- World Bank estimate over 3.2m will fall into poverty
- 21% of Batswana, 29% of BaSotho and South Africans can raise emergency funds
- Says SACU is the world’s most unequal region
A recently released World Bank Report has revealed that the existing challenges of poverty, inequality and unemployment in the Southern Africa Customs Union (SACU) have been exacerbated by the COVID-19 pandemic as both lockdowns and health risks left people unable to work for long periods with serious economic consequences.
In the report titled Inequality in Africa: An Assessment of the Southern African Customs Union, the World Bank assessed the poverty impact of COVID-19 as a labour income shock within the member states of SACU – South Africa, Eswatini, Botswana, Lesotho and Namibia. According to the World Bank, SACU is the world’s most unequal region.
Substantial impact on poverty has been made by the pandemic with SACU’s poverty rates estimated to increase by an average of 5 percentage points because of the pandemic and the lockdowns, which suggests nearly 3.2 million people falling into poverty.
“Botswana is at the low end of this distribution at 2.5 percentage points,” says the report. At the higher end of this distribution are Eswatini (5.9 percent) and Namibia (6.6 percent). Southern Africa has relatively low capacity to cushion the poverty impacts of shocks such as COVID-19-19 because of its low degree of financial resilience.”
With financial resilience being relatively low in southern Africa, the World Bank says data shows that in developing economies, about 50 percent of adults say they could come up with emergency funds but the figures are only 21 percent in Botswana and 29 percent in Lesotho and South Africa.
“Many people who say they could raise emergency funds depend on potentially unreliable financing sources,” the report observes. “In most southern African economies, over a fifth of these adults would get the money by picking up extra shifts at work or borrowing money from an employer. The numbers illustrate the economic insecurity of adults in the region and highlight the importance of strong safety nets to protect people from sudden expenses.”
According to the report, the COVID-19 pandemic is exerting additional pressure on inequality with socio-economic consequences of the pandemic being felt across SACU countries. It says the magnitude and velocity of the shock are testing the capacity of social protection systems to provide a cushioning response as the pandemic brings into sharper focus the need to narrow inequality of opportunity between different groups to support a more durable and inclusive recovery.
“Addressing the underlying structural factors that constrained access to opportunities in these societies even before the pandemic would reduce the risk of the crisis leading to permanent increases in inequality and lower trajectories of social mobility and living standards over time,” says the World Bank.
The poverty impacts of the pandemic are unequally distributed and tend to be more pronounced in urban areas. In South Africa, for example, the percentage point increase in poverty is more than 2.5 times larger in urban than in rural areas. In Botswana, on the other hand, urban and rural impacts are similar. In general, less-educated workers are more adversely affected, while workers with tertiary education are the least affected.
The report highlights data that shows that in South Africa, which the World Bank says is the most unequal country in the world, low wage workers suffered significantly more job losses than high-wage ones during the pandemic, depicting how the COVID-19 crisis is widening inequality by contributing to severe and unequal job losses “Comparing 2020-Quarter 4 to pre-crisis 2020-Quarter 1 shows that workers in the bottom 20 percent of the wage distribution experienced almost four times more job losses than workers in the top 20 percent,” says the report.
The World Bank study notes that social protection programmes could significantly mitigate the poverty impacts of the COVID-19 pandemic, saying social protection should be adapted to the nature of shocks and their distribution while building resilience among poor and vulnerable households to help them withstand economic shocks and natural disasters. “Programmes will need to be nimble enough and fiscally sound enough to allow for both vertical expansion (higher benefits) and horizontal expansion (more beneficiaries to cover the people affected by the shock) as needed,” says the report.