BILL WATCH 12/2020
[7th April 2020]
Covid-19: Financial Assistance for Vulnerable Groups
On the 27th March the President announced that the country would go into “lockdown” for 21 days, starting on Monday the 30th March. He said all businesses should stop working and people should stay in their homes for the 21-day period, except those engaged in essential services.
Lockdown is one of the extreme measures many governments across the globe have taken to slow down infection in the Covid-19 pandemic which has infected over a million people worldwide and killed over 70 000. Staying at home or in isolation has been encouraged by the World Health Organisation as the most effective method to slow down the spread of the disease.
In his announcement, the President did not indicate how vulnerable groups, including informal traders and small businesses that cannot absorb the effect of the lockdown, would be helped to survive. This was left to the Minister of Finance and Economic Development. This bulletin will examine the provisions that the Minister of Finance has made.
Social Protection and Cash Transfers
Last week the Minister of Finance released a statement saying that Treasury had set aside $600 million in financial support over three months [$200 million a month] for small businesses and vulnerable people affected by the lockdown. In his statement the Finance Minister said:
“Vulnerable groups in our society are the most exposed under this COVID-19 crisis. Accordingly, Treasury has set aside resources to cover one million vulnerable households under a Cash Transfer programme and payment will commence immediately. The Social Welfare Department will use its usual mechanisms to identify the beneficiaries.”
The $200 million per month for the next three months means that on average the million beneficiaries will be receiving a paltry $200 per month [in ZWDs].
The Minister further said he was ring-fencing the 2% Intermediated Money Transfer Tax (IMTT) for social protection and capital development projects, and proceeds from the tax would be channelled towards Covid-19 related mitigatory expenditure.
The Minister further said that additional resources would come from cuts from respective Ministry allocations/budgets; details of these cuts were being worked out. The Treasury had issued a Circular on 20 March 2020 instructing line Ministries to identify areas for cuts and areas for redirecting expenditure.
Two Ministries have been directed to draw up lists of beneficiaries of the programme:
The Ministry of Public Service, Labour and Social Welfare, in conjunction with local authorities, will come up with an updated list of individual and family beneficiaries.
The Ministry of Women Affairs, Small and Medium Enterprises and Community Development will draw up a list of small and medium businesses and informal traders affected by the lockdown.
However it is not clear how the beneficiaries will be selected.
Individual and family beneficiaries
In regard to vulnerable households, the Minister said the Department of Social Welfare would “use its usual mechanisms” to identify them. Presumably he was referring to the Social Welfare Assistance Act [link], which provides for financial payments to “destitute or indigent persons”, i.e. people who lack means of subsistence.
Under section 6 of the Act social welfare assistance can be given to destitute or indigent persons if the Director of Social Welfare, or someone acting on his or her behalf, is satisfied that they need it, taking into account factors such as:
the degree of their financial hardship
any other income or assistance available to them.
Small and medium enterprises and traders as beneficiaries
The Social Welfare Assistance Act does not cover assistance to businesses, and no criteria have been stated for the eligibility of small and medium enterprises and traders under the new scheme. The government is considering how to assist SMEs and those in the informal economy. The Ministry of Women Affairs, Community Small and Medium Enterprises Development is trying to collate information on these, but nothing has yet been done in the way of assistance nor has any information been made available on procedures for applying for assistance
Short comings of selection processes
From the announcements so far it does not seem that much thought has been given to how beneficiaries are to be selected, to ensure that only the most needy receive assistance:
The Social Welfare Assistance Act envisages a careful assessment of the needs of potential beneficiaries, and there is little time for such assessments to be made. It will not be easy to assess the needs of people who cannot leave their homes in order to apply for assistance.
The selection process, as announced by the Minister, may be subjected to political bias since councillors and ward development committees will probably have a large say in the selection of beneficiaries within their areas. Zimbabwe’s politics has been polarised for a long time and cases of aid being given along political lines have been common.
Several NGOs have been giving aid to vulnerable families. It is unclear if some families may benefit from both facilities. There is therefore need for NGOs and the Social Welfare Department to share information and their lists of beneficiaries.
Payment of Assistance
The statement by the Minister is silent on how beneficiaries are to receive their financial assistance, whether they are to get the money in cash, bank transfer or EcoCash.
The payment system that is adopted will have a great effect on the value of what the beneficiaries receive, considering the three-tier pricing system that is in the market. Prices are generally lower for people who pay cash compared to the prices payable by those who pay through debit cards or mobile money transfers.
Pensioners and NSSA
Zimbabwe has a rising number of pensioners and people who were retired on medical grounds. Many of them depend on the State-controlled pension scheme run by the National Social Security Authority (NSSA). The scheme however pays only ZWD 200 a month for pensioners and ZWD 240 for those who retired on health grounds or had accidents at work. These amounts are now pitifully small considering inflation which is above 500% and the poverty datum line of ZWD 5,000. Will these pensioners be eligible for assistance under the new scheme?
South Africa has an elaborate social welfare system that clearly spells out the qualification criteria and how much a beneficiary receives. The payments are received in cash in rural communities and those in urban areas have their monthly allowances deposited into bank accounts through the Post Office and other participating banks.
In the long term Zimbabwe should consider adopting a system such as South Africa’s.
Obviously the $600 million that has been set aside for Covid-19 relief was not provided for in this year’s budget, passed by Parliament at the end of last year; nor were any other funds that the Government may have to expend in order to keep the health system going. The Constitution however is clear that the Government can only incur expenditure that has been approved by Parliament and provided for in an Appropriation Act [sections 303(1) and 305(4) of the Constitution].
Parliament is currently in recess due to the pandemic, but as soon as it resumes the Minister of Finance should table a supplementary budget that takes account of the amounts that he has expended and will have to expend to mitigate the pandemic’s effects. He may also have to table a Bill in terms of section 307 of the Constitution seeking condonation of unauthorised amounts already expended.