The means test for social assistance grants and its recent evolution

Van Der Berg S. (2001)


Social assistance relates to that part of the social security system which provides material support to certain eligible categories of persons based upon need rather than contributions. South African social assistance programmes are relatively large for a developing country; currently, about R18 billion (2 1/2 % of GDP) is spent annually on such social transfers to households. They contribute substantially to income of poor households and, of all social programmes, are best able to reach the rural poor. But the interaction between private income sources and social grants complicates the economics of social assistance, as means tests potentially affect incentives and behavioural responses to social grants. After long fragmentation and apartheid-based differential means tests, the means test and benefits were unified in 1996 when new regulations were promulgated. These regulations, however, were considered by some to be inappropriate and contributing to the inordinate rise in social assistance costs for the state in the following years. Based on an investigation, a new set of regulations was promulgated in 1998. This paper flows from this investigation and the accompanying recommendations to the Department of Welfare (Van der Berg 1996). In this paper three means tests are considered: the apartheid means tests, the unified new means tests of 1996, and the amended means test as contained in the 1998 regulations.

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