The history and impact of social security in South Africa: experiences and lessons

Abstract Abstract This paper examines the history and impact of the rapidly expanding social protection system in South Africa. We document the dominance of cash transfer-based assistance programmes compared to social insurance. There is a clear racial pattern of social protection coverage, with Africans benefitting largely from social assistance and whites being disproportionately covered by social insurance. We also find that the expanded social assistance has a substantial impact on poverty and nutrition, with little evidence of adverse labour market effects. The programme appears to be affordable and, in the South African context, administratively feasible. We discuss potential economic and political incentive problems with the co-existence of social assistance and social insurance and, finally, the implications for the design of social protection programmes in other sub-Saharan African countries. Résumé Cette rédaction étudie l'histoire et l'impact du système de protection sociale qui est en expansion rapide en Afrique du Sud. Nous décrivons la prépondérance des programmes d'assistance de transfert d'argent comparé aux programmes d'assurance sociale. Il y a une tendance raciale nette de la couverture de la protection sociale dans laquelle les africains profitent en grand partie de l'assistance sociale et les blancs, de façon disproportionnée, sont couverts par l'assurance sociale. Nous trouvons aussi que ce système d'assistance sociale expansé a un impact important sur la pauvreté et la nutrition, et très peu de preuve des effets défavorables sur le marché du travail. Il semble que le programme est abordable et, dans le contexte sud-africain, viable administrativement. Nous examinons les problèmes potentiels des incitations politiques et économiques avec l'existence simultanée de l'assistance sociale et de l'assurance sociale. Et finalement, nous examinons les possibles conséquences de créer des programmes de protection sociale dans d'autres pays de l'Afrique subsaharienne. Keywords: social securitySouth Africa Acknowledgments This paper greatly benefited from discussions with, and comments from, Mahmood Messkoub, Giorgia Giovannetti and participants at the 2010 European Report on Development (ERD) meeting in Dakar on Promoting Resilience through Social Protection in sub-Saharan Africa, as well as a similar conference in Florence. We also thank an anonymous referee for helpful comments and discussion. Funding from the EU through the ERD is gratefully acknowledged. Notes UNICEF Citation(2008a) has estimated that around 40 per cent of households in South Africa have a bank account. South Africa under apartheid used race as a primary classification of the population into African, Coloured, Indian and White groups. Statistics continue to be collected using these classifications. The term 'black' is used to signify African, Coloured and Indian people, in the context where black signifies all previously disenfranchised groups. See also the section of this paper on the evolution and coverage of the social security system in South Africa, which provides information on the shares of beneficiaries by population groups. In October 2008, the means test was increased to 10 times the value of the grant for single care givers (and double that for married care givers), which means the means test automatically keeps pace with inflation. Until that time, the means test had been fixed at the same nominal level of R800 in urban areas and R1,100 in rural areas for 10 years. In the most extreme example, this meant that the means test for a married caregiver in an urban area changed from an income ceiling of R800 (approximately $183 PPP) per month to R4,600 (approximately $1,053 PPP). The CDG is given to the care givers of children who are severely disabled to the extent that they need full-time care. Thus, if such care were not available in the home, they would need to be institutionalised. The grant is available for children from one to 18 years of age. Since 1994, South Africa has provided free health care for pregnant women and children under the age of six in public health facilities. When examining which unemployed receive any benefits, it turns out that some 10 per cent of the unemployed have received benefits at some point of their unemployment spell (Leibbrandt et al., 2010a). During this period, expenditure of the EWPW increased from R7.8 billion in 2004/2005 to R54.2 billion in 2008/2009 (Department of Public Works Citation2009). However, a large part of the expenditure was material costs, such as building materials. Hemson (2007) estimated the wage costs of the EWPW at around 8 per cent of the total costs in infrastructure projects and 48 per cent in social sector projects. Unfortunately, there is no information on grant receipt for children over the age of 15. A study by Kakwani and Subbarao Citation(2005) examines the profile of the elderly population in 15 African countries. They find that the elderly, on average, face higher poverty rates than other population subgroups, especially when the elderly have become either the main income earner or care giver for children. We focus here on papers that take an econometric approach. For a broader review of both quantitative and qualitative studies, see Budlender and Woolard Citation(2006). The CSG is also a very important instrument for fighting the impact of HIV/AIDS, because many children live as orphans within other households or with other household members and need financial support to get an education and remain healthy (Meintjes et al. Citation2003).

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