SOCIAL GRANTS AND THE SOCIAL FABRIC
This brief looks at the importance of social grants in sustaining the social fabric.
In light of the current controversies about the administration of social grants beyond the end of March 2017, it is appropriate to ask the question: how important are these grants in sustaining the social fabric?. The simple (and correct) answer is: very, and the importance has increased over time. Releasing the results of the 2015 General Households Survey (“GHS”), Statistics South Africa pointed out that the percentage of individuals that benefited from social grants increased from 12,7% in 2003 to 30,1% in 2015, and that the percentage of households that received at least one grant increased from 29,9% in 2003 to 45,5% in 2015. In November 2016, 17 208 268 grants were made, including 12 040 467 child support grants and 3 266 869 older persons grants. The 2016/17 allocation to social grants is R 139 billion, 9.6% of consolidated government expenditure and 3.2% of GDP.
This brief seeks to go beyond the broad outline above. It poses and answers the following questions:
1. How many households depend on social grants, and where do they live?
Out of a total of 16 121 989 households, 1 915 435 depend solely on social grants and a further 1 543 244 depend mainly on them. A further 3 924 400 receive at least one grant, but are not solely or mainly dependent on grants. Over 70% of households in tribal areas receive one or more grants, and over 40% of households receiving grants live in tribal areas.
2. How many people receiving grants are entitled to them? How many are not? How many people not receiving grants are entitled to them?
Table 2 presents the information derived from the GHS. It must be interpreted with caution. There are several caveats:
• The income taken into account includes only income from employment - Appendix 2 contains details of the relevant means tests that are involved in this regard. No information on income from other sources is recorded in the GHS. Accordingly, more people may be excluded from eligibility on income grounds than indicated in Table 2.
• In the cases of the older persons grant, the disability grant and the war veterans grant, there is an asset test as well as an income test. In April 2015, the asset ceiling was set at R 930 600 for a single person and R 1 861 200 for a married couple, excluding the value of an owned property in which the applicants reside. No information on the value of assets was recorded in the GHS. Accordingly, more people may be excluded from eligibility on asset value grounds than indicated in Table 2.
• Ordinarily people are legally required to furnish information required by Statistics South Africa in surveys and censuses. There are some exceptions to this rule. No-one is required to declare their religious affiliation, for example. More importantly for this analysis, no-one is required to declare their income, though a majority supply the information voluntarily. But there is a substantial minority who do not, and their status in respect of a means test is therefore unknown. This accounts for the “cannot tell” column in Table 2.
• It is assumed that all people receiving war veterans grants are in fact water veterans and that all children in respect of whom a foster care grants are paid are in fact foster children.
• The disability grant poses special problems. The GHS specifies that a person is disabled if he has some difficulty in doing, one or more of the following: seeing (even with glasses if worn), hearing (even with a hearing aid if worn), walking a kilometre or climbing a flight of steps, remembering or concentrating, or communicating (understanding others or being understood by others). A person is severely disabled if he has a lot of difficulty in doing, or is unable to do, any activity on the list. A disability grant may be granted on a permanent basis or on a temporary basis, the latter when there is a prospect of recovery from the disability.
A person is counted as receiving a disability grant and eligible to receive it if (a) he is disabled or severely disabled and (b) is receiving a permanent disability grant and (c) meets the requirement of the means test. A person is counted as receiving a disability grant and ineligible to receive it if (a) he is neither disabled nor severely disabled or does not meet the requirements of the means test, and (b) is receiving a permanent disability grant. A person is put into the “cannot tell” category if he is receiving a temporary disability grant or if it is not known whether the grant is permanent or temporary, since the GHS contains no information on temporary disability. Finally, a person not receiving a disability grant is regarded as being eligible for one if he has a severe disability.
For these reasons, Table 2 should be regarded as an approximation only. Not all information from a survey is entirely accurate, and tests applied on the basis of survey data are not a perfect substitute for means testing on the ground. Nonetheless, Table 2 indicated that 19% of grants are paid to people ineligible for them, with the status of a further 6% of grants unknown. And the number of grants which would be paid if there were 100% take up would be 25% higher than the number actually paid.
3. How effective are social grants in lifting households out of poverty?
The first thing needed is a poverty line. The World Bank offers two: the lower set at US $1.90 per person per day in 2011 purchasing power parity dollars and the higher set at US$ 3.10. The higher poverty line will be used in this analysis. It comes to R 550 per person per month in 2015 prices.
The second step is to work out poverty lines for each household in the survey, these being calculated as R 550 multiplied by the number of people in the household.
The third step is to add up earnings in each household and compare the total with the household poverty line. This determines whether the household is in poverty before grants or not.
The fourth step is to calculate the income from all grants received by each household. Table 3 sets out the value of grants as set in April 2015.
Note that, with the exception of the child support grant, all grants are more than sufficient to lift the people in respect of whom they are paid out of poverty even if they have no other income.
The income from all grants received by each household is added to the earnings of that household and the total is compared with the household poverty line. This determines whether the household is in poverty after grants or not.
Table 4 sets out the results of the comparisons.
The good news from Table 4 is that 1 828 173 households are lifted out of poverty by social grants, and that a further 2 684 584 households have their incomes improved, even though they remain below the poverty line.
Table 4 raises two further questions.
4 Why do non-poor households have their incomes raised by social grants?
Table 4 indicates that 2 817 192 households have their incomes increased by social grants even though they were not poor before grants. One of the reasons for this is that means tests are not aligned to a poverty line. Another is more subtle: the means tests are not applied to households as a whole, but to sub-units within households.
An example will make the second point clearer. Consider a six person household (which needs R 3 300 per month to be non-poor), composed as follows:
A and B are both over the age of 60 and under the age of 75. They are married to each other and they have both stopped working. They have two unmarried children between the ages of 18 and 59 living with them. C, a man, is employed and earns R 3 500 per month. D, a woman, is not employed and looks after her two children E and F, who are both under the age of 18.
The household is not poor before grants, because C’s earnings are higher than the household poverty line. But the household qualifies for two older persons grants for A and B, and two child support grants for E and F. The total grant income is 2 x 1410 + 2 x 330 = R 3 480 per month. The household ends up with an after grant income of R 6 980 per month.
One might consider adding a means test applying to the household as a whole, rather than to sub-units as a whole. The existing means tests would be maintained, but there would be a further means test applied to the household as a whole, based on a per capita poverty line determined by the government. This change would be radical. It would reduce the number of grants paid, creating the space for a rebalancing of grant sizes to increase poverty reduction. An unintended consequence might be a change the structure and composition of households.
5 What are the characteristics of poor households before grants which (a) receive no grants or (b) receive grants which do not pull them out of poverty?
Table 5 sets out the distribution of household characteristics across five categories of household:
• All households
• All households, poor before grants
• Households, poor before grants receiving no grants
• Households, poor before grants, receiving grants and poor after grants
• Households, poor before grants and non-poor after grants.
Table 5 can be interpreted as follows:
• Average household size varies across the categories. In particular, it is smaller than average in poor households which receive no grants and larger than average in poor households which receive grants, but remain poor after receiving them. The non-poor households receiving grants are on average considerably larger than non-poor households not receiving grants.
• The dependency ratio (the number of children and old people per 100 adults) varies across the categories. In particular, it is low among poor households who receive no grants, indicating a relative scarcity of old people and children who might attract them. It is high among the poor before grant and poor after grants, with marked preponderance of children among dependents. It is higher still among the poor before grants and non-poor after grants, but in this case the proportion of old people among dependents is considerably higher. Old people are more desirable dependents because they bring in much larger grants than children. The dependency ratio is particularly low among non-poor households not receiving grants.
• There are missed opportunities for grants in all categories, particularly among the poor who receive no grants.
• Relative to the distribution of all households across geographical types, the poor before grants are underrepresented in metros and overrepresented in tribal areas, and likewise the poor before and poor after grants, relative to the distribution of poor households before grants. Non-poor households not receiving grants are overrepresented in metros and underrepresented in tribal areas.
Two conclusions can be simply stated:
1. The social grant system is certainly improving many lives, but it could do better with the same resources.
2. If you are poor, look after your old people. They may well be a route out of poverty. As others have noticed, the older persons grant buys social inclusion for the old.
Head of Research
 The eligibility criteria for the various social grants are summarized in Appendix 2.
 Statistics South Africa, General Household Survey 2015, Statistical Release P0318, 2 June 2016
 As adjusted by the Medium Term Budget Policy Statement in October 2016
 All data in this section come from the 2015 GHS. A comparison of GHS estimated with SA Social Security Agency and Treasury statistics in contained in Appendix 1.
The table below compares the number of grants according to the GHS, Social Security Agency statistics for June 2015 and Treasury expenditure estimates. The agreement is generally good, though the distribution of the three child grants in the GHS leaves a little to be desired.
Appendix 2 – Eligibility requirements for social grants
All grants. Must be a South African citizen, permanent resident or refugee and eligible persons (and applicants, where different) must reside in South Africa.
Older persons grant. Must have passed 60th birthday, must not be maintained or cared for in an institution funded by the state, must not be in receipt of another social grant. A means test is applied, and the size of the grant may be reduced as a result, or a person may be denied a grant altogether.
War veterans grant. Must have passed 60th birthday or be disabled, must have fought in the Second World War or the Korean war, must not be maintained or cared for in an institution funded by the state, must not be in receipt of another social grant. A means test is applied, and the size of the grant may be reduced as a result, or a person may be denied a grant altogether.
Disability grant. Must be between 18 and 59, must have medical report confirming disability, must not be maintained or cared for in an institution funded by the state, must not be in receipt of another social grant. A means test is applied, and the size of the grant may be reduced as a result, or a person may be denied a grant altogether.
Care dependency grant. Payable to support a child under the age of 18, must have medical report confirming permanent severe disability, must not be maintained or cared for in an institution funded by the state. A means test is applied to the applicant and spouse, if any.
Child support grant. Payable to support a child under the age of 18, who must not be maintained or cared for in an institution funded by the state. The applicant must be the primary care giver of the child, and no applicant can apply for support for more than six non-biological children. A means test is applied to the applicant and spouse, if any.
Foster care grant. Payable to support a child under the age of 18 in foster care. A court order confirming is needed, and the child must remain in foster care. No means test is applied.
Grant in aid. The person must be in receipt of an older persons grant, a war veterans grant or a disability grant, must require full-time attendance by another person because of mental of physical disability, must not be maintained or cared for in an institution funded by the state.
Means tests. Single persons are excluded from the older persons grant, the war veterans grant and the disability grant if their other income exceeds R 69 000 per annum, and married persons if other income received by both partners exceeds R 138 000 per annum. Single applicants are excluded from the care dependency grant if their other income exceeds R180 000 per annum, and married persons if other income received by both partners exceeds R 360 000 per annum. Single applicants are excluded from the child support grant if their other income exceeds R42 000 per annum, and married persons if other income received by both partners exceeds R 84 000 per annum.
In the cases of the older persons grant, the war veterans grant and the disability grant, the grant size degresses linearly from the maximum to zero as other income increase beyond R 27 000 per year. Or they are supposed to. In practice, means tests are hard to apply when there is an implicit tax on increasing income and it seems from the pattern of expenditure that very little degression takes place, so that people who receive one of these grants is likely to receive the maximum sum. This is the assumption in the analysis.