PRETORIA, October 7, 2021—The World Bank, in collaboration with the Government of South Africa, released a new report assessing the country’s social assistance programs and systems. In an environment of high unemployment, persistent poverty, weak economic growth and shrinking fiscal resources that has been exacerbated by the Covid-19 pandemic, the Social Assistance Programs and Systems Review: South Africa report underscores the critical role of the grant and social assistance system in mitigating poverty. This report also provides policy considerations that could help move South Africa’s system of social transfers towards sustainable and productive investments in its people.
The report finds that overall, South Africa’s system of programs is effective, well-targeted, and provides sizeable benefits to the poorest households. The social assistance system effectively reduces poverty and inequality rates. Cash transfer programs are having positive and important impacts on a wide variety of outcomes, including nutrition and food security, educational attainment, health, labour supply, and livelihoods. Furthermore, the grant system has established effective delivery systems that identify beneficiaries and include registration, payment, and grievance redressal processes which can be scaled up rapidly during crises such as the COVID pandemic.
Accounting for 3.3% of GDP and 15.4% of total government spending, the cost of South Africa’s social assistance system is relatively high compared to the average of other upper middle-income countries (UMICs). With 51% of its spending going to the Older Persons Grant, South Africa spends five times more than its peers on social pensions, although the report notes that social pensions are leveraged to compensate for the poor coverage of the system of contributory pensions in South Africa. Likewise, with 38% of spending going to Child Support Grants and other targeted grants such as the Care Dependency Grant and the Foster Child Grant, South Africa’s provision of social grants aims to respond to diverse household needs.
Given the high unemployment rates and limited access to unemployment insurance for workers not in formal employment, the system has been an important government intervention and a critical policy response in the post-apartheid era. Overall, the system uses a combination of progressive taxation and pro-poor social spending to address inequality.
“South Africa’s strong and effective social protection programs have helped protect vulnerable people and ensured that they can meet their basic needs, especially during the pandemic when limited fiscal resources are under pressure,” said Marie-Francoise Marie-Nelly, World Bank Country Director for South Africa, Botswana, Eswatini, Lesotho, and Namibia. “It is our hope that this research will enhance policies to ensure that the important investments the government is already making will help to break the cycle of poverty for the next generation, keep children healthy and in school, and help households transition from social grants to more sustainable income generating opportunities.”
Some of the system’s shortcomings identified in the report include limited support to working-age adults and informal workers in particular; weak integration across programs and government agencies; and the system’s limited ability to address household needs comprehensively. Social transfers are not fully integrated with other support services to help recipient households exit poverty.
However, the report recognises the important steps taken by the Department to link social grants, especially Child Support Grant (CSG) beneficiaries to a number of services, including student financial aid, to ensure accessibility to comprehensive packages of government programmes for the poor. Moreover, the government’s most recent COVID response extends the R350 Social Relief of Distress Grant to also protect caregivers of CSG beneficiary children, in addition to eligible working-age adults and informal workers.
To support households more comprehensively, the report suggests continuing to strengthen the integration of the social assistance system with services provided by departments such as the Basic Education, Health, Public Works and Home Affairs and developing an integrated social registry or an interoperable set of databases that can be used to more effectively identify vulnerable individuals and households, as well as coordinate the services they receive.
More analysis and assessments of different options are required to find affordable solutions for protecting low-income workers, especially informal sector workers, from unemployment or other shocks.
To support social grant beneficiaries to transition to jobs, the report suggests strengthening the quality and reach of the public and non-government employment service programs and providing easier access for grant beneficiaries. It also suggests building out the government’s new youth platform to better connect South Africa’s youth to job opportunities and provide more resources for jobseekers.