SA’s social security system is an effective intervention to support the poor but a key weakness is the lack of coverage for unemployed adults who have no source of income and are not disabled, a World Bank report has concluded.
The lack of income support for unemployed adults who are outside the net of the child support grant, old-age grant and disability grant is the key argument in favour of a universal basic income grant, which has gained traction in the governing ANC and parts of the government in the context of an unemployment rate of about 34%.
The World Bank report — the Social Assistance Programs and Systems Review: SA, undertaken in collaboration with the department of social development, which was released Thursday — acknowledged the fiscal constraints facing the government, which would make it difficult to expand the social assistance system for the foreseeable future.
It says that the weak coverage of working-age adults “has important implications for other social assistance interventions as benefits received by children and the elderly are shared with working-age adults in the same households who have no other means of support.” Unemployment benefits provided by the Unemployment Insurance Fund are only available for those who work in the formal sector.
The report highlights the medium term opportunity SA has to link beneficiaries to other government services and programmes that help advance access to the labour market and earnings. To support social grant beneficiaries to transition to jobs, the report suggests strengthening public and non-government employment service programmes and providing easier access for grant beneficiaries. It also suggests a better connection for SA’s youth to job opportunities and more resources being given for jobseekers.
The social assistance system is effective and well targeted towards those who most need support but the World Bank says the benefits could be multiplied “if the social-assistance programmes could be reformed towards nudging households’ investments in human capital”.
The World Bank observes that SA’s social assistance programme represents one of the country’s most important post-apartheid successes in reducing poverty and inequality. SA spends more on social assistance than most other countries globally — 3.31% of GDP.
The social assistance system is extensive in terms of both the number of people it covers, directly and indirectly, as well as in terms of the amount of scarce resources it consumes.
About one in three citizens is a direct beneficiary of a social grant, while nearly two-thirds of the population (64%) are either direct or indirect beneficiaries of the system. About 18-million people receive grants of one kind or another at a projected cost in the 2021/2022 year of R229bn.
Transfers though small in absolute terms are equivalent to 7.3% of households’ expenditure nationally and 60% in the poorest 20% of the population. Social grants are estimated to reduce the poverty rate by between 10.1 percentage points and 38.5 percentage points, depending on the choice of official poverty line.
In terms of value for money, estimates of the cost-benefit ratio for social assistance in SA reveal that while it performs about 10% better than the average for Sub-Saharan African countries and is on par with upper middle-income countries overall, its performance is almost one-fifth weaker than the average for countries in Latin America and the Caribbean.
“The costs of SA’s system are relatively high compared to other countries,” the report concludes though notes that its efficiency has been improving.
The average cost to pay out a grant has decreased in real terms from about R57 in March 2020 prices during the 2005/2006-2009/2010 period, to R36.70 in the 2019/2020 financial year.
The proportion of the budgeted social assistance transfers that is allocated to administration has fallen from 7.8% in 2008/2009 to 4.4% in 2019/2020.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.