Cape Town — Most of the money paid out by the governments of Kenya and Sierra Leone to those struggling with the economic effects of the coronavirus has gone to big corporations and not the poor, a new study has found. While South Africa promised more to big business, it has actually paid out more on welfare grants.
The Financial Transparency Coalition (FTC), an international grouping of civil society organisations which promotes fairer and more transparent global financial systems, included the three countries in a survey of government bail-outs [PDF] in nine countries in Africa, Asia and Central America.
The coalition's report said that in eight of the nine countries "a staggering 63 percent of pandemic-related funds went on average to big businesses... while only a quarter of the funds went to social protection."
In the three African countries, the proportion of bail-out money promised to big business was even higher. In Kenya, 92 percent of spending for recovery from coronavirus went to corporates. Sierra Leone announced spending on corporates totalling 74 percent, but actually paid out 92 percent of recovery spending to corporates.
South Africa announced bail-outs for corporates amounting to 66 percent of the total, but paid out only 30 percent to them.
In contrast, the sums announced for "social protection" were much lower. Kenya allocated only seven percent of its recovery package to this category, while Sierra Leone announced 12 percent but paid out only 1.5 percent.
South Africa - which already has a social welfare system covering 30 percent of its population (mainly children and the elderly) – announced spending on social protection totalling 32 percent of its recovery package, but has actually paid 68 percent of the package in grants.
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However, the coalition report notes that South Africa has not directed any spending specifically to its informal economic sector. Kenya has spent less than one percent on the sector, while Sierra Leone announced support totalling 11 percent of its assistance, and has paid out six percent.
The fourth category of actual spending surveyed - on small and medium enterprises - ranged from two percent of the total in South Africa to half a percent in Sierra Leone.
South Africa's Covid-19 stimulus package has previously been reported as the largest in any emerging-market economy - and larger than the developed economies of South Korea and Canada - and the Financial Transparency Coalition bears this out.
Of the nine countries surveyed, only India has a bigger package - U.S. $115 billion - but this constitutes 4.44 percent of its gross domestic product, while South Africa's actual spending of $19.8 million constitutes seven percent of GDP.
The non-African countries surveyed, apart from India, were Bangladesh, Nepal, Honduras, Guatemala and El Salvador.
Matti Kohonen, director of the Financial Transparency Coalition, said in a news release accompanying the report that by the end of this year, 150 million people are expected to fall into extreme poverty due to the pandemic.
The imbalance in relief spending, he added, "threatens to further widen the gap between rich and poor, and increase countries' mounting debt, all while undermining countries' healthcare and social protection systems."
The coalition recommended steps to redress the imbalance including a minimum corporate tax rate of at least 25 percent and levying or increasing taxes on the wealthy, corporations and high-income earners.
