Big firms reap pandemic funds, the poor miss out

Developing countries have used most of their Covid-19 recovery funds to bail out big businesses, neglecting millions of people who have been pushed into poverty.

These include cash-in-hand workers, women and the disabled, a study has revealed.

In eight countries, an average of 63 per cent of pandemic-related state aid went to big businesses, while 26 per cent went to social protection schemes, 10 per cent to small and medium-sized enterprises, and only one per cent to informal sector workers.

The findings by the Financial Transparency Coalition civil society group were based on spending in Kenya, South Africa, Sierra Leone, Bangladesh, Nepal, Honduras, Guatemala and El Salvador.

India was analysed separately because of government changes to the definition of a small business during the pandemic.

“By the end of 2021, some 150 million people are expected to fall into extreme poverty due to the pandemic,” the FTC’s director, Matti Kohonen, said in a statement.

“(But) those most impacted by this crisis in the Global South – the poor, informal workers, and smaller businesses – are being left out,” he said as the group called for tax hikes on big companies and the rich to tackle growing inequality.

Covid-19 has unleashed an economic storm that has hit the poor and vulnerable hardest, with women and marginalised workers facing the worst of job losses. The World Bank warns that up to 150 million people are at risk of living on less than Sh215 ($1.90) a day.

The latest estimates by the International Monetary Fund show the world economy shrunk by 3.3 per cent in 2020, and numerous studies have detailed how the crisis has exacerbated economic inequalities.

In Africa, Kenya allocated 92 per cent of its pandemic-related funds to corporations, followed by Sierra Leone with 74 per cent, according to the FTC research. India dedicated 38 per cent of the aid to welfare schemes, a share that reached 32 per cent in South Africa.

Despite making up most of the workforce in all nine countries, informal workers got just two per cent of state aid on average. In Bangladesh, where cash-in-hand workers represent 85 per cent of the labour force, they were allocated nothing, as was also the case in South Africa, Nepal and Honduras.

Other vulnerable groups such as women, the disabled and the elderly fared even worse, receiving less than one per cent.

Chenai Mukumba, research manager at Tax Justice Network Africa, an FTC member, said the allocations given to corporates were disproportionate and did not always prevent job losses.

“Once you’ve given these resources to corporates, you have no control whether it’s going to support their workers and save jobs or elsewhere, and we often don’t see the trickle-down effect,” Mukumba said.  

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