In its latest Poverty and Shared Prosperity Report for 2022, the World Bank cited two South African examples of how digitisation can improve the efficiency of fiscal administration. Fingerprint-based biometrics have improved the social grant system and saved $65m annually, while tax compliance costs have been reduced with e-filing process for small and medium enterprises. Improved use of technology and data continues to show benefits for developing economies around the world, thereby improving governance systems which in turn can lead to reducing poverty and increasing shared prosperity.
For three straight decades until the COVID pandemic, poverty had been steadily decreasing around the world, with more than 1 billion being uplifted out of extreme poverty during that period. This progress came to a grinding halt with lockdowns, restricted trade and limited economic activity from 2020, compounded by rising food and energy prices as well as climate shocks and global conflict, particularly among the world’s biggest food producers. In his foreword to the report, World Bank President David Malpass acknowledges that the “global goal of ending extreme poverty by 2030 would not be achieved”.
Half the world live on less than $7 per day and nearly 7% of the world’s population live on less than $2 per day, with most of these in Africa. Global median income has also declined due to COVID with the poorest suffering disproportionate setbacks in education and health, with massive learning losses and shortened lifespans. The report provides the first comprehensive look at the landscape of poverty in the aftermath of an extraordinary series of shocks to the global economy. These setbacks, if left unaddressed by policy action, will have lasting consequences for people’s lifetime income prospects and for development more broadly.
Digitisation is cited in the report as a means of improving fiscal discipline in developing nations and thereby achieving the much needed progress to get the world back on the road to recovery. With limited resources and record debt levels, most nations are looking to accelerate such improvements in governance and South Africa’s social grants system and tax processes are highlighted as examples of this progress.
According to the report; “Use of fingerprint-based biometric automated teller machines enabled the South African government to identify and remove the 650,000 social grants being delivered to noneligible citizens, saving it US$65 million annually. This system also ensures that payments cease even when an individual’s death is not registered. Recipients must confirm their participation in the program through monthly fingerprint verification or voice recognition.”
In comparison with a number of other countries that attempted improved tax filing systems, the report highlights the success of South Africa’s e-filing system in saving time and money. “E-filing replaced paper filing for VAT and employment taxes, tax compliance costs (TCC) for small and medium enterprises fell, on average, by 22.4 percent and hours spent on tax compliance fell by 21.8 percent from 2006 to 2008.”
Both these examples demonstrate effective and efficient digital transformation strategies to strengthen governance with improved processes, data quality and save time for citizens and businesses. These are critical for recovery in a post-pandemic world as we all chart a course back to pre-COVID levels of poverty reduction and sustainable shared prosperity.
