Conditional Cash Transfers in South Africa

Social Security in South Africa: Cash Transfers All grants are means tested (targeted) – All social grants are payable subject to the assets and income of the applicant and, if applicable, the spouse. – There is a pre – determined formula to assess the amount of grant payable (sliding scale) – Assets are defined as possessions owned by a person and income is defined as money earned or received for work rendered.

Social Security in South Africa: Cash Transfers Means Tests for Old Age, War Veterans and Disability Grants – Single Person Assets must not exceed R The total annual income of the applicant, after all permissible deductions must not exceed R per annum. – Married Person Assets must not exceed R The total annual income of the applicant, after all permissible deductions must not exceed R per annum. A residential dwelling is a example of a asset, however the property is not taken into consideration if the applicant resides on the property. This asset is taken into consideration if the applicant leases the property and derives an income Value of each of these Grants is R820 per month

Social Security in South Africa: Cash Transfers Means tests for Children’s Grants – Foster Care Grants The annual income of the foster child must not exceed twice the annual foster child grant amount payable. The Cut Off Level for the grant is – R590 x 12 x 2 x R The incomes of a foster parent/parents are not taken into consideration. Value of this Grant is R590 per month

Social Security in South Africa: Cash Transfers Means tests for Children’s Grants – Care Dependency Grant The combined annual income of the applicant and spouse after all permissible deductions must not exceed R The annual income of the care dependency child must not exceed twice the annual care dependency grant payable. Income of the foster parent of a care dependant child is not taken into consideration Value of this Grant is R820 per month

Social Security in South Africa: Cash Transfers Means Test for Children’s Grants – Child Support Grant (CSG) A primary care giver qualifies if both the child and the primary care giver – Live in a rural area in an informal dwelling and the personal income is below R – Live in rural area in a formal dwelling and the personal income is below R – Live in an urban area in a formal dwelling and the personal income is below R9600 per annum – this is only applicable to a person living in an a brick/concrete or asbestos house The value of the grant is R190 per month

Service Delivery Success

The “10 Year Review” research commissioned by the SA government found that: –the Social grants are no longer allocated on a racial basis as they were under the apartheid system –beneficiaries of social grants increased from 2.6 million in 1994 to 10.9 million in March 2006 –the Social Security system, after it was decentralized, was the key anti-poverty driver between 1995 and 2004

Service Delivery Success Without social grants, 58 per cent of households would fall below the subsistence line, as opposed to the current figure of about 53 per cent State transfers contribute to two-thirds of the income earned by households in the poorest quintile Even with full take-up of existing grants, over half the population, 21.9 million people, would remain below the poverty line Source: “Breaking the Poverty Trap – Financing A Basic Income Grant in South Africa”, BIG Financing Reference Group, March 2004.

Service Delivery Success Source: National and Provincial Departments of Social Development and National Treasury

Service Delivery Success Source: Fiscal Incidence Study, 2005 – S. v.d. Berg, I. Woolard and C. Simkins

Service Delivery Success The Fiscal Incidence Study of 2005 shows: –That SA’s social grants are highly targeted towards the poor, which is unique in its size and reach for a developing country –The 1995 social grant concentration curve is better targeted towards to poorest 20% of the population than in 2000 –However the CSG in 2000 only targeted 0-6 year olds and has subsequently been rolled out in - a phased approach - to children under the age of 14

Service Delivery Success The Fiscal Incidence Study of 2005 shows (cont.): –The social grant concentration index is well targeted at in 2000 (and in 1995) due to: poorer households derive their income from grants (almost exclusively) the means test is geared to target only poorer segments of the population, however the old age pension is does cover a larger proportion of the elderly population there is little stigma attached to grant receipts in South Africa, particularly for old age pensions

Service Delivery Success The Fiscal Incidence Study of 2005 shows (cont): –That SA’s social grants are highly targeted towards the poor, which is unique in its size and reach for a developing country –The social grant concentration index is in 2000 compared to poorer households derive their income from grants (almost exclusively) means test operates to target grants only to poorer segments of the population, although social old-age pensions do cover a very large proportion of the elderly population.

Service Delivery Success Why is grant expenditure in 1995 better targeted to the poorest 20% of the population than in 2000, despite good targeting results? –The introduction of the CSG could have led to an initial weakening of the target –Many CSG recipients live in households with some other income, while pensioners reside in households with no other income –The CSG means test is difficult to implement, as it has to be very finely

Service Delivery Success

Strengths and weaknesses of the current system Source: Servaas v.d. Berg – An Analysis of Fiscal Incidence sp Strengths –11 million grants paid on a monthly basis, with over 8 million beneficiaries –Positive impact on poverty –Pro-poor and have contributed towards poverty directly –well targeted to address the needs of the poor especially those in quintiles 2 and 3

Strengths and weaknesses of the current system Weaknesses –Despite being well-targeted, grants don’t adequately address the needs of the poorest 20% of the population –There is no income support to unemployed individuals – unemployment insurance provides temporary relief on a contributory basis – this puts tremendous pressure on the disability grant –Government services and systems are uncoordinated and independent of each other; policies, programmes and regulations are often contradictory or create perverse incentives

Strengths and weaknesses of the current system Weaknesses –Government services and systems are uncoordinated and independent of each other, even when interaction is required –Government policies, programmes and regulations are often contradictory or create perverse incentives –High levels of fraud and corruption due to poor verification systems with other key government departments

Policy Gaps and the Way Forward Universal versus targeted/conditional cash transfers? Tremendous pressure for a Basic Income Grant due to high unemployment levels? Conditional cash transfers linked to employment creation programmes (and skills development) Individual versus family grants? Family grants could address the needs of households in a more wholistic manner, while still investing in human capital

Policy Gaps Government offers numerous services to children but these are not coordinated – is CCT the way to go in South Africa, linking ECD, free primary health care, access to the school nutrition programme? This is a critical area that needs to be addressed without being punitive –The Human Science Research Council is piloting a CCT study in the Kwa Zulu Natal linking the CSG to ECD and free primary health