Master’s Thesis – B. I. Lekezwa

LEKEZWA, BONGISA. (2011). The impact of social grants as anti-poverty policy instruments in South Africa: An analysis using household theory to determine intra-household allocation of unearned income.

Master’s Thesis

Author(s): Bongisa Indira Lekezwa

Supervisor: Krige F. Siebrits

Institution: Stellenbosch University, Faculty of Economic and Management Sciences, Department of Economics

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Social assistance is a large and fiscally costly component of anti-poverty policy in South Africa and therefore lends to the questions: Are the grants effective tools for reducing poverty in South Africa and, moreover, how significant is their impact on poverty? As a measure of reducing poverty and improving the non-social indicators of the poor, the government has expanded the social grants since the advent of the new democracy. The country‟s social grant system is advanced and covers a broad range of individuals, as it is intended to cover vulnerable individuals over their life course from childhood to adulthood and into old age. Policy discourse surrounding the grants centres on the sustainability of the system and their implications for development. It is therefore important that their significance is shown and that their impact is illustrated by highlighting their reach into severely poor households. As a measure of poverty alleviation on their own, the grants are not enough and South Africa‟s poverty alleviation strategy has to rest primarily on economic growth and job creation. In addition, there are significant challenges in the system, such as the fact that there is no poverty grant targeted specifically at the unemployed; consequently, too much strain is placed on the resources of grant-receiving households that the whole household is plunged into poverty. Accordingly, the question this raises is: How can government solve the problem of the poor clustering around these grants? This dissertation will systematically show that the use of social security as a poverty-alleviating tool is effective given the extent of poverty in South Africa and the limitations on resources. It will also show that the decision-making structures in households influence the way grants affect the resource allocation needed for achieving lower levels of poverty. The extent to which the cash transferred to poor households via the grant programmes reduces poverty is likely to be influenced significantly by the decision-making structures in the grant-receiving households. There is evidence that grant money is shared in extended households, which suggests that decision making is broadly unitary or cooperative. However, we can only observe the outcomes and not the decision-making process in this regard and therefore can only draw tentative conclusions. Although there is cause for concern regarding the propensity of social grants to affect people‟s behaviour negatively, there is a case to be made for retaining grants as an important, though not the only, form of anti-poverty strategy. This highlights the need for continued research on the labour market and the social grants causal relationship. It also shows that research into the fertility effects of the grants is wanting, especially if there are speculative concerns that might inform policy on the impact of CSG on fertility.