Development Progress

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1 H T U SO CA'S I R F A : Y R STO ial c o ca i r f A South ytem: e g ity ecur ing covera ing d it Expan t and lim lity a n u a r q g e f n o ni i e n increa orga ny M nke n-za e g a eth ca H Jei harle M C with r and Jen Development Progre Development Progre

2 South Africa ocial ecurity ytem: Expanding coverage of grant and limiting increae in inequality Key meage 1. Proviion of ocial grant ha limited the growth of inequality and poverty among the poor in South Africa. 2. Coverage of ocial grant ha increaed ignificantly in the country, from jut over 2 million beneficiarie in 1996/97 to almot 14 million in 2009/ The mot important factor contributing to progre in increaing coverage are trong table leaderhip, change made to the Contitution and the building of new intitution. Social grant are affordable given budgetary prioritiation and the ize of the tax bae coupled with an efficient tax-gathering ytem. Development Progre torie

3 Proviion of ocial grant ha played an important role in limiting the growth of poverty. Summary South Africa i one of the richet African countrie, with per capita gro dometic product (GDP) at $5,678 in 2008, compared with a ub-saharan African mean of $2,055 per capita. 1 However, it i alo one of the mot unequal, and riing aggregate level of income hide tark difference in poverty acro different racial group and growing level of income inequality. The country Gini coefficient tood at 0.70 in 2008, compared with 0.66 in The recent rapid extenion in coverage of ocial grant ha helped to limit thi growth in inequality and the depth of poverty experienced in the country. For example, in 2008, 54% of the population lived below the poverty line, down from 56% in Thi would have been 60% without the ocial grant. 3 Since 1994, the South African government ha attempted to develop a comprehenive approach to poverty and inequality uing a range of intrument and complementary programme. Thee include ocial grant, unemployment inurance, public work programme for the working poor and the ocial wage package, which comprie acce to education, health and other ervice. With it origin in the 1920, but retricted for many year to the white and mixed race population, the ytem ha in the pat 20 year expanded coverage ignificantly acro racial group. The range of intrument deployed ha alo increaed. Coverage of non-contributory ocial grant i now larger than in any other African country, reaching 14 million people (28% of the population) Leibbrandt, M., Woolard, I., Finn, A. and Argent, J. (2009) Trend in South African Income Ditribution and Poverty Since the Fall of Apartheid. Social, Employment and Migration Working Paper 101. Pari: OECD. 3 Ibid. 4 National Treaury (2010) Budget Review RP: 04/2010. Pretoria: National Treaury. 5 SASSA (2009) Annual Report 2008/09. Pretoria: Department of Social Development. 6 National Treaury (2010). 7 Seeking, J. (2002) The Broader Importance of Welfare Reform in South Africa. Social Dynamic (Special Iue: Welfare Reform) 28(2): What ha been achieved? Coverage of ocial grant ha increaed ignificantly in South Africa, from jut over 2 million beneficiarie in 1996/97 to almot 14 million in 2009/10 4 (Figure 1), particularly through extenion of eligibility for the Old Age Grant and the Child Support Grant. In the former cae, the retirement age ha been lowered to 60 for men, to match that of women. In the latter cae, eligibility ha gradually increaed to cover children up to 18, riing from 320,000 grant in 2000 to 9.4 million in 2009/10; thi account for more than 80% of the increae in the total number of ocial grant. Figure 1: Coverage of ocial grant ince 1996/97 5 Million of beneficiarie Old Age Grant War Veteran Grant Diability Grant 1996/ / / / / / / / / / / / /09 Foter Care Grant Care Dependancy Grant Child Support Grant Grant-in-Aid In 2008/09, 69,449 million rand ($8,930 million) wa pent on ocial grant payment (3.2% of GDP). Thi i higher than the ub-saharan African average and alo exceed ocial aitance expenditure a a percentage of GDP for many European countrie. 7 The riing trend in expenditure in real term ha included expanion of the Child Support Grant, increae in the number of beneficiarie a a reult of improved outreach and, very recently, mall increae in the real value of ome grant. It i important to note that targeting i carried out through mean tet and, ince thee are not alway implemented effectively, ome leakage to the non-poor doe occur.

4 Figure 2: Total expenditure on ocial aitance grant between 2003/04 and 2008/09 8 Ran (Million) Figure 3: Pro-poor nature of ocial pending, Cumulative % of pending / pre-tranfer income 69,000 64,000 59,000 54,000 49,000 44,000 39,000 34,000 29, / / /06 Nominal value Real value (in 2000 price) 2006/ / / Cumulative % of population Pre-tranfer income School eduction Tertiary education Health Social aitance Houeing Line of equality Proviion of ocial grant ha played an important role in limiting the growth of poverty, reducing the depth of poverty among the pooret and temming increae in inequality in South Africa. In Figure 3, the dahed line how equal amount going to rich and poor people; anything to the left i pro-poor, meaning more goe to the poor. 8 SASSA (2009). 9 National Treaury, in Samon, M., MacQuene, K. and van Niekerk, I. (2005) Social Grant South Africa. Policy Brief 1. London: ODI. 10 Samon et al. (2005) Figure 3 how that, compared with other intervention to ait the poor (uch a education proviion, houing, health care), ocial aitance (i.e. ocial grant) i the mot pro-poor and benefit the pooret population the mot. Social grant have had a range of poitive outcome with regard to non-monetary apect of poverty, relating to improved health of recipient houehold member, child growth rate, chool attendance and adult houehold member being able to invet in job earch activitie. 10 What ha driven change? Strong and conitent leaderhip South Africa ha had trong and table leaderhip ince the fall of Apartheid in The African National Congre (ANC) ha been re-elected three time ince 1994, each time with a ignificant majority. The ANC identifie itelf a the party of the poor: in it 1994 election manifeto, it promied baic welfare right, and it ha continued campaigning on a ocial aitance platform. In the 2004 election manifeto, entitled A People Contract to Create Work and Fight Poverty, Thabo Mbeki declared the following: 11 At the heart of our challenge are two linked concern we mut create work and roll back poverty. Thee two core objective are the major focu of our programme for the Second Decade of Freedom. Meanwhile, continued high level of poverty and inequality threaten political, ocial and economic tability, and thi ha reulted in continued political motivation to increae coverage of ocial grant. Contitutional change The extenion of ocial grant in South Africa ha been particularly dramatic becaue it ha been upported by contitutional change. The ANC commitment to poverty reduction reulted in legilative and intitutional change that put ocial aitance right at the heart of South Africa Contitution in Since then, people have had a contitutional right to adequate helter, food, education and ocial ecurity. Thi right-baed ytem mean the tate ha a legal obligation to provide ocial aitance, which largely explain the emphai on Development Progre torie

5 Increae in ocial expenditure have been poible becaue of table macroeconomic condition and a ucceful and efficient tax ytem in South Africa. increaing ocial grant coverage in the country. South Africa i particularly unuual in the ub-saharan African context, a the entire ocial aitance ytem wa developed dometically without ignificant donor input in term of policy or additional financial reource. Intitutional reform, macroeconomic tability and efficient tax collection Hitorically, bureaucratic complexitie contrained takeup, which meant many of thoe eligible for grant were not receiving them. Meanwhile, the Department of Social Development, reponible for adminitering the grant, had inadequate capacity. In recognition of thi, the government attempted to implify the proce by etablihing the South African Social Security Agency (SASSA), to adminiter the grant, while the Department of Social Development retained it reponibility for policy development. SASSA ha introduced a range of ucceful accountability meaure, including internal audit procee, regional audit teering committee and a fraud prevention trategy. SASSA ha alo reponded to difficultie obtaining documentation in rural area, which have been a factor in differential rate of take-up in both rural and peri-urban area. Through the Integrated Community Regitration Outreach Programme (ICROP), SASSA end in mobile unit to remote area in the form of cutomied truck, which are equipped with information and the communication technology infratructure neceary to proce grant application. 12 Meanwhile, increae in ocial expenditure have been poible becaue of table macroeconomic condition and a ucceful and efficient tax ytem in South Africa. Stable and high tax return are a prerequiite for grant utainability. Leon learnt South Africa till face challenge in addreing poverty and inequality, but ha been very ucceful in expanding the proviion of ocial grant. The cae hold five key leon for other countrie. Social grant have been effective in reducing the depth of poverty and the vulnerability of beneficiary houehold. However, they have not been able to counterbalance the force cauing inequality in South Africa to increae. Headcount poverty and inequality are increaing, owing to larger macroeconomic force that the grant ytem cannot addre. Social grant are affordable with an adequate tax bae and an efficient tax-gathering ytem. Budgetary prioritiation of intervention to reduce poverty i of high importance, a government have to chooe in the context of limited budget among competing policie, which all have an impact on poverty and inequality, directly or indirectly. Policy coherence i key. Social grant complement other form of ocial aitance (including education, health and other ervice proviion) and have different target audience. A trong, table intitutional tructure i required for ocial aitance. Enhrining the right to ocial aitance in the Contitution and creating trong new intitution mean ocial grant are not ubject to hifting government preference. Proviion of ocial grant i not ufficient to enure ocial and political tability. Delay in ervice delivery, in particular in houing, frutration at the lack of change and excluion of the working-age poor from grant proviion have led to an increae in civil action and ocial unret in South Africa in recent year. Development Progre torie 12

6 Thi brief i an abridged verion of a reearch paper and i one of 24 development progre torie being releaed at The development progre torie project communicate torie of country-level progre from around the world, outlining what ha worked in development and why. The project howcae example of outtanding progre acro eight main area of development. You can find out more about the project, methodology and data ource ued at Thi publication i baed on reearch funded by the Bill & Melinda Gate Foundation. The finding and concluion contained within are thoe of the author and do not necearily reflect poition or policie of the Bill & Melinda Gate Foundation. Photo credit from top to bottom Flickr/United Nation Photo. South Africa Flickr/Development Work. South Africa Flickr/DFID. South Africa Flickr/Andew Ahton. South Africa Flickr/World Bank Photo. South Africa Overea Development Intitute 111 Wetminter Bridge Road London SE1 7JD United Kingdom Tel:+44 (0) Fax:+44 (0) Overea Development Intitute ODI i the UK leading independent think tank on international develop ment and humanitarian iue. ODI hold the copyright for all ODI publication, which are ubject to UK copyright law. ODI welcome requet for permiion to reproduce and dieminate it work, a long a they are not being old commercially. A copyright holder, ODI requet due acknowledgement and a copy of the publication. The view preented in thi paper are thoe of the author and do not necearily repreent the view of ODI. Overea Development Intitute 2011