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CAPE TOWN, SOUTH AFRICA – MAY 12: People wearing face masks seen in a building of the South African Social Security Agency (SASSA) in Cape Town, South Africa, on Tuesday, May 12, 2020. The South African government announced that a R350 grant to help the unemployed people who did not receive any kind of subsidy or subsidy during the Covid-19 pandemic would receive a payment from May to October. It will be open to South Africans, refugees and permanent residents already in the Department of the Interior system and those residing within the borders of South Africa. (Photo by Gallo Images / Nardus Engelbrecht)
Estimates from the National Revenue Dynamics Study – Coronavirus Rapid Mobile Survey (NIDS-CRAM) indicate that the Covid-19 grant reached 4.3 million people at the time of the survey. This represents 12% of South Africa’s adult population, 11.5% of the workforce, and nearly one in four (24%) of the unemployed seeking.
Since March this year, nearly 1,200 social protection measures have been implemented around the world in an attempt to mitigate the adverse effects of the Covid-19 pandemic. Almost a third of these measures consist of cash transfers (donations) and 68% are new. In this regard, the South African government expanded the country’s social assistance system by completing the amounts of each grant, as well as introducing a special Covid-19 Social Relief of Distress (SRD) grant of R350, both for six months.
Altogether, President Cyril Ramaphosa’s welfare package potentially provided much-needed support to some 36 million South Africans, or 63% of the population, an incredible reach in such a short period of time. We know that the distribution of existing subsidies in South Africa is very progressive, so any additional spending will benefit poor households. This is important because we estimate that those living in the poorest fifth of households accounted for a third of the total job loss between February and April. What was less known, however, is the extent to which the new Covid-19 grant would reach those most in need.
The special Covid-19 grant was intended to provide relief to people over the age of 18 who are unemployed, do not receive any income or any other social grant, or support from NSFAS or the FIU. Grant payments began in late May, following application and payment processing delays, largely attributable to setting up relevant processes and systems, late verification of recipient bank details, and issues Sassa experienced obtaining access to databases for verification purposes. These delays are reflected in the monthly grant spending data. While R36.5 million was spent on the Covid-19 grant in May, almost R1 billion it was spent in June. As of early September, R 4.8 billion out of the total budgeted amount of R 11.85 billion had been allocated over six months (40.5%) to approximately 5.5 million selected applicants.
Only now do we have enough data – NIDS-CRAM Wave 2 conducted from July 13 to August 13, 2020 – to analyze the distribution of the special Covid-19 grant. The NIDS-CRAM is a widely representative mobile survey of 7,000 South African adults that seeks to inform policy-making by assisting rapid research on key socio-economic outcomes in South Africa during the Covid-19 pandemic and national shutdown. At the time of writing, there is no comparable existing data set that can be used to analyze these dynamics. Although our estimated number of grant recipients is similar to official records, we must emphasize that our estimates of household income come with some unavoidable imprecision given the extent of the missing data.
NIDS-CRAM estimates indicate that the Covid-19 grant reached 4.3 million people at the time of the survey. This represents 12% of South Africa’s adult population, 11.5% of the workforce, and nearly one in four (24%) of the unemployed seeking. Nearly 90% of the beneficiaries are African American, 55% are male, and nearly three in five (57%) are under 35 years of age. More than half (53%) of those who were not employed during the June shutdown received the grant, compared to just 15% of those who were not employed before the February shutdown, indicating a fairly positive initial goal of the grant. Taking into account jobless transitions, about one in five of those who were employed in February but not in June received the grant.
A key concern of the introduction of the grant was whether it would reach vulnerable households. As shown in the graph below, we find that the application and receipt of the grant has been relatively pro-poor. Of the 4.3 million recipients, 33% live in the poorest fifth of the households, 13% in quintile 3 and only 6% in quintile 5. In other words, for each recipient who lives in the richest quintile of households, more than five recipients live in the poorest. About 90% of those in the richest quintile have not even applied.
So, both in absolute and relative terms, the distribution of the Covid-19 grant has been progressive. However, many people, while eligible for the grant, do not receive it. Furthermore, the scope of this insufficient coverage is regressive. Of the 6.5 million eligible non-beneficiaries estimated in June, nearly half live in the poorest third of households. There may be various reasons for this exclusion error, such as that many people are not really in danger (for example, those who technically have no income but are fully supported by their partners, or self-employed who are not registered in SARS). The additional challenge, however, lies in ensuring that the ineligible do not receive the grant. We found that 28% of those who are not eligible but have received the grant live in the richest tertile of households. Although such leakage is substantially less for the Child Support Grant (CSG), it is important to note that the Covid-19 grant brought millions of previously unreached people into the system who could not have been contacted through the CSG.
While 4.3 million people were successfully awarded the grant at the time of the survey, another 4.3 million were still awaiting the outcome of their applications, 62% of whom were not employed in June. The challenge for social assistance in South Africa during the shutdown was to effectively reach low-income households, but crucially also those who lost their jobs. To some extent, the supplements to existing grants targeted the former, while the special Covid-19 grant targeted the latter. Ultimately, this is indicative of a fairly positive integrated social welfare response from the government, within a tight fiscal environment during a period of negative growth. DM / MC
Haroon Bhorat is Professor of Economics and Director of the Development Policy Research Unit at the Faculty of Economics at the University of Cape Town. He has published more than 200 academic journal articles, book chapters, and working papers and, in September 2019, was nominated to serve on President Ramaphosa’s Presidential Economic Advisory Council (PEAC). Tim Köhler is a junior researcher and PhD candidate in the Development Policy Research Unit based at the Faculty of Economics at the University of Cape Town.
