Safety nets in high poverty environments and the role of the family

I was twenty-seven years old at the time, still new to Africa and asked James why he could not politely refuse. He looked at me, clearly taken aback by such ignorance and simply stated: “he is my father’s brother. I cannot refuse him.” He added that he hadn’t seen his uncle for years, that his uncle did not support him during his studies but that he could not deny him. It was clear that James felt treated unfairly but was powerless in the face of a system that just was what it was. I learnt a thing or two that day about the role of (extended) family and social support networks in a high-poverty society, as I did over the many years that followed:

1. Social security is not provided by the state but through family.
2. Short term loyalty towards the family often prevails over long term interest in the employment relationship. Pressure on an employee from family members can be high to provide a solution for a hospital bill, payment for the education of a talented child in the family or to pay for a funeral or wedding. Sometimes, as seems to have been the case of James, this sort of pressure can be malicious too. The pressure can become so high that staff sees no other option than to come up with a “solution” at the expense of their employer and the risk of losing their job.
3. The more you earn, the more people you are expected to support. This means that these pressures do not get less as someone climbs the hierarchy ladder in a company and starts to earn more: it gets worse.

Our top five measures for providing some level of safety

I do not know what it is to be poor or to face such pressures myself: I tick a lot of the privilege boxes. I do think that over time I’ve developed some level of understanding that has helped me to formulate some actions that an employer in a high-poverty environment can take to support their staff in dealing with this. Here’s my top five:

1.  Provide short term company loans and salary advances or work with a financial institution to provide this. Most of the time, the problem is not money itself but cashflow. People have small buffers, and an adverse event can cause immediate cash problems.
2. Provide third party insurance. This is a space that has grown rapidly the last few years and has become feasible to offer to employees. Different insurers offer low price point (subsidized) packages that cover health, accident and death insurance, including for family members.
3. Where insurance is not feasible for whatever reason, provide it through the business. We came up with a “make-a-wish” fund, where the company put in a fixed amount per month and staff can, you guessed it…, make a wish. We put a staff committee in charge of the fund, and they could either donate or lend money from the fund for the fulfilment of any wishes. I only retained a veto right on any disbursement decisions. Such a solution allows the coverage of a wide range of risks like an event that makes a house inhabitable, an operation to improve a child’s quality of life or the donation of milk formula to a father of twins whose wife died in childbirth. These are actual examples that were funded in this case.
4. Increased frequency of payments. Most of the time, employees are paid monthly. For those at the lower levels of salary within your organization you could consider paying (part) weekly. It brings in a steadier flow of cash and earlier than payment at the end of the month. This can tackle a lot of the small expense issues that your staff may be facing. It also prevents the family from going hungry in case the entire salary was used just after payday to settle some problem or for alcohol, as we unfortunately also had to deal with.
5. Stimulate entrepreneurship. Together with the make-a-wish fund, this is my favourite. Almost anyone that we employed for a year or two had developed a side-hustle. The income from working as an employee served as starting capital for a micro business: making soap, trading clothes, selling snacks, raising chickens or rabbits, catering for parties over the weekend, renting out a small property, etc.

As an employer you can actively encourage micro businesses. Loans as discussed under point one can play a big enabling role. I also always made time to exchange with staff about their business plans and answer any questions they might have, play the role of a business coach if you will. The beauty of this is not just that the micro-business brings in additional revenue but that it also creates (informal) employment for family members of your staff: quite often the catering stall is operated by a sibling or cousin without employment. So, the resilience of the family goes up and the pressure on your staff to serve as a social safety net goes down. Spill over effects everywhere and everyone wins.

One more example

My favourite example of the last point, encouraging entrepreneurship, is the housekeeper that we employed during our early years. She was 19, had missed a few years in school and we encouraged her to continue studying and paid for her fees. She did very well but faced a terrible situation when her exam papers “disappeared”. What she (and her regular teacher) suspected that happened was that they were sold by the examinator to someone who paid for a pass. Discouraged, she did not want to wait another year to sit exams. She asked us for a business loan to go and buy blankets in South Africa and resell them in Zambia. We went through the numbers with her, challenged a few assumptions here and there (as with any excited entrepreneur, profit expectations were a bit on the high side) and lent her the money she asked for. She repaid, asked for a new loan, and kept repeating this, also after she had left our employment. Long story short, now more than ten years later, she is still successfully running her trading business and supporting her family through the income she generates through this activity.

The other side of the coin

The last two articles we wrote were about locking down your business and the ruthless elimination of opportunity for theft: identifying risks, iron cladding your business processes so that you can bring staff integrity problems to manageable proportions. This article is about the other side of the coin: the heart for people and equipping them with the tools to better face the pressures of life and something that resembles a safety net in case it’s needed. In our opinion, one cannot function without the other.

If you’d like to discuss how we can help your business improve its results, contact us.