Food Voucher Scheme: Briefing

Social Development

15 February 2001
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Meeting report

SOCIAL SERVICES PORTFOLIO COMMITTEE

SOCIAL SERVICES PORTFOLIO COMMITTEE
16 February 2001
FOOD VOUCHER SCHEME: BRIEFING

Chairperson: Mr E Salojee

Documents handed out:
Food Voucher Scheme - February 2001
Food Voucher Scheme:Presentation
Situational Analysis of Householdfood Security and Nutrition Programmes in South Africa: National Institute for Economic Policy (http://www.niep.org.za)

SUMMARY
The Women Development Bank addressed the committee on the usefulness of the food voucher scheme as an effective poverty reduction tool and as a tool to ensure food security - especially in large families which usually have to depend on the salary of a single income earner. A parallel was drawn to the system used in Brazil indicating that it can be expanded from food vouchers to smart cards that are properly encoded to prevent a potential abuse of the system.

MINUTES
Food Voucher Scheme
Ms Tania Slabbert, Executive Director of the Women Development Bank (WDB), briefed the Committee on the concept of the food voucher system that the WDB is currently promoting. The WDB's opinion is that the food card system addresses the issue of food security and is an effective poverty reduction tool.

Food voucher schemes were first introduced in the UK in the 1950s as a means of meeting the needs of a social programme to ensure food security. Since then the programme has been running in over 31 countries worldwide, including South America, India and China. It is hoped that the programme will be initiated in South Africa as well. There are over 11 million users of the system in Brazil. The Brazilian implementation of the system was particularly interesting as South Africa and Brazil have similar socio-economic conditions. She noted that food vouchers have become an acceptable poverty alleviation tool when viewed in a developing world context.

Ms Slabbert pointed out that the Constitution guarantees the right to have sufficient food. However, this is a problem as it can only be achieved within the state's available resources. She said that the scheme somewhat alleviates this burden.

Statistics prepared by the National Institute for Economic Policy found that:
- 14 million South Africans are vulnerable to food insecurity
- R9, 55 has to be spent on an individual per day, anything less than this amount amounts to food insecurity.
- 75% of all South African households have a monthly income of less than R2 500.
- Households of three or more are more likely to experience a food expenditure gap.
- Large households of five or more experience the widest gap: spending R850 on average on food per month whereas they need to spend R1 430 to meet minimum nutritional standards.
- Large households are invariably supported by a single worker. Consequently, low wage earners are the best medium to address poor household needs.

Current Initiative
The WDB is meeting with government officials and with the South African Revenue Services Commissioner to consider the tax aspects of the scheme. WBD's proposal is that the government should create an enabling environment which encourages employers to pay part of workers salaries in a currency only exchangeable for food. The primary target group should be workers earning less than R2 500 per month.

Benefits of the initiative are clear as better nutrition results in:
- improved productivity
- fewer workplace accidents
- reduced absenteeism
- better concentration at schools
- improvement in family health
- from a South African context, the HIV epidemic increases the need for access to a well balanced diet.

The Brazilian Experience
The Brazilian Workers Feeding Scheme has been in operation for 25 years. This is one of the most successful public/private partnerships in that country. The scheme has three products:
1 The restaurant ticket - used by workers to obtain meals at restaurants
2 The food card - used in grocery supermarkets
3 Food hampers - used mostly by Brazilian farm workers

The South African Proposal and Implementation
Ms Slabbert believes that the food voucher is a better alternative for local needs because the majority of South Africans do not eat in restaurants but prefer to buy food and prepare it at home. The system could be implemented via a smart card system to prevent or minimise abuse.

The consortium would roll out a network of smart card readers in supermarkets and shops around the country. In rural areas where there is no fixed telecommunication infrastructure, cell phone networks will be used to enable remote spaza shops to become part of the network. The smartcard network would be available countrywide to government to facilitate the likes of pension payouts, disability grants, UIF entitlements and basic income grant. She stressed that smart cards are not new in this country and thus would be readily accepted. Any company wishing to administer the scheme would have to comply with criteria laid down by the government. This would ensure that there is no abuse.

She noted that the system could be abused by dishonest retailers who can discount vouchers for cash. To prevent potential abuse, companies such as Accor are moving from a voucher to a smart card system. The smart cards would have credit entitling the holder to make a purchase.

The Scheme Consortium
The consortium that is currently promoting the scheme in this country is:
the Women's Development Banking Investment Holdings (part of WDB), the Disability Employment Concerns Trust and Accor SA

The Women's Development Banking Investment Holdings is part of the Women's Development Banking Group which provides small loans, without a profit, and basic business skills to women in rural areas.

The Disability Employment Concerns Trust was established by seven major NGOs representing 12% of the population with disabilities. It is a vehicle for the disability sector to become involved in the economy, such as holding shares in different investment companies. Representations are then made to the respective companies in which the Trust is a shareholder to employ disabled people and to comply with labour legislation such as the Employment Equity Act.

Accor SA is one of France's largest companies involved in the implementation of such schemes.

The WDB would encourage government to introduce tax incentives to employers issuing food vouchers. She outlined the benefits of using the tax system as follows:
- it makes use of the private sector's employer/employee infrastructure
- it offers an opportunity to draw the business sector into the scheme
- in using the relatively sophisticated remuneration tax environment, a further level of control against abuse is added.

What about the unemployed?
Ms Slabbert pointed out that low income workers form the backbone of an informal social security system. The unemployed can benefit in the following way:
- the tax incentive to businesses can be extended beyond their own employees as part of their charitable contribution to society
- by assisting the low paid and their dependants through a public-private partnership, government frees up its own resources to assist the "deep level" unemployed.

Pensioners could receive benefits that are specifically targeted to their needs such as food, rent, electricity. They could receive and pay for these services using a smart card at one service point. Secure card delivery ensures reduced risk of being preyed upon and a more efficient way of being paid.

Conclusion
Ms Slabbert urged the committee to appoint a delegation to visit Brazil to research on how the system works in that country. To finish off, she invited the South African government officials to make a statement of firm interest that the project merits further study.

Discussion
Ms M Maunye (ANC) commended the scheme as a helpful tool in poverty alleviation programme. However she was dissatisfied with how the scheme will address unemployment in South Africa. South Africa has the highest rate of unemployment and in some cases the whole family is unemployed. How will people benefit from the scheme if no one in the family is employed?

She asked how would WDB categorise and define a "family" because in traditional African society, a family is more than a nuclear family but also includes extended families. She also wanted to know how the system would be administered.

Ms Slabbert replied that the scheme is not expected to be a cure for all the unemployment problems in the country. It will only address problems relating to poor households who do have income earners. The system could be used by the government as a stepping stone in addressing serious unemployment problems. She pointed out that the scheme could also be used in extended families and not only in nuclear families.

In regard to scheme administration, she said once a tax incentive is granted, any company that wishes to administer the scheme would have to approach the employers and offer to administer the scheme on behalf of the employees.

Mr M Masutha (ANC) praised the scheme. He however commented that there could be challenges regarding the scheme's implementation in a country such as South Africa as it currently has poor infrastructure. There could be problems in areas with poor infrastructure and adequate resources would have to be extended to these areas to ensure the effective use of a swipe card.

Dr E Jassat (ANC) outlined his concern about fraud and abuse. He drew a parallel to the abuse that has occurred in medical aid schemes and asked if there was any potential for abuse of the scheme. He praised the system for its potential to prevent smart card holders from buying substances other than food such as alcohol and tobacco.

Ms Slabbert replied that there would be very limited potential for abuse with the smart card in comparison with its food voucher counterpart. This is the reason behind the graduated changeover from a food voucher system to a smart card system that has been taking place in Brazil.

Ms S Rajbally (MF) also praised the system but denounced it for its potential failure to prevent card holders from buying fruit or vegetables from a vendor who sells across the street, and who does not operate the system.

Mr Masutha asked about the form of identification that will be used for a user.

Ms Slabbert replied that this could be achieved by properly encoding the smart cards so that the user can be properly identified.

The meeting was adjourned.

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