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Expanding the Social Security Net in South Africa:
Opportunities, challenges and constraints


Kalie Pauw and Liberty Mncube1
Development Policy Research Unit (DPRU), University of Cape Town

United Nations Development Programme (UNDP), International Poverty Centre (IPC)

Country Study No 8, July 2007

SARPN acknowledges the International Poverty Centre as the source of this document: www.undp-povertycentre.org
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Abstract

For a large proportion of the South African population, social welfare grants are an important source of income. Since 2000, rapid increases in government expenditure on social security have further enhanced the contribution of welfare grants to the income of poor households and have thus been important in the fight against poverty. Given these apparent successes, many are calling for further expansions in social security provisioning, with the idea of developing conditional cash transfer schemes occasionally surfacing in policy circles. However, as we argue in this Country Study, there are various constraints to such expansions of the welfare net. Whereas in the past much of the increased expenditure on social security provisioning could be financed out of government revenue overruns, further increases are likely to be possible only through reallocation of government expenditures. There is already evidence of substitution taking place within the social budget since education and health expenditures have apparently declined in favour of increased welfare transfer expenditures. This trend, we argue, is untenable and may harm the already weak education and health services in South Africa. Conditional grants linked to school attendance and visits to health clinics would place further pressure on health and education services, as well as on the agencies responsible for disbursing and monitoring welfare payments in the country. We argue, therefore, that budgetary and service delivery constraints currently present a strong argument against expansion of the social welfare system in the immediate future.

Introduction

After coming into power in 1994, the ANC government committed itself to specific goals in the area of social policy, which included eliminating poverty, achieving an acceptable distribution of income lowering unemployment levels and increasing social assistance programmes (Taylor, 2002). Government even went so far as to entrench the right to social assistance in the Constitution [s27(1)(c)] (see Haarmann, 2001), a bold move that has made it vulnerable to Constitutional Court challenges, as seen in the State versus Grootboom case in 2000 (Taylor, 2002). Social welfare transfers to households have stepped up significantly over the last decade, partly because social welfare was previously targeted mainly at White recipients. At the same time that the number of people eligible for grants has increased dramatically, there has been a clear policy decision to increase welfare spending, both in terms of the value of the grants paid and in terms of their scope or coverage.

In 2002 the Taylor Committee published a report on its investigations into the social security system in South Africa (Taylor, 2002).2 It noted that the current welfare system had been inherited from the previous era without any substantial changes having been made in terms of its design. The underlying assumption of the ‘old system’ was that the employed could support themselves and that unemployment was temporary (Taylor, 2002: 15). However, South Africa’s unemployment problem has since been recognised to be structural and the achievement of full employment to be an unlikely prospect. Furthermore, since a large proportion of the population lives outside the economic mainstream, the trickle-down effect of growth has been inadequate to address poverty. These unique circumstances, the Taylor Committee argued, required a fresh look at social protection systems and the task of better adapt ing systems to the needs of specific social environments.

In this Country Study, we first examine the use of cash transfers as a policy tool in developing countries, and particularly the design of such systems (section 2). In section 3, we analyse social security provisioning in South Africa in more detail, focusing on the history of social security provisioning, the types of grants currently in place, government welfare expenditures and expenditure increases over the last decade. Attention is also given to the current debate concerning the possibility of additional expansions of social security provisioning (specifically the basic income grant debate). Section 4 reviews the fiscal and service delivery constraints to further expansion of the social security system in South Africa, centreing on conditional grants attached to education and health services. Lastly, in section 5, we provide general conclusions, make policy recommendations and offer suggestions for further research.


Footnotes:
  1. The authors are from the Development Policy Research Unit (DPRU) at the University of Cape Town. The comments by Haroon Bhorat (DPRU) and Jean Le Nay (UNDESA) are greatly appreciated.
  2. An overview of the Taylor Report is presented in the appendix.


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