Targeting children’s social grants in South Africa: Does the ‘means’ justify the end? ____________________________

1. Targeting children’s social grants in South Africa: Does the ‘means’ justify the end?____________________________ Anti-poverty programmes and children’s development: A Mexican – South African dialogue SARPN Workshop – 26 May 2005 By S Rosa, A Leatt & K Hall Children’s Institute University of Cape Town

2. Introduction • Under international human rights law and Constitution of the Republic of South African Act 108 of 1996 (Section 27, 28 & 29) children have various socio-economic rights, including the right to water, social security, basic nutrition, shelter, basic health care services, social services, and education. • Under the SA Constitution, the state is obliged to realise the rights of everyone, including children. The state has therefore instituted several poverty alleviation programmes. • The State has designed a variety of targeting mechanisms to ensure that these programmes reach the identified population groups. For eg. social grant programmes are primarily targeted via age-based and income-based (means-tested) mechanisms. • This presentation seeks to critically evaluate the targeting mechanism for the pre-eminent social assistance programme aimed at children, the Child Support Grant (CSG) – known as the means test. I will also make recommendations for improvement to the targeting mechanism. • In light of this and the conceptualisation and implementation of other poverty alleviation programmes, I will then briefly comment on whether CCTs are an appropriate targeting mechanism for the CSG in the South African context.

3. Background: Means to Live Project • Presentation based on the Means to Live Project of the Children’s Institute - focuses on the targeting of various poverty alleviation programmes for the realisation of children’s socio-economic rights. • The Means to Live Project will soon release discussion papers on various sectors and will then conduct primary research on the intersection of the various targeting mechanisms and the consequences for people living in poverty. • The Project is looking at the targeting mechanisms for the following poverty alleviation programmes and how they intersect: • National School Nutrition Programme • School fee exemption policy • National housing subsidy scheme • Free basic water policy • Child Support Grant • Free health care services for children and pregnant women • As part of the project, a costing of the means test has also been conducted based on primary research in the Western Cape and Eastern Cape, in March 2005, and calculations by Debbie Budlender at the Centre for Actuarial Research at UCT. (Paper forthcoming 2005).

4. Ensuring social security meets its targets • Targeting can be described as a way of identifying beneficiaries for a benefit or good. • It can be universal by, for eg. universal free primary education or universal free basic health care for children under 6; or • Narrower targeting would seek to identify specific individuals, households, communities or entities to which scarce resources or public goods can be transferred. These narrower targeting objectives require more specific mechanisms to identify their intended beneficiaries.

5. Types of targeting mechanisms David Coady of the International Food Policy Research Institute and Margaret Grosh of the World Bank recently completed a 122 programme and 48 country study of different means testing mechanisms and their implications. (Coady et al: 2003) They outline three broad categories of targeting mechanisms: • Individual or household assessment - used to assess the income or means at the disposal of the individual or the household to support themselves. Verifiable, simplified/ non-verifiable or proxy means tests. • Categorical targeting - uses some basic characteristic of the person or household as a basis for inclusion in a beneficiary group, eg. age categories. • Self-Selection targeting - Particular interventions where although eligibility is universal, the mechanism for accessing the goods or benefits is intentionally designed to discourage the non-poor from accessing it.

6. Child Support Grant (CSG) • The CSG was implemented in 1998 to help to alleviate the poverty experienced by many children in South Africa. • The CSG is the state’s primary programme to realise the right to social assistance and other related socio-economic rights for poor children. • It currently targets about 5.5 million children between the ages of 0 and 14. • The CSG is a flat-rate cash transfer targeted at poor children between the ages of 0 and 14 years, via the ‘primary care-giver’ of the child (R180 per month from 1 April 2005) . • The grant is paid to those who qualify in terms of a means test of the PCG and her spouse. (Deductions are made for UIF, pensions, tax, medical aid and other grants, namely the CSG and OAP.) • Means test R800 per month if the child and ‘primary caregiver’ live in an urban area in a formal dwelling or R1 100 per month if the child and his or her PCG live in a rural area or in an informal dwelling. • There are no conditions for health or education attached to the grant as per the Social Assistance Act 59 of 1992.

7. Targeting the CSG The CSG is thus targeted via two types of targeting mechanisms: • Individual assessment – assessment of the means or the income of the PCG and spouse and the use of proxy indicators of poverty, namely housing type and area; • Categorical targeting – delineation of age-groups who may be eligible for the grant.

8. Conditional Cash transfers Rationale: • Conditional Cash Transfer (CCT) programmes, are designed to provide cash, benefits or services to the poor, conditional upon investments in human capital such as sending children to school or bringing them to health centres on a regular basis. (Das et al, 2004, World Bank; Rawlings & Rubio: 2003, World Bank) • It is viewed that by investing in the human capital of children, the intergenerational cycle of poverty will be broken. • CCT programmes essentially have one of the following objectives: (Das et al, 2004, World Bank) • To reduce future poverty - investing in human capital by increasing the health and educational attainment of children; • Targeting of resources and pro-poor redistribution – so when governments are unable to directly discern individual characteristics, CCTs induce self-selection so that the targeted group participates in the program and others opt out.

9. Conditional Cash transfers Overview: • Have been established in recent years, particularly in Latin America and the Caribbean, eg. Mexico, Brazil, Colombia, Honduras, Jamaica, Nicaragua. (Many funded by the WB) • Programmes have been evaluated to measure their effectiveness and broader impact on households’ behaviour. • Evaluations have shown positive results and programmes have been extended.

10. Conditional Cash transfers • Education and health components: • Mostly targeted to primary school children, but in countries with higher educational attainment such as Mexico, seek to benefit secondary school-age children; • In Mexico and Honduras, education grant covers both direct costs (school fees, school supplies, transport etc.) & indirect opportunity costs of sending children to school rather than work. • Health and nutrition grants targeted to younger children, pregnant and lactating women. Aimed at food consumption, health care and nutrition education. Cash transfer dependent on attending health centres regularly.

11. Conditional Cash transfers 2. Supply side support • In some countries, also provide support to strengthen supply of health and education services. • Grants also directly to schools and health centres.

12. Conditional Cash transfers 3. Poverty targeting • Targeting the poor is a critical feature of CCTs. • Most rely on both geographic and household level targeting. (Mostly proxy means-tests of poverty at household level) • CCT programs playing an increasing role in countries’ poverty reduction strategies through major income transfer.

13. Conditional Cash transfers 4. Evaluation results: • Available for Mexico, Brazil and Nicaragua. • Show that CCTs can provide effective incentives for investing in poor’s human capital. • Positive effects on enrollment rates for boys and girls. • Impact on attendance rates are mixed! • Effective in reducing child labour. (Mexico) • Child health and nutrition improved. Increase in nutrition monitoring and immunisation rates. • Improved consumption levels on food. (Mexico) • CCT investments delivered in cost-effective way. (Mexico)

14. Conditional Cash transfers 4. Evaluation results cont: • Gap – need for promotion of income-generating activities. • Gap – need to assess effectiveness of CCTs as permanent institution for addressing chronic poverty. • Caution – not to assume that positive evaluation results in a handful of countries can be replicated in other areas, especially areas facing supply constraints in health and education OR where capacity to administer a CCT program would be limited. (Rawlings & Rubio: 2003, World Bank) • Caution – CCTs not necessarily the BEST approach to achieving a particular outcome. Need for comparison to identify the most effective and efficient approach.

15. Issues with targeting of the CSG • Eligibility • Age categories • Problems with the means test: • Difficulties with proof of income; lack of verification • Income thresholds have not changed • Household size not taken into account • Administrative costs of Department of Social development • Burden of time and costs imposed by means test on poor applicants

16. Eligibility and targeting of CSG • Using a poverty line of R430 a month, 74.9 % of children aged 0-17 in South Africa are poor (Woolard: 2003) = more than 13 million children. • Using a R215 per month poverty line, Woolard found that 54.34% of children across South Africa are ultra-poor = 9.7 million children. (Coetzee & Streak: 2004)

17. Eligibility and targeting of CSG • Figures for how many children would be eligible under the inflated thresholds were calculated by Budlender, based on the GHS 2003. • Eligibility was calculated for each age category in terms of the current means test thresholds of R800 and R1 110, as well as in terms of the inflation-adjusted cutoffs of R1 120 and R1 541. • In terms of age, the first set covers children under 9 years (the situation for most of 2003), the second set children under 11 years (the situation for most of 2004), the third set children under 14 years (the situation from April 2005), and the fourth set children up to the age of 18. • The change resulting from adjusting the cutoffs for inflation is about four percentage points. Overall, about 66% of children in the chosen age group are eligible under the current thresholds and 70% under the inflation-adjusted threshold. (Budlender: forthcoming 2005) • So we see that eligibility under current and inflation-adjusted MT based on GHS are not far off poverty figures.

18. Age categories • The gap is that the CSG is available only to children between the ages of 0 and 14. • If the Department of Social Development manages to reach all the poor children under the age of 14, there will still be: • three million 15-18 year olds living in poverty without any assistance, of which 2.5 million are living in dire poverty, while • 60% of the adult population living in poverty continue to receive no assistance.

19. Problems with the means test 1. Problems with proof of income/ lack of verification: • People are unable to prove their lack of income or small informal earnings. • Proof of income may be necessary in order to avoid fraudulent claims being made and to ensure that the support reaches the intended beneficiaries. • BUT requirements of proof placed on CSG applicants are ineffective because; large numbers of people are working in the informal sector; many kinds of independent and irregular contracts, eg. seasonal workers on farms in the WC, and many of the poor in South Africa are unbanked. • There is no standard verification of the documentation presented in the application process, as it would simply be too complicated and too costly to administer. • This is then a waste of time and administrative costs in checking and double-checking forms, when the checking is potentially ineffective. • It is also argued that this is a waste of time and administrative costs because most people who would take the trouble to apply for the CSG would need it – it is assumed that the wealthy would thus not be accessing the grant for these reasons.

20. Problems with the means test 2. Income thresholds have not changed since 1998: • The means test threshold levels of R800 and R1 100 per month have not increased with inflation since they were instituted in 1998. • The value of the grant has kept pace with inflation in recent years. • Without raising the threshold poverty levels in line with inflation, the threshold becomes lower and lower in real terms. • Means that many children who would have been eligible for the means test under a means test adjusted for inflation, are unable to access the CSG although they are as poor as other children who did access the CSG in 1998. • Budlender calculated the impact of not adjusting the means test thresholds. She shows that to keep pace with inflation, the thresholds would need to be set at R1 123 and R1 544 respectively in 2004. Instead, in 2004 the value was equivalent to buying power of R570 and R784 in 1998. (Budlender: forthcoming 2005)

21. Problems with the means test 3. Household size • A further flaw in the means-testing mechanism is that it does not take into account the number of people living in the household and the number of children that have to be cared for within the financial means of the PCG. • In the interviews conducted for the costing, the size of the PCGs families and the number of children in their care varied considerably, yet the same income threshold applied to all of them. • The inequity created by the means test in this regard undermines and contradicts the gains made with the open ‘care-giver’ concept in trying to get away from discrimination against certain family structures.

22. Problems with the means test 4. Administrative costs of Department of Social development • CI commissioned Debbie Budlender, at the Centre for Actuarial Research (CARe), to undertake a costing of the means test for the CSG in December 2004. Results not finalised yet, but here are preliminary results. • In order to do the above costing, the CI conducted primary research to gather the following information: • How many staff hours and costs are spent by DSD and SAPS on administering the means test portion of the CSG application? • What are beneficiaries required to do, how long does it take them and how much money do they spend or sacrifice by having to collect all the information together for the means test portion of the application of the CSG?

23. Time estimates for implementation of the means test for DSD Usual time Means test only W Cape E Cape W Cape E Cape Screening officer 10.2 6.7 1st attesting officer 19.2 11.7 2nd attesting officer 13.3 8.8 Assessment clerk 10.2 6.2 Data capturer 10.0 7 Verifying officer 8.5 4.8 Screening officer 3.0 1.5 Attesting officer 5.8 2 Verifying officer 4.7 1.4 Data capturer 3.7 2 Approval officer 3.6 2.1 STANDARD TOTAL 71.4 20.9 45.2 9.0

24. Costs to applicants 5. Burden of time and costs imposed by means test on applicants • We estimate the total time and money costs to applicants of complying with the means test part of an application for the CSG, requires close on six hours of time and costs about R25 per applicant. • Time costs were calculated by adding together the SAPS and non-SAPS time costs. Total money costs were calculated by adding together the SAPS and non-SAPS money costs and adding the estimate for lost earnings of applicants.

25. CCTs for South Africa? Rationale • As investment in human capital? • Education outcomes: • South Africa has an extremely high enrolment figure, despite the existence of school fees. (Fleisch & Woolman: 2003) • Estimates of the level of enrollment in South African schools vary between 93 – 97%. (Fiske & Ladd) • BUT need a distinction between enrolment and attendance. Many children are temporarily or permanently barred from school because of inability to pay school fees and fees for uniforms and transport, despite being enrolled (Wilson: 2003). • Problem is lack of implementation of fee exemption policy in South Africa together with insufficient funding for schools who then are forced to charge learners school fees. CCTs would not solve this unless linked to funding/subsidies for schools for taking in poor children (including secondary level) and where children who received the CSG would be exempt from school fees automatically.

26. CCTs for South Africa? • Health outcomes: • Adequate immunisation is an indicator of individual and population-based health as it plays a key role in reducing the chances of a child contracting a disease or reducing the severity of an infection and may boost a child’s immunise system to counteract other infectious diseases. (WHO & UNICEF 2004) • The bulk of immunisation occurs within the child’s first year of life, ending in South Africa at 18 months with a booster at 5 years. • South Africa: children <5 immunisation national coverage = 71% (2004) – compared to 63% in 1998. • Department of Health’s target is 90%.

27. CCTs for South Africa? 2. As a targeting mechanism? • Woolard shows that grants are exceptionally well-targeted. She shows that the poorest 20% of households receive the largest amount from state grants, equivalent to two-thirds of their income (Woolard: 2003). And grants are well-targeted at children via mostly female PCGs. • Administration capacity at municipal and provincial level will be difficult – need for links between municipalities and schools and health clinics. • Need for effective administration with cross-communicating databases and coordination of government departments, which at present do not work well together in planning and implementation of poverty alleviation programmes. • Extra barriers created through need to prove school attendance and health care facility attendance may serve to exclude more people in need. • Banking sector need to come on board to provide bank accounts and relief from bank charges. • Difficult while we still have user fees for health services for children over the age of 6 and a school fee exemption policy that is barely implemented due to low funding support to schools. Money will be handed from one government department to another government department in payment of fees. • May also be very difficult for the most vulnerable children to access, as they may not have resources, even with a CSG, to pay for transport to school, or may have to look after sick and dying family members etc.

28. Alternatives… It is argued therefore, that CCTs are not appropriate for SA at this point in time, but perhaps in future when departments responsible for various poverty alleviation programmes are working in a more integrated manner, and poverty alleviation programmes are all in fact being implemented effectively. • In order to deal with current problems of targeting the CSG, the following solutions are recommended. • Firstly, the threshold for both tiers of the means test for the CSG should be adjusted in line with inflation. • Secondly, since the means test used for the CSG is not verifiable, and therefore creates unnecessary costs for the government and applicants, a universal targeting mechanism of self-selection should be implemented and the means test done away with.

29. Alternatives… 3. Finally, the most sensible alternative would be to make the CSG universal by giving it to all children under the age of 18 - as a first phase of a Basic Income Grant - and reclaim the money from the better-off households through the tax system. (Financing Report on BIG) • This would be a means test in reverse and would hopefully be more carefully constructed on the basis of absolute and not relative poverty levels. • The administrative burden to households would be eradicated, and would leave the cost of setting up a system whereby everyone is able to get access the money via a bank account or pay point. • This kind of financing model is also the fairest and most redistributive as the richer part of the population takes a certain responsibility for the poorest.