The ugly truth about social grants

Households earning income in the top 20%, 10% and even the top 1% claim all types of grants.

Having access to grants gives the lowest household income earners an increased level of life satisfaction, but it decreases the life satisfaction of the highest household income earners.

These are the results of a study of the Well-being Economic Research team of the University of Johannesburg, in collaboration with an international team consisting of Prof Talita Greyling, Dr Tam Adhikari (research associate) and Dr Stephanie Rossouw (senior research associate).

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Their study used the National Income Dynamics Study (NIDS) dataset, a well-known representative South African data set, in surveying individuals and households.

The NIDS survey has been conducted every two years since 2008, with the latest data published in 2018. The study involved 42 000 households pooled over the five years in which the surveys were conducted.

The households, from the lowest income earners to the highest, were divided into five equal parts (quintiles) and each group of 8 400 households was studied.

The income of the households in the middle of a group was, in most cases, much lower than the average income of the households in that group, which is an indication of skewed distribution.

Considering the type of grants accessed over the years by the different groups, households in the highest income quintile accessed all types of grants and this trend increased over time, especially in respect of the child support grant.

Of the top 20% households, 0.4% claimed the child support grant in 2008-09, increasing to 10% of households in the top 20% in 2017. This implies an increase of 24% over the time period.

A similar trend can be seen accessing of the old-age grant. The team used different econometric models to determine if accessing grants did indeed increase the well-being of households.

As expected, they found that the life satisfaction of the households in the lowest four quintiles did increase, but surprisingly the life satisfaction of the households in the highest income group decreased.

Households in the top quintile have median income that is 66 times more than the lowest income earners. Thus, there is a ratio of 1:66. This means that for every R1 earned by the lowest quintile, the top quintile earns R66.

In contrast, for the number of households that access grants, the ratio is 1 (lowest quintile):0.41 (highest quintile). In other words, for almost every two households that claim a grant in the bottom quintile, one household in the top quintile claims a grant.

Clearly, something is wrong with the system.

If grants were introduced to decrease poverty and inequality, it has most likely ended up having the opposite effect – increasing inequality.

But how is it possible that the highest income quintile households can access grants aimed at the poor?

To qualify for most of the grants, an individual or married couple must pass the means test.

Given that the means test is based on a certain level of income or assets of an individual (if the person is married, the means test doubles), a household member can earn an income below the means test even though he/she is a member of a household that earns an income in the top 20% of households, which legally gives them the right to access a grant.

Households in the highest quintile can also claim the foster care grant, which has no means test and is accessible to all.

Another concern that the South African Social Security Agency (Sassa) revealed was fraudulent activities related to claiming grants. This has increased over time.

So, the system allows members of households earning household income in the top brackets to claim grants, but is this fair to the poor and does it contribute to fulfilling the main aim of the social welfare system?

The study concluded that the system of allocating grants to the most vulnerable should be revisited.

news@citizen.co.za