
We are learning illuminating lessons on the conduct of fiscal policy during a pandemic. FILE PHOTO | NMG 

We are learning illuminating lessons on the conduct of fiscal policy during a pandemic.

A special sitting of Parliament will be convening next week to legislate and effect the taxation measures the government recently announced to cushion individuals and firms from the impact of the coronavirus.

I still maintain that the fiscal incentives the government rolled out still fall far short when compared to what is being implemented in the developed West.

When you tinker with taxes like pay-as-you-earn, your target is only employees in the formal sector who earn a salary.

When you reduce value-added tax, the target is companies in the formal sector who will benefit in terms of pressures on cashflows.


And, when you reduce corporation tax, the incentive is to companies in the formal sector that pay corporate taxes.

Clearly, the tax measures the government rolled out were in the most part mainly targeted to benefit the formal sector.

We are yet to think about stabilisation to sustain livelihoods of the majority of citizens who work in the informal sector.

If there is a lockdown, the main challenge for the government will be how to craft measures address income and livelihood options for the urban poor.

Just the other day, we closed restaurants, bars, pubs, cafes and nightclubs. Most of the owners of the outfits have responded by sending workers home, informing them that they would not be paid until the situation improves.

I know of owners of a hotel chain who has sent e-mails to suppliers asking for a moratorium on payments until the business re-opens. Barmen, cashiers, delivery drivers, machine operators in factories, cleaners, matatu drivers, and touts have been sent to the streets in droves.

We have been taken through a lesson of just how this category of our national workforce is an integral part of the people who drive this economy.

Can this economy survive a protracted lockdown?

So far, South Africa is the only country in sub-Saharan Africa to have imposed a 21-day lockdown of the economy. But the advantage the South Africans have over the rest of sub-Saharan Africa is that they have an unemployment benefits system that has been running for many years.

Although the system only covers workers who have contributed to the fund and excludes most informal sector worker, it provides a good basis for designing livelihood support measures to a good part of the population.

For sub-Saharan African countries like us with neither safety nets nor reliable data and statistics on the self-employed and informal sector workers — a protracted poses major political consequences.

You rush to impose a lockdown on a city like Kampala, Nairobi and Dar es Salaam at a huge risk of sparking riots in the streets.

For most informal sector workers, the choice between obeying stay at home orders and not is starvation and death.

I have heard some pundits predicting that the lockdowns many governments in sub-Saharan are contemplating may trigger our version of Arab Spring.

Informal sector workers and the small businesses that have been forced to shut their operations because of social distancing rules need better protection.

And, I can’t see how the government will escape having to consider introducing a much wider conditional cash transfer system targeting the self-employed and informal sector worker.

A protracted lockdown that is not accompanied by a system of supporting livelihoods of workers in the informal sector is a recipe for chaos and insecurity.

And, we have several advantages in this regard.

First, the government — under Inua Jamii, has acquired the capacity to successfully implement a nationwide cash transfer programme. Currently, 500,000 households receive monthly cash stipends under four cash transfer programmes.

Secondly, we are lucky to have well-functioning mobile money payments platforms capable of moving billions to beneficiaries.

The pandemic is going to expose how much this society has retrogressed in terms of providing decent jobs to our people.

The policy must prioritise giving the majority of our people jobs with designated working hours, paid leave, adequate medical cover and salaries and wages decent enough to pay for decent housing, commuter fare and school fees for their children.

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