PREPARING SOCIAL SECTORS FOR A CHANGING POPULATION IN SOUTHERN AFRICA. By Lucilla Maria Bruni, Jamele Rigolini, and Sara Troiano

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1 PREPARING SOCIAL SECTORS FOR A CHANGING POPULATION IN SOUTHERN AFRICA By Lucilla Maria Bruni, Jamele Rigolini, and Sara Troiano

2 MULTI-SECTORAL STUDY TO FEED POLICY DIALOGUE Macro CGE model (LINKAGE) Demographic projections Internal Validity GIDD model Micro-simulations National Transfer Accounts External Validity Micro

3 A TEAM EFFORT Lucilla Bruni, Jamele Rigolini, Sara Troiano (WB Social Protection) Tom Moultrie, Morne Oosthuzein (University of Cape Town) Servaas Van der Berg, Marizanne Knoetsen (University of Stellenbosch) Amer Ahmed, Marcio Cruz (WB Development Prospects) Michele Gragnolati (WB Health/Population) David Margolis, Chaimaa Yassine (Paris School of Economics) Hannah Lantos (Johns Hopkins University)

4 INDEX 1. Life at the crossroad: demographic dividend, or demographic bomb? 2. Investing in good jobs is investing in the next generations 3. Rebalancing social spending to promote long term inclusion and growth Education: addressing the quality challenge Health: lost in the epidemiological transition Social protection: towards an integrated life-cycle approach 4. Conclusions: getting social sectors ready for a changing population

5 THE AGE STRUCTURE IN SOUTHERN AFRICA DIFFERS SUBSTANTIALLY FROM SSA Total fertility rates and population pyramids Females Males Females Males Rest of SSA Southern Africa Females Males Females Males

6 Crude Death Rate (%) THE HIV/AIDS EPIDEMIC DID NOT STOP THE DEMOGRAPHIC TRANSITION Crude death rates Botswana Lesotho Namibia South Africa Swaziland 25 Population pyramids for South Africa with and without HIV/AIDS Thousands Females - AIDS Females - no AIDS Males - AIDS Males - no AIDS

7 A DEMOGRAPHIC WINDOW OF OPPORTUNITY IS OPENING FOR SOUTHERN AFRICA Botswana Namibia Swaziland ( ) (24-286) ( ) ( ) ( ) (263-21*) Upper Middle Income BRICS (195*-23) ( ) ( ) ( ) (22-265) UMI - China BRICS - China ( ) (22-239) (24-244) (25-252) UN definition: child dependents <3% and old-age dependents <15%

8 THE DEMOGRAPHIC TRANSITION AMPLIFIES THE IMPACTS OF GOOD BUT ALSO BAD POLICIES Virtuous cycle Healthy and educated children Policies Social policies Macro policies Regulation Outcomes Vicious cycle Unhealthy and poorly educated children Growth Economically independent elderly Productive adults Equity Labor markets Dependent elderly Unproductive and dependent adults Fiscal sustainability

9 THE DEMOGRAPHIC TRANSITION AMPLIFIES THE IMPACTS OF GOOD BUT ALSO BAD POLICIES Virtuous cycle Policies Vicious cycle Social policies This study Healthy and educated children Macro policies Regulation Unhealthy and poorly educated children Outcomes Growth Economically independent elderly Productive adults Equity Labor markets Dependent elderly Unproductive and dependent adults Fiscal sustainability

10 GDP pc, 25 (Index, 214=1) TO HARNESS THE DEMOGRAPHIC DIVIDEND, INCLUSIVE GROWTH POLICIES WILL BE NECESSARY Botswana No demographic effects Education convergence Faster productivity growth Lesotho and Swaziland Namibia South Africa Demographic effect (same policy environment) Employment ratio convergence + gender parity All interventions

11 Poverty rates (25) INCLUSIVE GROWTH POLICIES CAN ALSO BREAK THE INTERGENERATIONAL CYCLE OF POVERTY Botswana Lesotho Namibia South Africa Swaziland Initial year (212) Demographic effect (same policy environment) Faster productivity growth All interventions No demographic effects Education convergence Employment ratio convergence + gender parity

12 Contribution to poverty by age group HARNESSING THE DIVIDEND WILL REQUIRE A STRONG FOCUS ON THE NEXT GENERATIONS There are many more poor children, than elderly poor Botswana Lesotho Namibia Swaziland South Africa

13 INDEX 1. Life at the crossroad: demographic dividend, or demographic bomb? 2. Investing in good jobs is investing in the next generations 3. Rebalancing social spending to promote long term inclusion and growth Education: addressing the quality challenge Health: lost in the epidemiological transition Social protection: towards an integrated life-cycle approach 4. Conclusions: getting social sectors ready for a changing population

14 Unemployment rate (% Labor force) WORKING AGE, BUT NOT WORKING 6 Unemployment Males Females Males Females Males Females Males Females Males Females Botswana Lesotho Namibia South Africa Swaziland years years years years years

15 Youth (15-24) unemployment rate YOUTH UNEMPLOYMENT LIMITS THE CHANCES OF HARNESSING THE DEMOGRAPHIC DIVIDENDS Youth unemployment is more dramatic than in most countries Lesotho Botswana Swaziland Namibia South Africa 2 Turkey Argentina Philippines Brazil Chile India Paraguay 1 Mexico Thailand Ethiopia Adult (25-49) unemployment rate

16 Jobs in 25 (Index, Jobs in 215=1) HARNESSING THE DIVIDEND REQUIRES INCREASING BOTH PARTICIPATION AND EMPLOYMENT Botswana Lesotho Namibia South Africa Swaziland Jobs needed to keep unemployment constant Jobs needed to eliminate unemployment Jobs needed for full employment and full labor market participation

17 INDEX 1. Life at the crossroad: demographic dividend, or demographic bomb? 2. Investing in good jobs is investing in the next generations 3. Rebalancing social spending to promote long term inclusion and growth Education: addressing the quality challenge Health: lost in the epidemiological transition Social protection: towards an integrated life-cycle approach 4. Conclusions: getting social sectors ready for a changing population

18 % GDP per capita % GDP per capita LESOTHO S EDUCATION SPENDING PROFILE IS HIGHER THAN OECD LEVELS (TERTIARY ED) 4 Lesotho 4 OECD Age Education Age Education Most of the additional spending is generated by a scholarship system (bursaries)

19 % GDP per capita % GDP per capita SOUTH AFRICA S EDUCATION SPENDING PROFILE IS ALIGNED WITH OECD LEVELS 4 South Africa 4 OECD Age Education Age Education

20 % of GDP FEWER CHILDREN WILL ALLOW GREATER INVESTMENT PER PUPIL 14 Lesotho Education - Constant profile Education - Profile converging to OECD

21 % of GDP FEWER CHILDREN WILL ALLOW GREATER INVESTMENT PER PUPIL 14 South Africa Education - Constant profile Education - Profile converging to OECD

22 PISA score Combined index BUT SOUTHERN AFRICA HAS AMONG THE LOWEST EDUCATION ACHIEVEMENTS Imputed PISA scores are well below their benchmark levels Lesotho Swaziland Namibia Botswana South Africa Log GDP per capita

23 INDEX 1. Life at the crossroad: demographic dividend, or demographic bomb? 2. Investing in good jobs is investing in the next generations 3. Rebalancing social spending to promote long term inclusion and growth Education: addressing the quality challenge Health: lost in the epidemiological transition Social protection: towards an integrated life-cycle approach 4. Conclusions: getting social sectors ready for a changing population

24 NCDS ARE EMERGING WHILE OLD DISEASES ARE STILL WIDESPREAD Years of Life Lost Developed SSA Botswana Lesotho Namibia South Africa Swaziland 1 st Cause of YLLs Ischaemic Heart Disease HIV/AIDS HIV/AIDS HIV/AIDS HIV/AIDS HIV/AIDS HIV/AIDS 2 nd Cause of YLLs Stroke Malaria TB TB TB LRIs LRIs 3 rd Cause of YLLs Lung, tracheal, Diarrheal Diarrheal and bronchus LRI LRIs LRIs TB Diseases Diseases cancers 4 th Cause of YLLs Self-Harm Diarrheal Diarrheal Diarrheal Diarrheal LRIs Diseases Diseases Diseases Diseases TB 5 th Cause of YLLs Alzeheimer's Pre-term birth Road Injuries Pre-term Birth Stroke Violence Road Injuries 6 th Cause of YLLs Cirrhosis Neonatal Self-Harm Violence Self-Harm Stroke Pre-term Birth 7 th Cause of YLLs COPD 8 th Cause of YLLs Colorectal Cancers Enceph. Protein energy malnutrition Congenital defects Pre-term Birth Neonatal enceph. Neonatal enceph. Self-Harm 9 th Cause of YLLs LRIs Neonatal Sepsis Maternal Death Stroke Road Injuries Road Inuries Self-Harm Pre-term Birth Ischeamic Heart Disease Ischaemic Heart Disease Diabetes 1 th Cause of YLLs Road Injuries TB Violence Road Injuries Violence Pre-term Birth Violence Stroke Neonatal enceph.

25 % GDP per capita % GDP per capita BOTSWANA SPENDS ON ELDERLY S HEALTH CARE LESS THAN THE OECD 4 Botswana 4 OECD Age Health Age Health

26 % GDP per capita % GDP per capita SOUTH AFRICA SPENDS ON ELDERLY S HEALTH CARE LESS THAN THE OECD 4 South Africa 4 OECD Age Health Age Health

27 % of GDP A SLOW AGING POPULATION WILL ALLOW FACING OLD AND NEW HEALTH CHALLENGES 14 Botswana Health - Constant profile Health - Profile converging to OECD

28 % GDP A SLOW AGING POPULATION WILL ALLOW FACING OLD AND NEW HEALTH CHALLENGES South Africa Health - Constant profile Health - Profile converging to OECD

29 INDEX 1. Life at the crossroad: demographic dividend, or demographic bomb? 2. Investing in good jobs is investing in the next generations 3. Rebalancing social spending to promote long term inclusion and growth Education: addressing the quality challenge Health: lost in the epidemiological transition Social protection: towards an integrated life-cycle approach 4. Conclusions: getting social sectors ready for a changing population

30 Nigeria Zimbabwe Thailand Zambia Philippines Tunisia India Mexico Colombia Uganda Bulgaria Ethiopia Botswana Turkey Argentina Poland Namibia Chile Swaziland Brazil South Africa Lesotho Spending in Social Assistance as % of GDP A GENEROUS SOCIAL ASSISTANCE SYSTEM

31 Social assistance per capita (USD) AN IMBALANCE BETWEEN PROTECTION AND PROMOTION The elderly are the largest recipient of social assistance 2, 1,5 1, 5 Botswana Lesotho Namibia South Africa Swaziland Children and young dependents (-19) Old-age dependents (65+)

32 Poverty rate CASH TRANSFERS POVERTY REDUCTION IMPACT IS MOSTLY TO BE FOUND AMONG THE ELDERLY 1% Botswana 8% 6% 4% 2% % Age Post grants Pre grants

33 Poverty rate CASH TRANSFERS POVERTY REDUCTION IMPACT IS MOSTLY TO BE FOUND AMONG THE ELDERLY 1% Lesotho 8% 6% 4% 2% % Age Post grants Pre grants

34 Poverty rate CASH TRANSFERS POVERTY REDUCTION IMPACT IS MOSTLY TO BE FOUND AMONG THE ELDERLY 1% South Africa 8% 6% 4% 2% % Age Post grants Pre grants

35 % GDP per capita % GDP per capita NON-CONTRIBUTORY PENSIONS ARE GENEROUS BUT STEERED TOWARDS THE VERY ELDERLY (LESOTHO) Lesotho OECD Age Social Transfers Noncontributory pensions

36 % GDP per capita % GDP per capita NON-CONTRIBUTORY PENSIONS REMAIN LESS GENEROUS THAN IN THE OECD (SOUTH AFRICA) South Africa OECD Age Social Transfers Noncontributory pensions

37 % of GDP BUT CONVERGING TO OECD GENEROSITY WOULD PUT PRESSURE ON PENSIONS 14 Lesotho Non-contributory pensions - Constant profile Non-contributory pensions - Profile converging to OECD

38 % of GDP BUT CONVERGING TO OECD GENEROSITY WOULD PUT PRESSURE ON PENSIONS 14 South Africa Non-contributory pensions - Constant profile Non-contributory pensions - Profile converging to OECD

39 INDEX 1. Life at the crossroad: demographic dividend, or demographic bomb? 2. Investing in good jobs is investing in the next generations 3. Rebalancing social spending to promote long term inclusion and growth Education: addressing the quality challenge Health: lost in the epidemiological transition Social protection: towards an integrated life-cycle approach 4. Conclusions: getting social sectors ready for a changing population

40 GETTING SOCIAL SECTORS READY FOR A CHANGING POPULATION An opening of the fiscal space to respond to changing social needs Start by helping youth access good jobs Social policies should become more balanced across the life cycle, consistent with a promotion approach Increase investment in youth s human capital - starting from the early ages Social policies cannot do the job alone

41 THANKS

42 BACK UP SLIDES

43 % GDP per capita % GDP per capita BOTSWANA S EDUCATION SPENDING PROFILE IS HIGHER THAN OECD LEVELS 4 Botswana 4 OECD Age Education Age Education Most of the additional spending is generated by a scholarship system (bursaries)

44 % GDP per capita % GDP per capita NAMIBIA S EDUCATION SPENDING PROFILE IS ALIGNED WITH OECD LEVELS 4 Namibia 4 OECD Age Education Age Education

45 % GDP per capita % GDP per capita SWAZILAND S EDUCATION SPENDING PROFILE IS ALIGNED WITH OECD LEVELS 4 Swaziland 4 OECD Age Education Age Education

46 % of GDP FEWER CHILDREN WILL ALLOW GREATER INVESTMENT PER PUPIL 14 Botswana Education - Constant profile Education - Profile converging to OECD

47 % of GDP FEWER CHILDREN WILL ALLOW GREATER INVESTMENT PER PUPIL 14 Namibia Education - Constant profile Education - Profile converging to OECD

48 % of GDP FEWER CHILDREN WILL ALLOW GREATER INVESTMENT PER PUPIL Swaziland Education - Constant profile Education - Profile converging to OECD

49 % GDP per capita % GDP per capita LESOTHO SPENDS MORE ON HEALTH CARE THAN THE OECD 4 Lesotho 4 OECD Age Health Age Health

50 % GDP per capita % GDP per capita NAMIBIA SPENDS ON ELDERLY S HEALTH CARE LESS THAN THE OECD 4 Namibia 4 OECD Age Health Age Health

51 % GDP per capita % GDP per capita SWAZILAND SPENDS ON ELDERLY S HEALTH CARE MUCH LESS THAN THE OECD 4 Swaziland 4 OECD Age Age Health Health

52 % of GDP A SLOW AGING POPULATION WILL ALLOW FACING OLD AND NEW HEALTH CHALLENGES 14 Lesotho Health - Constant profile Health - Profile converging to OECD

53 % of GDP A SLOW AGING POPULATION WILL ALLOW FACING OLD AND NEW HEALTH CHALLENGES 14 Namibia Health - Constant profile Health - Profile converging to OECD

54 % of GDP A SLOW AGING POPULATION WILL ALLOW FACING OLD AND NEW HEALTH CHALLENGES Swaziland Health - Constant profile Health - Profile converging to OECD

55 % GDP per capita % GDP per capita NON-CONTRIBUTORY PENSIONS REMAIN LESS GENEROUS THAN IN THE OECD (BOTSWANA) Botswana OECD Age Social Transfers Noncontributory pensions

56 % GDP per capita % GDP per capita NON-CONTRIBUTORY PENSIONS REMAIN LESS GENEROUS THAN IN THE OECD (NAMIBIA) Namibia OECD Age Social Transfers Noncontributory pensions

57 % GDP per capita % GDP per capita NON-CONTRIBUTORY PENSIONS REMAIN LESS GENEROUS THAN IN THE OECD (SWAZILAND) Swaziland OECD Age Social transfers Noncontributory pensions

58 % of GDP BUT CONVERGING TO OECD GENEROSITY WOULD PUT PRESSURE ON PENSIONS 14 Botswana Non-contributory pensions - Constant profile Non-contributory pensions - Profile converging to OECD

59 % of GDP BUT CONVERGING TO OECD GENEROSITY WOULD PUT PRESSURE ON PENSIONS 14 Namibia Non-contributory pensions - Constant profile Non-contributory pensions - Profile converging to OECD

60 % of GDP BUT CONVERGING TO OECD GENEROSITY WOULD PUT PRESSURE ON PENSIONS Swaziland Non-contributory pensions - Constant profile Non-contributory pensions - Profile converging to OECD