South Africa’s Economic Reconstruction and Recovery Plan was launched in October 2020 by the Presidency in response to the economic impacts of the Covid-19 pandemic. Besides the Presidential Employment Stimulus program, it included emergency social protection measures, among which the introduction of a special Covid-19 Social Relief of Distress grant (SRD), providing ZAR350 per month for unemployed people not covered by any other form of support. The South African government now seeks to develop options for the future of SRD grant.

Find out more about the Extension in South Africa

The objective of this research project is to produce motivated recommendations on how the SRD should be designed going forward into the longer term, in order to maximize the impact of the grant on employment outcomes and to ensure it effectively reduces poverty, while maintaining its cost to an acceptable level:

1. To maximise the impact of the grant on employment, the project needs to understand how to design and label the grant to encourage its use for job search.
2. To ensure the grant effectively reduces poverty, the project must figure out the most cost-effective way to target and assess the eligibility of recipients. Moreover, poverty reductions can be scaled up by determining measures that could encourage take up among the most disadvantaged. 

Once these goals have been achieved, and in order to inform public decision-making, these findings must be communicated to a number of stakeholders in government and civil society.

This project is part of a wider research program conducted with several South African research centres and in close collaboration with the South African Presidency. Four other research projects analysing the externalities of the Covid-19 stimulus policy are currently being developed as part of the first pillar of the Extension's activities in South Africa.

This research project uses the model generated to conduct the 2014/2015 fiscal incidence assessment and introduces updated data for 2019-2021. It simulates five scenarios around eligibility criteria, targeting mechanisms, value, disbursement model and conditionalities and computes the potential impact on poverty and employment outcomes.

You will find below the research paper related to this project: 

• Proposal for the extension, redesign and repurposing of the SRD for the goal of poverty reduction

• Anda David, AFD Research Officer

Labour market panel surveys (LMPS) are household surveys that allow to observe the evolution of labour market dynamics by following the same individuals over several years. Conducted in Egypt in 1998, 2006, 2012 and 2018, these surveys have become the focus of research on the labour market, human development, migration, the (de)composition of families and social protection. They make it possible to analyse the impacts of the various tax and monetary reforms undertaken in the country. The data also sheds light on the opportunities and challenges women face in the labour market. 

This research partnership supports the implementation of the fifth wave of the ELMPS survey in Egypt by providing co-financing dedicated to data collection and dissemination. The objective of this collaboration is to support the production of the wave, as well as presentation chapters of this wave, four of which will be published as research papers to deepen knowledge on the Egyptian labour market. Particular attention will be paid to the analysis of the labour market situation in Egypt following the Covid-19 pandemic, thus providing relevant insights in this post-pandemic context.

The new ELMPS 2023 wave is largely based on the questionnaire of the 2018 ELMPS survey, which addressed issues such as demography, employment, income, migration and well-being. 

This edition differs from previous editions in several ways:

• It incorporates questions dedicated to assessing the impact of the Covid-19 pandemic;
• It broadens its coverage by including new components, such as the digital economy (gig economy) and employment measurement in the emerging green and circular economy sectors;
• It provides for a skills-based module, with the inclusion of a wider variety of skills, which will assess the extent to which workers' skills match the needs of the labour market.

These improvements are intended to ensure more comprehensive and representative data, thus providing a solid foundation for informed public policy development.

The ELMPS 2023 database will be made available on the ERF website. 

Research papers will focus specifically on:

• The role of internal migration in territorial dynamics; 
• The evolution of the insurance system and its coverage; 
• Technology in the labour market and its use; 
• The green economy and the labour market. 

A book will be published covering the themes of 1) labour supply; 2) employment structure; 3) inequalities; 4) mismatch between labour supply and demand; 5) gender and occupational segregation; 6) international migration; 7) social protection; 8) technology in the workplace; 9) green economy; 10) small and medium-sized enterprises (SMEs); 11) care activities (paid and unpaid); 12) food security and resilience to shocks.

Contacts: 

• Dr. Cecilia Poggi, Research Officer, AFD
• Prof. Ragui Assaad, Humphrey School of Public Affairs, University of Minnesota

The ecological transition is a unique type of structural change: green industries grow while greenhouse gas-intensive and non-green industries decline. This complex process affects the productive, trade and financial structure of national economies, which can generate transition risks. 

These risks arise from the dependence of economies on high greenhouse gas emitting industries, which constrains their low-carbon transition: 

• External risk: if a country depends on greenhouse gas-intensive industries as a source of foreign exchange, the transition will affect its balance of payments and the country's ability to import goods and services (including the machinery and inputs needed for the transition);
• Fiscal risk: if a country relies on emission-intensive industries as a source of tax revenue, the transition will reduce its budgetary resources, which are needed for public investments relevant to the transition (green infrastructure, social spending...);
• Socio-economic risk: if a country relies on emission-intensive industries as a source of employment, the transition will lead to the destruction of jobs in certain sectors, making targeted measures necessary (social protection, training, etc.).

However, not all countries are equal in the face of the ecological transition: they are affected differently by these changes, depending on the structure of their economy and their trade relations with other economies. 

The ESTEEM model has been developed to identify and better understand these risks, so as to be able to define the most appropriate trajectory for each country.

The ESTEEM macroeconomic model is a tool developed by AFD to understand countries' transition trajectories, in order to:

• Assess the extent to which their economy is exposed to risks of imbalances in the context of a green transition, by identifying the main macroeconomic constraints that may emerge and how they can be addressed to ensure an adequate transition path;
• Take into account the ecological and environmental specificities of countries, as they are more or less exposed to transition risks depending on the structure of their economy.

The research paper "Developing countries' macroeconomic exposure to the low-carbon transition" presents the methodology for assessing countries' exposure to external, fiscal and socio-economic risks. Based on their capacity to adapt their productive structure, it analyses countries' vulnerabilities and risks in these three dimensions. Using an environmental input-output table for 189 countries, it identifies carbon-intensive industries and then estimates each country's direct and indirect dependence on these industries.

Besides the above research paper, which provides a comprehensive analysis, other studies have been developed. The paper "Impacts of CBAM on EU trade partners: consequences for developing countries", for example, uses the ESTEEM model to analyse the impact of the border carbon adjustment mechanism (CBAM) on the European Union's (EU) trade partners. While most analyses of CBAM have focused on the consequences for EU economies, this research paper focuses on developing and emerging economies.

In addition, AFD is conducting ESTEEM projects in Uzbekistan and Vietnam, in which the ESTEEM model is used to provide the authorities of these two countries with an analysis of the macroeconomic impacts of their low-carbon transition. 

Finally, based on the original ESTEEM project, other studies are being developed: 

• ESTEEM-Biodiv seeks to understand the risks linked to ecological dimensions other than dependence on carbon-intensive industries (water stress, excessive land use, pollution, etc.);
• ESTEEM-Dynamic, which started in 2022, seeks to understand how the systemic impacts of a transition vary according to the trajectory or scenario selected. This new model, which is dynamic, does not take economic structures as given: by allowing certain variables to be modified, it makes it possible to assess which are the most appropriate paths to follow in order to reduce the risks of transition and ensure the effectiveness of a transition.

The studies show that, depending on the structure of their economy, their budgetary leeway and the robustness of their social protection system, countries are more or less exposed to the risks and vulnerabilities generated by a transition to a low-carbon economy. The ESTEEM model, by making it possible to identify these risks, helps to anticipate them in order to promote the success of the transition.

The interest of the national applications of ESTEEM – currently in Uzbekistan and Vietnam – is to provide an analysis taking into account the specificities of each country:

• Uzbekistan: although Uzbekistan does not rely much on declining industries, the Uzbek economy is a high emitter of greenhouse gases in key transition sectors, such as electricity and construction. This means that decoupling trajectories requires productive and technological capacity building actions to ensure an adequate transition trajectory, leading to job creation and avoiding fiscal and external imbalances.
• Vietnam: the analysis shows that Vietnam is a highly exposed economy at socio-economic level, particularly because high-paying jobs are located in declining industries. Furthermore, the analysis of the different climate scenarios shows that the economy is very exposed because the country's agriculture will be strongly impacted. Nevertheless, Vietnam is also a very dynamic economy with a strong capacity to migrate to green products, which can contribute to the success of the transition.

Find out more: 

• Developing countries' macroeconomic exposure to the low-carbon transition (AFD Research Papers, October 2021)
• Low-carbon transition: What macroeconomic vulnerabilities for developing countries? (Research Conversation webinar, December 2021)
• Low-carbon transition in Latin America: what are the risks and the main constraints? (Development Matters, OECD blog, June 2022)
• Impacts of CBAM on EU trade partners: consequences for developing countries (AFD Research Papers, March 2022)

Since 2020, the COVID-19 pandemic has been testing the employment stability, the production capacity, the food availability as well as social protection systems response capacity in the Middle East and North Africa (MENA) region at an unprecedented scale. Thus, evidence is needed to detail how are countries faring in the short-run of this global event and how are governments responding to alleviate the vulnerabilities faced by household and firms alike.

ERF and AFD have collaborated in a research partnership aimed to provide a platform to answer some pressing questions regarding the impact of COVID-19 on people’s lives and firms’ behaviours, and shed light on the coping mechanisms that have been taken to help them in these tough times. This project was led by Ragui Assaad (University of Minnesota and ERF), Caroline Krafft (St. Catherine University), and Mohamed Ali Marouani (Université Paris1-Panthéon-Sorbonne and ERF). 

Under this collaboration, a call for proposals was launched in 2020 on “The Impact of COVID-19 on Households and Firms in the MENA Region”, with a view to understand the consequences of the social and economic crisis generated by the pandemic. ERF received 53 proposals, and the review process led to the acceptance of 6 proposals selected to use some novel rapid phone surveys for household and firms, to highlight with relevant research questions several dimensions of coping mechanisms and changes experienced in several countries of the MENA region. Six articles and six policy briefs are part of this collaboration.

 

Researchers responding to this call received access to the data of the new ERF COVID-19 MENA Monitor rapid phone surveys, including enterprise survey data (available for download) and household survey data (available for download) for the following countries: Egypt, Morocco, Tunisia and Sudan.

As part of the partnership, four ERF policy briefs describe the data and provide a digest of what the rapid phone surveys describe about the impact of the pandemic on MENA labour markets and firms:

• Krafft, Assad & Marouani (2022), The Impact of COVID-19 on Middle Eastern and North African Labor Markets: Employment Recovering, but Income Losses Persisting 
• Krafft, Assad & Marouani (2021c), The Impact of COVID-19 on Middle Eastern and North African Labor Markets: A Focus on Micro, Small and Medium Enterprises
• Krafft, Assad & Marouani (2021b), The Impact of COVID-19 on Middle Eastern and North African Labor Markets: Glimmers of Progress but Persistent Problems for Vulnerable Workers a Year into the Pandemic
• Krafft, Assad & Marouani (2021a), The Impact of COVID-19 on Middle Eastern and North African Labor Markets: Vulnerable Workers, Small Entrepreneurs, and Farmers Bear the Brunt of the Pandemic in Morocco and Tunisia

The six selected research projects provide a wide variety of evidence in the context of research on the short-term socio-economic effects of the Covid-19 pandemic:

• The first article (by V. Hlasny & S. Al Azzawi) explores the effects of the pandemic on workers’ employment outcomes in Egypt and Jordan. They estimate logit models of workers’ job loss and multinomial logits of workers’ labour market statuses, investigating who has been most affected among the working population. They show the COVID regime stringency having affected negatively employment and labour market participation of most groups of workers – particularly youths, even if they were not disadvantaged pre-COVID. Higher education is associated with the retention of a better employment status, conferring consistently high returns in terms of remaining an economically active individual, or remaining employed, and in formal employment. Workers’ pre-COVID employment status affects their outcomes amid COVID, implying strong employment-status dependence. Those laid off amid COVID come predominantly from among those without (formal) employment pre-pandemic. Between mid-2020 and mid-2021, men’s employment prospects gradually improved, but women faced a stagnation, by being largely excluded from work opportunities. Youths trailed non-youths early during the pandemic, but have caught up during recovery. In sum, youths and women have been affected more adversely than non-youths and men at the height of the pandemic. They face higher risks of getting laid off, and have a harder time returning to work – supporting the ‘last in’ if not the ‘first out’ hypothesis.
• The second article (by Z. El-Sahli & M. Alsamara) investigates the effects of the pandemic on small and medium-sized enterprises (SMEs) in four non-oil-exporting MENA countries (Jordan, Morocco, Tunisia, and Egypt). MENA SMEs resorted to wage and work hours reductions more often than layoffs in the wake of the pandemic. Within SMEs, larger firms are more resilient, recover faster, and adapt more often. At the sectoral level, the accommodation and food services sector is the worst affected in most of its outcomes. There is, however, clear recovery in Q2 2021 (versus Q1) across sectors and countries. Furthermore, SMEs that switch to remote work are less likely to face closures, they recover faster, and adapt more frequently, signalling higher resilience and adaptability. On the other hand, participation in government assistance programs does not improve firm outcomes, whereas firms that participate in international trade are more resilient and adaptable in the face of the shock. 
• The third article (by A. El-Shal, E. Moustafa, N. Rostom & Y. Abdelfattah) looks at social safety nets (SSNs) and emergency transfers from NGOs during the onset of the pandemic, estimating if and to what extent SSNs have mitigated food insecurity in MENA between November 2020–June 2021 in Egypt, Morocco, Jordan and Tunisia. Using a difference-in-differences approach, the authors show that those who received non-usual government support in Tunisia were 15 percentage points (ppts) less likely to be unable to buy their typical amount of food due to price increases than those who did not receive support. No significant effects are observed in Egypt, Jordan, and Morocco. Non-usual social support from non-governmental institutions had greater effect. Individuals who received non-usual support from non-governmental institutions in Morocco and Jordan were, respectively, 22 ppts and 15 ppts less likely to report being unable to buy their typical amount of food due to decreased income. Their estimates also show that government SSNs have mitigated the negative effect of food insecurity on resorting to adverse coping strategies during COVID-19, especially selling assets
• The fourth article (by A. Spinardi, N. Isamiddinova, I. Clavijo & K. Henkens) investigates the associations between factors affecting households during the pandemic, such as food insecurity and gender mental health inequalities in Egypt, Tunisia, Morocco, Jordan, and Sudan. Using data from the World Health Organization (five-question module to measure mental health and well-being) and the ERF COVID-MENA Monitor Household Survey, it inspects gender mental health gap and quantifies the relative contributions of some COVID-19 related shocks and changes on gendered mental health inequality. The results indicate a statistically significant difference in the mental health well-being between men and women, with women’s mental health being significantly poorer than that of men. Women, on average, worry more over the health consequences of the pandemic and the household’s economic situation. They report higher levels of food insecurity in their households, and this variable significantly explains the observed difference in mental health outcomes between genders. 
• The fifth article (by L. Idres & M. Lassassi) analyses the populations’ behaviour toward COVID-19 safety measures in Algeria, Morocco and Tunisia, specifically inspecting which safety measures are observed and what category of people is most likely to observe them. To answer these questions, ERF COVID-MENA Monitor Household Survey are used for Morocco and Tunisia, whilst for Algeria a household survey collected from the Research Center of Applied Economics for Development (CREAD) is used. There are some similarities among the population’s behaviour of these countries, such as the fact that women are found to be those who most observe the safety measures. The educational level also plays a role in determining behaviour, but its impact differs from country to country. Moreover, an ordered probit model is estimated to identify the determinants of the observed safety measures intensity in each country. Women and the elderly mostly comply with the barrier methods, but men and youth are those who use these measures more intensely. Furthermore, a simulation analysis shows that the percentage of Moroccans observing three safety measures converges to 80%, against 59% in Tunisia, and only 5% in Algeria.
• The sixth article (by S. Nour) proposes a country case study for Sudan, using two distinct sources of data. The World Bank and Sudan Central Bureau of Statistics High Frequency COVID-19 Survey (2020) data shows that the impact of COVID-19 on employment status is manifested in a loss of jobs for the majority and nearly two-thirds of households during June - July 2020. The employment loss, the unemployment and even the change of employment of households are mainly explained by the closure of businesses and administrations due to the restrictions applied in response to the pandemic. The impact of COVID-19 is also manifested in loss of income for almost a fifth of households, and reduction of livelihoods or sources of income. The ERF COVID-19 MENA Monitor Household Survey (2021) shows an increase in temporary or permanent layoffs/suspensions of workers, reduced hours, reduced wages, delays in payment of wages for workers and a limited provision of social insurance to workers.

Several recommendations stem from the research questions discussed within this research partnership. These are available for free download from the AFD Policy Dialogue series:

• “Women and Youth labor market outcomes during Covid19: Evidence from Egypt and Jordan”
• “Resilience in the Time of Covid-19: Lessons Learned from MENA SMEs”
• “Social Safety Nets and Food Insecurity in MENA in the Time of Covid-19”
• “Gender and Mental Health: Covid-19 shock-related factors”
• “Populations' behavior analysis toward Covid-19 safety measures: Evidence from Algeria, Morocco and Tunisia”

Contact:

• Cecilia Poggi, AFD Research Officer
• Yasmine Fahim, Director of Research & Programs, ERF