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Report on Incentive Structures of Social

Assistance Grants in South Africa

Presented by:

Kesho Consulting and Business Solutions (Pty) Ltd

Contracted By:

GeoSpace International

Commissioned By:

The Department of Social Development



Acknowledgements

I would like to thank the following people/organisations for their invaluable contributions to this study:

- Prof. Paul Spicker, for his research, assistance and contribution to Chapter 2.

- Dr. Stephen Rule, for his contribution in Chapter 3 on the Literature review.

- Jan Vorster, for his quantitative research on Incentive Structures of Social Assistance Grants in

South Africa (Chapter 4).

- Prof. Robert Walker, for his invaluable advice throughout the process, participation in workshops,

inputs on the literature review and valuable comments on the structure of the report.

- Rohan Stadler, for his research assistance.

- Anna van den Berg, Thabani Buthelezi and Thilde Stevens from the Department of Social

Development.

- Access for their valuable contribution through a submission.

- All other people who contributed information.

While appreciating your input and support, the author accepts full responsibility for the research

results.

Mark Steele

July 2006



Executive Summary

Executive Summary

INTRODUCTION

In South Africa, the provision of social assistance benefits constitutes the largest part of the

government’s poverty alleviation programme. By December 2005, a total of 10.6 million

people, including approximately 7 million children, were benefiting directly from the various

grant types. Grant beneficiaries represent 22% of the South African population, excluding

other family members that may also benefit directly or indirectly because of them staying in

the same household.

In the context of high unemployment, poverty and the increasing HIV/AIDS pandemic in

South Africa, it can be expected that the demand for social assistance grants will continue to

rise. The increase in uptake was further facilitated by government, with contributions from

civil society, through the improvement of systems for both grant delivery and the

dissemination of grant information to potential beneficiaries, as well as changes to the

eligibility criteria.

The sizeable increase in grant uptakes has resulted in at least two general reactions:

On the one hand, stakeholders have applauded the government for the increase in grant

uptakes but have also indicated that many people who should be benefiting from social

assistance still do not. These stakeholders have also pointed out that the South African

Social Security System is not comprehensive. Civil society are conducting campaigns to

convince government to extend the benefit system to include all poor children and/or to

provide a basic income grant to all South Africans. These efforts are partly motivated by

research findings that illustrate the poverty alleviation function of social assistance

benefits.

On the other hand, both within government and among the public, some concerns have

been raised about the increase in grant uptakes. These concerns are mainly about

financial sustainability, corruption and some unintended effects (perverse incentives)

within the current South African Social Security System.

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Executive Summary

The question of the possible existence of perverse incentives in the South African Social

Security System has been in the press headlines for sometime. In addition to anecdotal

stories in some communities many assumptions have been made about this phenomenon.

AIM OF THE REPORT

This report is the first part of an ongoing programme of research concerning the incentive

structures created by the configuration of social assistance grants in South Africa. Many of

the potentially perverse incentives created by the South African Social Security System

result from its categorical nature in which benefits are provided to certain categories of

people in financial need but not to others and, in addition, some grants have a higher

monetary value than others. In the context of high unemployment, poverty and HIV/AIDS, it

can be expected that the South African Social Security System will be under continuouspressure.

The four key areas that this research addressed were:

the alleged increase in teenage pregnancies relating to the child support grant;

the possible fostering of children in the biological family context in order to access the

foster child grant;

the believed reluctance to take medicines to control certain ailments that can lead to

permanent disability in order to access the disability grant; and

the supposed tendency of beneficiaries accessing grants not to take part in the labour

market and therefore creating a culture of economic dependency.

UNDERSTANDING INCENTIVES

The incentives associated with the South African Social Security System are created by the

provision of grant income only to people with particular characteristics. Some of these

characteristics can be acquired by people changing their behaviour in order to be able to

successfully apply for grants with the prospect of becoming better off financially. It is

therefore important to understand the complexity of human behaviour and other factors that

can influence this behaviour in terms of incentives. The decision to change behaviour in

order to change one’s characteristics to become eligible for a grant is not a simple and

straightforward one. In any decision (for instance to get pregnant to access an amount of

R190) there are always certain costs as well as benefits involved. People further do not

respond immediately and directly to incentives; for many there are delays, hesitations and

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Executive Summary

doubts before they act. Incentives become perverse when an individual would be better off if

they took a course of action in which someone else – normally a person or body in authority

– disapproves. Moreover, it is sometimes not the potential recipients themselves that

respond in unanticipated ways to incentive structures. It may, for example, be gatekeepers

such as doctors or social workers, or even social security staff, acting in the perceived best

interests of their clients.

DISABILITY GRANT

The incentive concerns associated with the Disability Grant (DG) were as follows:

Self infection with infected materials;

Engaging in deliberately risky behaviour; and

Failure to take health enhancing medicines or operations in order to stay sick and

continue claiming the disability grant.

International Evidence

International evidence, especially in the United Kingdom, United States and Canada

indicates that the increase in claiming disability benefits is a world-wide phenomenon. It is

important to recognise that circumstantial evidence of migration into incapacity benefit is not

always easy to interpret. For example, the coincidence of high levels of incapacity benefit

receipt in areas of high unemployment is not necessarily evidence of shirking; sick people

who become unemployed may legitimately be eligible for the DG. No evidence could be

found in the international literature of persons infecting themselves, or not taking life saving

medicines in order to claim disability benefits. International literature further suggested that

incapacity benefits are typically higher than unemployment and other benefits because they

are envisaged to be long term rather than temporary. They often also meet the additional

costs of disability and may also have a compensatory component. Other things being

equal, it seems that there are incentives for grant recipients to migrate to incapacity benefits

to increase their income.

Local Evidence

Local evidence suggests that the growing take-up of the DG should be seen in the context

of poverty, unemployment, the impact of HIV/AIDS, increased awareness of the DG and the

increased access to the South African Social Security System. Further to this, changes in

administration and the implementation of the DG system has resulted in the inconsistent

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Executive Summary

application of assessment criteria. Also many people from previously under-serviced areas

who should have been in the system, started to exercise their rights to access social

assistance benefits.

Further local evidence also suggests many instances where applicants change their

behaviour in order to obtain the DG, although much of the evidence remains anecdotal.

Moreover, such evidence needs to be interpreted with care. When, for example, a medical

officer at a tuberculosis (TB) clinic opined that ”…it seems sometimes to me that developing

TB is a kind of a blessing for some of them, that they now stand a chance of getting a grant”

he was not necessarily suggesting illicit behaviour on the part of beneficiaries but instead

remarking on the ironic circumstance of people needing to be sick in order to have access

to a stable and more adequate income. It was further stated that in some of the poorer

provinces, the DG is known as the “poverty grant” because it is such an important source of

income, sustains so many households, and may be mistakenly viewed by some as a

generic anti-poverty measure rather than as a grant for persons with disabilities.

Quantitative Analysis

The analysis of the SOCPEN data confirmed that the rapid increase in uptake of the

Temporary Disability Grant (TDG) commenced prior to 2001. The increase in the uptake of

the Permanent Disability Grant (PDG) did not occur until after 2001 when it coincided with

an apparent reduction in the severity of the conditions for which the PDG and TDG were to

be awarded. Further to this it was found that the number and percentage of rejected/not

recommended applications have dropped significantly since 1997. Less than 1% (16,289) of

applications were rejected in March 2005, compared to 8% (31,821) during 1997. This is

most likely to reflect the new more relaxed benefit conditions although one would expect

some fall in the number of rejected claims as people become more familiar with the grant

system.

The feminisation of the DG beneficiaries was also confirmed by the analysis of the

SOCPEN data. The majority of women tend to uptake the DG later in life compared to that

of men. Just over half the women receiving the DG are also accessing grants for children;

whether women who cannot work (disabled) are able to provide adequate personal care to

children will depend on the health condition and individual circumstances but it is a

phenomenon that is likely to continue even among those who are not, for as long as women

continue to take the principal responsibility for childcare.

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Executive Summary

Excluding cases that became eligible for the older person’s grant (OPG), it appeared that

the majority of DG beneficiaries have remained on the system, irrespective of whether they

received a TDG or a PDG. The biggest migration from the TDG to the PDG (28%)

happened during 1999 to 2001 and again from 2003 to 2005 (18%). A very low percentage

of DG beneficiaries reported being employed, indicating that the DG is well–targeted and

that few people are illicitly supplementing their grant income with other earnings.

Grant Administration System

According to the Social Assistance Act (Act 13 of 2004) the DG is intended to be a

compensatory grant and not unemployment or poverty alleviation grant. It appears that

many officials and doctors find themselves in ambiguous situations where they recognise

both the financial and health needs of people and constitutional right to social security andaward the grant believing it to be a form of poverty relief. This is further legitimated by the

fact that the DG is not linked to a person’s incapacity but rather to an illness.

Another administrative problem encountered was the fact that the TDG is not, as a rule,

lapsed and therefore beneficiaries tend to stay on the system for long periods of time. This

could act as a factor encouraging people to enter the grant system through the TDG,

knowing that they would get financial assistance for a substantial period of time. It was

further reported that even if people are unsuccessful on first application, they return with

new ailments until such time as their applications are approved.

The issue of people discontinuing the taking of their medicines in order to stay in the grant

system was tested at a few clinics in Gauteng and although in most cases officials

confirmed this behaviour, this phenomenon will be investigated in greater detail when the

proposed qualitative research study is launched.

Summary

The quantitative analysis of the SOCPEN data did not provide any evidence of people

changing their behaviour in order to access the DG. It only confirmed the increase in uptake

and the feminization of DG beneficiaries. Local evidence and interviews held, however,

suggest that perverse behaviour has become apparent amongst some beneficiaries. Further

to this, it appears that in some instances, the DG is used as a poverty alleviation grant

rather than a compensatory grant.

CHILD SUPPORT GRANT

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Executive Summary

The incentive concern associated with the Child Support Grant (CSG) was as follows:

The CSG provides an incentive for especially teenagers to have a child in order to

access the grant, and thereby creating an increase in teenage pregnancies.

International Evidence

International evidence found that the incidence of teenage pregnancy is high in the United

States and United Kingdom where benefit levels are low. It also indicated that the link

between social grants and pregnancy is most discussed in the United States, where Charles

Murray advocated the ending of such benefits. However, his position was challenged by

evidence that increases in lone parenthood and teenage births were trends that were well

established prior to the provision of higher benefits in the 1960 and 1970.

Local Evidence

Local evidence suggested that South Africa already had a relatively high teenage fertility

rate before the introduction of the CSG. Demographers pointed out that although the total

fertility rate for the country had declined, the teenage fertility rate remained relatively high

and did not show the same decline. Some demographers indicated that there was evidence

of an increase in teenage births between 1995 and 2005, while others indicated that pre-

teen and early teen fertility had remained constant; fertility had increased amongst girls in

their late teens or early twenties. In Lieu of this it appears that there is no consensus

whether teenage fertility is increasing or decreasing.

Local evidence further indicates that reasons for teenage fertility and family formation are

complex and culturally embedded. Having children out of wedlock and teenage births were

a well-established phenomena under certain sections of the population long before the

introduction of the CSG.


The quantitative analysis revealed that there had been a huge growth in the number of CSG

beneficiaries in recent years. However, if a comparison is made between the numbers of

teenagers receiving the CSG with the incidence of teenage births in the national population,

the quantitative analysis suggests that the take-up rate of the CSG by teenage mothers

remains low. Teenagers (younger than 20 years) represent 5% of all CSG recipients

registered at October 2005. These teenagers claiming the CSG were considerably lower

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Executive Summary

(13% lower) than the proportion of teenage mothers in the South African population

(mothers younger than 30 years).

When the CSG was introduced for younger children, one of the main reasons was to

provide financial support during the window of nutritional opportunity period (within the first

three years of a child’s life) when good nutrition has the most significant effect on the

development of a child. However, the majority (53%) of CSG recipients only apply for the

CSG when their children are older. Reasons for the relatively low uptake probably include

the fact that caregivers struggle to get the required documentation and do not always have

the necessary knowledge about the CSG.

Summary

From the analysis of the SOCPEN data, no link could be established between the

availability of the CSG and the fertility behaviour of teenagers in the South African

population. Furthermore, it was evidenced that the percentage of teenage mothers on the

system were low, and that most caregivers only apply later for the CSG. In addition, the

majority of caregivers only receive one CSG, and resultantly the issue of “farming with

children” could also be ruled out.

FOSTER CHILD GRANT

The incentive concerns associated with the Foster Child Grant (FCG) were as follows:

To foster a child within the biological family context in order to receive a higher grant

amount; and

To foster a child after the age of 14 years when the child is no longer eligible for the

Child Support Grant.

Local Evidence

Local evidence revealed that informal fostering is a well-established practice in certain

sections of the South African population. It further suggested that foster care is a valuable

form of alternative care for children whose parents are dead or unable to care for them.

However, the legal and policy framework developed in South Africa for foster care services

was based on Western models of family life and childcare practices. This has resulted in a

system of foster care that is inadequate in meeting the disparate needs of South African

children. Evidence of this is the extent to which foster care has been used as a form of

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Executive Summary

income support for poor families rather than a form of alternative care for children found in

need of care due to parental unfitness. Factors such as the impact of the CSG, growing

numbers of children requiring care due to HIV/AIDS and ineffective family reunification

services, have increased pressure on the foster care system. At the same time it appears

that the foster care system has failed in adequately meeting the needs of children requiring

placement outside the family context.


The quantitative analysis revealed that the majority of FCG’s are paid to children who have

lost one or both parents and that the majority of foster parents are related to the foster

children. In 41% of cases, the foster parent was the grandmother, in 30% of the cases the

foster parent was the aunt, and in 12% of cases other relatives were the foster parents.Only in 9% of the cases were the foster parents not related to the foster child. Nearly two (2)

out of three (3) foster parents receive more than one grant type. Many are also recipients of

the OPG, the DG and or the CSG. Because the majority of foster children are orphans, their

placements are expected to be long-term. However, the majority of orphans are not

supported through receipt of the FCG and the FCG caseloads could rise substantially if

more families took this course of action in the event of parents dying.

The quantitative analysis further found that children enter formal foster care when they are

older than seven (7) years. Fifty two percent of foster children were 13 years or older. Only

10% were younger than seven (7) years and 8% were older than 17 years. The majority of

foster children are in the age band where they are no longer eligible for the CSG.

Grant Administration System

The FCG was not intended to substitute the CSG in the case of orphans and the extent to

which it does could partially be explained by the weaknesses in the administration system

for foster care. There are too few Social Workers and Commissioners at the Children’s

Courts to handle the high load of cases. The caseloads of social workers are high, which

results in reviews (every two years) not being carried out and therefore the FCG almost

becomes a permanent grant until the children reach the age of 18. The fact that ID numbers

for foster children are not required on the SOCPEN system makes it difficult to verify the

age of the foster children. The loopholes in the administration system also makes it possible

for children to claim both the CSG and the FCG since the FCG does not require a child ID-

number.

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Executive Summary

The foster care system is also designed to make provision for the rehabilitation of parents

(where applicable) with the intention to reunite the child(ren) with their biological parents.

From interviews with social workers, it appears that the rehabilitation of parents does not

always take place as a result of the shortage/high workload of social workers. This

increases the notion that foster care is seen as a permanent arrangement rather than a

temporary arrangement.

Informal kinship care is a well-established practice for which formal intervention through the

child protection system is in many cases unnecessary. Many cases are channelled through

the child protection system that does not necessarily need protection, but rather financial

support. It is mostly grandmothers or other relatives who act as foster parents.

Grandmothers claiming foster care are therefore not a new phenomenon. It was also found

that children who lost one or both their parents and whose grandmothers were looking after

them were receiving CSG in one instance while others under the same circumstances

received the FCG.

Summary

The quantitative analysis confirmed that family members foster most children currently

registered on the SOCPEN system. Due to the fact that most children are orphans and no

incentives exist to adopt, it can be expected that the foster care could become a permanent

arrangement. Further indications point to the fact that most children under the foster care

system are in need of financial assistance rather than child protection.

CONCLUSION

The review of literature indicated that incentives to access social grants have existed as

long as means-test-based social security systems have been around. Available literature

reveals numerous configurations, dynamics and possible incentives and perverse incentives

in the area of social security and welfare systems internationally. The issue is thus certainly

not unique to South Africa. In a social security system that is rather categorical (South

African) than universal, and in the context of high poverty levels and the impact of HIV/Aids,

incentives exist for people to change their behaviour in order to gain an income through one

of the available grants. These incentives are not necessarily perverse.

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Executive Summary

Further to this, local evidence also indicates that given the high levels of unemployment and

poverty, the impact of HIV/AIDS and the growing awareness of citizen’s rights to social

security, huge demands on the South African Social Security System will continue. For as

long as the current categorical approach of the South African Social Security System

continues to exhibit gaps in coverage, the DG and FCG do provide incentives (not

necessarily perverse) for people to access these grants.

Although no evidence could be found in the quantitative analysis of the Socpen data that

link the FCG, CSG and DG to the perverse issues that were researched, it is realised that

especially the FCG and the DG are creating incentives for people to use these grants as a

form of poverty relief in poor areas.

These grants will remain under pressure to cater more widely than was originally intended

when the systems were designed. Most of the concerns about possible perverse incentives

are related to impoverished people requiring income support within a system that does not

provide universal coverage. This opens the system to persons who falls outside the

respective age groupings. It appears that within these limitations, officials were for years

already responsive to impoverishment, sometimes beyond the intention of the particular

grant.

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Table of Content

Table of Content

Executive Summary i

Table of Content xi

List of Figures xiv

List of Tables xv

Definitions xvi

Abbreviations xviii

CHAPTER 1: INTRODUCTION AND BACKGROUND

1

1 Introduction 1

2 Background 2

3 Aim 3

4 Objectives 3

5 Methodology 4

5.1 Phase 1: Literature review, conceptualisation and understanding the Grant

Administration System 4

5.2 Phase 2: Quantitative trend analysis of existing data sets 5

5.3 Phase 3: Qualitative fieldwork and analysis 5 6 Structure and Contents of this Report 6

CHAPTER 2: UNDERSTANDING INCENTIVES

7

1 Introduction 7

2 Characteristics of Incentives 7

3 Understanding Incentives in terms of Costs and Benefits 8

4 Scott Kerr’s Model 10

5 Summary 11

CHAPTER 3: LITERATURE REVIEW ON PERVERSE INCENTIVES

13

1 Introduction 13

2 International Evidence 15

2.1 The Existence of Perverse Incentives 15

2.2 Children, Lone Parenthood and Fertility 16

2.3 Fertility 18

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Table of Content

2.4 Dependency 19

2.5 Disability and Incapacity Benefits 23

3 South African Evidence 27

3.1 Child Support Grant 27

3.2 Disability Grant 30

3.3 Foster Care Grant 34

4 Conclusion 39

CHAPTER 4: FINDINGS OF THE QUANTITATIVE STUDY ON INCENTIVE

STRUCTURES OF SOCIAL ASSISSTANCE GRANTS IN SOUTH AFRICA 40

1 Introduction 40

2 South African Grant Beneficiaries 40

3 Disability Grants 43

3.1 Disability in the South African Population 43

3.2 Uptake of the Disability Grants 44

3.3 Combination of DG and other grants 45

3.4 Income from Grants 46

3.5 Migration form Temporary to Permanent Disability 46

4 Child Support Grant 46

4.1 Introduction 46

4.2 Recipients and Caregivers 48

4.3 Marital Status and Teenage Fertility in South Africa 48

4.4 Uptake of the CSG 50

4.5 Income and Employment 51

4.6 Number of CSGs per Caregiver 51

4.7 Uptake and Income from other Grants 52

5 Foster Care Grant 52

5.1 Introduction 52

5.2 Foster Care System 53

6 Migration form one Type of Grant to another 56

6.1 Introduction 56

6.2 Changes in Caregiver 57

6.3 Migration form Social Maintenance Grant 57

7 Conclusion 58

CHAPTER 5: EXAMINATION OF THE GRANT ADMINISTRATION

SYSTEM 61

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Table of Content

1 Introduction 61

2 South African Social Security Administration System 61

2.1 SOCPEN as a Grant Administration System 61

2.2 Provincial Responsibilities 62

2.3 National Responsibilities 62

2.4 Management of the Administrative System 63

3 Characteristics of an Effective and Efficient Grant Administration System 63

3.1 Delivery and Volume 63

3.2 Speed of Service 64

3.3 Accuracy and Adequacy 65

3.4 User Efficiency 66

4 Weaknesses in the Grant Administration System 67

4.1 Foster Care System 67 4.2 Child Support Grant System 71

4.3 Disability Grant System 71

5 Conclusion 75

CHAPTER 6: SUMMARY OF FINDINGS AND CONCLUSION 78

1 Introduction 78

2 Understanding Incentives 78

3 Disability Grant 79

4 Child Support Grant 82

5 Foster Care Grant 83

6. Conclusion 85

BIBLIOGRAPHY 87

Annexure 1: Understanding Incentives, Paul Spicker A-1

Annexure 2: Submission by the Alliance for Children’s Entitlement to Social

Security (ACESS) regarding the Department of Social Development’s

study on the possible existence of perverse incentives in the Social

Grant System B-1

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List of Figures

List of Figures

1 Population pyramid of the South African population adults, 2005 41

2 Population pyramid of adult beneficiaries, including recipients of the

child grants, October 2005 41

3 Population pyramid of the adult beneficiaries excluding recipients of

child grants, October 2005 42

4 Type of grants received by adult beneficiaries 43

5 Sex and age profile of DG beneficiaries on SOCPEN, October 2005 45

6 Types of grants per sex received by DG beneficiaries 45

7 Age of mothers less than 30 years on SOCPEN and Census 2001 48

8 Percentage of teenage mothers (<20 years at time of birth of CSG child,

mother caregivers only) 49

9 Percentage of teenage mothers per province (mother caregivers only) 50

10 Percentage take up of FCGs per province 54

11 Age of foster children grouped 55

12 Beneficiary migration across grants, shown as percentage 57

13 Number of Foster Care Grants per Social Worker per province 69

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List of Tables

List of Tables

1 Steps Involved before applying for a social security benefit 11

2 Summary of issues pertaining to international evidence on perverse incentives 16

3 Summary of issues and policy responses on fertility 19

4 Summary of issues and policy responses regarding dependency 23

5 Summary of issues and policy responses regarding disability and incapacity

benefits 26

6 Summary of South African research on the Child Support Grant 30

7 Increases in PDGs, TDGs and CDGs, 2001-2004 31

8 Summary of South African research on the Disability Grants 34

9 Take up of Foster Care Grants, 1998-2004 36

10 Foster Care Placements, 2004 38

11 Summary of South African research on the Foster Care Grant 39

12 Number of CSGs per caregiver, shown as percentage 52

13 Main reasons why children were placed in foster care, shown as percentage 53

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Definitions

Definitions

Adoption. Adoption is the permanent placement of children within a family setting and

therefore the perfect fit between child and parents is fundamental for a successful

placement.

Aged Person. Mean any person who has according to the Social Assistance Act, 2004

(Act No 13 of 2004) attained the prescribed age in accordance to Sections 10 (a) or (b).

Applicant. Means any person who applies for social assistance in respect of himself or

herself or on behalf of another person in terms of the Social Assistance Act, 2004 (Act No

13 of 2004).

Beneficiary. Means any person who receives social assistance in terms of Section 6, 7, 8,

9, 10, 11, 12 or 13 under the Social Assistance Act, 2004 (Act No 13 of 2004).

Care Dependent Child. Means a child between the ages of one and 18 years who

requires and receives permanent home care due to his or her severe mental or physical

disability.

Care Dependency Grant. Means a grant paid to a parent or a foster parent in respect of a

care dependency child in terms of Section 7 of the Social Assistance Act, 2004 (Act No 13

of 2004).

Child. Means any person under the age of 18 years.

Child Support Grant. Means a grant paid to a primary caregiver of a child who satisfies

the criteria as in terms of Section 6 of the Social Assistance Act, 2004 (Act No 13 of 2004).

Disability Grant. Means a grant paid to a disabled person in terms of Section 9 of the

Social Assistance Act, 2004 (Act No 13 of 2004).

Disabled Person. Means any person who has attained the prescribed age and is, owing

to his or her physical or mental disability, unfit to obtain by virtue of any service, employment

or profession the means needed to enable him/her to provide for his or her maintenance.

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Definitions

Foster Care Grant. Means a grant paid to a foster parent in terms of Section 8 of the

Social Assistance Act, 2004 (Act No 13 of 2004).

Foster Child. Means any child who has been placed in the custody of a foster parent in

terms of Chapter 3 or 6 of the Child Care Act, 1983 (Act No 74 of 1983) or Section 290 of

the Criminal Procedure Act, 1977 (Act No 51 of 1977).

Foster Parent. Means any person, except a parent of the child concerned, in whose

custody a foster child has been placed under Chapter 3 or 6 of the Child Care Act, 1983, or

Section 290 of the Criminal Procedure Act, 1977, or a tutor to whom a letter of tutorship has

been issued in terms of Chapter IV of the Administration of Estates Act, 1965 (Act No 66 of

1965).

Older Person. Mean any person who has according to the Social Assistance Act, 2004

(Act No 13 of 2004) attained the prescribed age in accordance to Sections 10 (a) or (b).

Older Persons Grant. Means a social grant paid to aged person in terms of Section 10 of

the Social Assistance Act, 2004 (No 13 of 2004).

Parent Means the legal parent of a child as defined in the Child Care Act, 1983 (act 74 of

1974).

Primary Care Giver In relation to a child, means a person, whether or not related to the

child, takes primary responsibility for meeting the daily care needs of the child.

Social Grant. Means a grant-in-aid, a supplementary grant, a child support grant, a foster

care grant or a care dependency grant.

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Abbreviations

Abbreviations

AIDS Acquired Immune Deficiency Syndrome

AP Assessment Panel

CASE The Community Agency for Social Enquiry

CDG Care Dependency Grant

CSG Child Support Grant

DG Disability Grant

EU European Union

FCG Foster Care Grant

GDP Gross Domestic Product

GHS General Household Survey

HIV Human Immuno Virus

HSRC Human Science Research Council

LFS Labour Force Survey

OECD Organisation for Economic and Co-operation Development

OPG Older Persons Grant

PDG Permanent Disability Grant

PMO Pension Medical Officer

SABC South African Broadcasting Corporation

SAPA South African Press Association

SOCPEN Social Pension Database

StatsSA Statistics South Africa

TB Tuberculosis

TDG Temporary Disability Grant

UK United Kingdom

US United States

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Chapter 1: Introduction and Background

Chapter 1:

Introduction and Background

1. INTRODUCTION

In South Africa, the provision of social assistance benefits constitutes the largest part

of the government’s poverty alleviation programme. By December 2005 a total of 10.6

million people, including approximately 7 million children, were directly benefiting from

grants types. Grant beneficiaries' represent 22% of South Africa’s population,

excluding other family members that may also benefit directly or indirectly because of

them staying in the same household (Vorster, 2006).

As the majority of beneficiaries of social grants are women and children, this most

probably results in a direct alleviation of the consequences of poverty in households

headed by women (Vorster, 2006).

In the context of high unemployment, poverty and the increasing AIDS pandemic in

South Africa, it can be expected that the demand for social assistance grants will

continue to rise (Vorster, 2006). The increase in uptake was further facilitated by

government, with contributions from civil society, through the improvement of systems

for both grant delivery and the dissemination of grant information to potential

beneficiaries, as well as changes to the eligibility criteria (Vorster, 2006).


On the one hand, stakeholders have applauded the government for the increase

in grant uptakes but have also indicated that many people who should bebenefiting from social assistance still do not. These stakeholders have also point

out that the South African Social Security System is not comprehensive (See

submission by ACESS attached as Annexure 2). Civil society are conducting

campaigns to convince the government to extend the benefit system to include all

poor children and/or to provide a basic income grant to all poor South Africans.

These efforts are partly motivated by research findings that illustrate the poverty

alleviation function of social assistance benefits (Vorster, 2006).

Page: 1




On the other hand, both within government and among the public, some concerns

have been raised about the increase in grant uptakes. These concerns are mainly

about financial sustainability, corruption and some unintended effects (perverse

incentives) within the current South African Social Security System (Vorster,

2006).

2. BACKGROUND

The question of the possible existence of perverse incentives in the South African

Social Security System has been in the press headlines for sometime. In addition to

overwhelming anecdotal stories in some communities, many assumptions have been

made about this phenomenon.

The following news article can be found on the SABC NEWS website as an

illustration:

Social grants policy might be reviewed

November 03, 2005, 15:00

Social security grants policy might be reviewed if a link between teenage pregnancy and

the uptake of child support grants is proved, Vusi Madonsela, the social development

director-general, says. This follows claims from many quarters of society that girls fall

pregnant to get the money due to poverty.

In a media briefing at Parliament today, Madonsela said there is no current evidence of any

links between child support grants and an increase in teenage pregnancy. Statistics South

Africa (Stats SA) had recently looked at the prevalence of uptake of child support grants

and issues of teenage pregnancy before and after the introduction of the child support

grant in 1997. "And what Stats SA found is that there is no demonstrable increase in

teenage pregnancy after the introduction of the grant.

"But it does give us an opinion that perhaps we would need to dig deeper into the matter,

because there is anecdotal information a possible link...So, we would like to satisfy

ourselves that (this) is indeed the case, and if it is, we will need to take appropriate

measures with regard to a possible review of our policy."

During the same briefing, Manto Tshabalala-Msimang, the health minister, said many

assumptions are being made about the growth in the numbers of people accessing grants

and the massive fraud experienced in the system. To assess the impact of social grants on

communities, research on "perverse incentives" had been commissioned.

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"These incentives refer to behavioural changes in our communities, and examples include

alleged increase in teenage pregnancies relating to the child support grant, and potential

fostering of children by biological family members in order to access the foster care grant,"

she said. – Sapa

These assumptions have mostly been made in the absence of comprehensive

information on social grant beneficiaries. In order to act and respond on these

assumptions, the Social Cluster requested the Department of Social Development to

commission a research study to investigate the possible existence of unintended

effects and if they are found to exist to specify their character.

The four key areas that this research addressed were:

the alleged increase in teenage pregnancies relating to the child support grant;

the possible fostering of children in the biological family context in order to access

the foster child grant;

the believed reluctance to take medicines to control certain ailments that can lead

to permanent disability in order to access the disability grant; and

the supposed tendency of beneficiaries accessing grants not to take part in the

labour market and therefore creating a culture of economic dependency.

3. AIM

The aim of this report is to examine the possibility of incentive structures created by

the configuration of social assistance grants in South Africa.

4. OBJECTIVES

The objectives of the study were:

To understand the human behaviour with regard to incentives and the

complexities around that, mainly in terms of costs and benefits of decisions;

To give a review of international and local literature on the concept of incentives

and perverse incentives;

To do a quantitative analysis of administrative data on the SOCPEN System, and

data collected through the Beneficiary Profile Survey, in relation to other data

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sources in an attempt to understand the pattern benefit in the context of the

existence of possible perverse incentives; and

To analyse the grant administration system in regard to the weaknesses that

could contribute to financial leakages and possible perverse incentives.

5. METHODOLOGY

Additional questions were added to the Beneficiary Profile Survey of the Department

of Social Development addressing issues of possible unintended effects. After much

consideration and various interactions with both local and international experts, it was

realised that the study had to be broadened to accommodate the multi-dimensional

aspect of this research topic. It was then decided to follow a three-phased approach

to examine and understand these incentives within the context of grantadministration, family structure and individual and family strategies for making ends

meet and the interaction between all these. In lieu of this, the three phases of the

research are discussed below:

5.1 Phase 1: Literature review, conceptualisation and understanding the Grant

Administration System

This phase includes local and international debates on the four issues mentioned

above, methodological challenges as well as the conceptualisation of possible

perverse incentives in the context of behavioural issues. An examination of the grant

administration system has also been done in this phase to understand the context in

which these issues possibly exist.

Further to this, the Alliance for Children’s Entitlement to Social Security (ACESS)

were approached and asked to respond to the study on perverse incentives in the

social grant system. ACESS is an alliance of more than 1000 member organisations

working on a wide range of children’s issues. It also works with a number of affiliated

organizations in civil society such as COSATU, the Treatment Action Campaign, the

Basic Income Grant Coalition and many others. Through its work with its members

ACESS has a detailed understanding of the experience, needs and concerns of poor

children and their parents within the social assistance system in our country

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The submission received from ACESS has been included as Annexure 2 of this report

and their comments, where appropriate, have been included into the reports’

discussions and findings.

5.2 Phase 2: Quantitative trend analysis of existing data sets (full report is

available on request)

The main aim of the quantitative analysis was to utilise existing data to establish a

proper profile of grant beneficiaries to inform the debate on incentives. All

beneficiaries were included but focus was on the Child Support Grant (CSG), Foster

Care Grant (FCG) and the Disability Grant (DG). Additional questions to cover the

unintended effect related to Social Grants were added to the Beneficiary

Questionnaire. These questionnaires were administered to 2000 BeneficiaryHouseholds; the complete data set on the Beneficiary Survey was utilized in this

study. Variables from a SOCPEN profile were compared to National data (Stats SA)

to contribute to a better understanding of uptake. The 2005 National Profile Survey on

Grant Beneficiaries and their Households together with Census data 1996 and 2001;

1995-1999 October Household Surveys; 2000-2004 General Household Surveys;

and, 2000-2005 Labour Force Surveys were utilised to identify variables linked to

debates on possible or unintended incentives of social benefits.

5.3 Phase 3: Qualitative fieldwork and analysis (This phase will be completed by

the end of the financial year)

Information will be gathered at Provincial level by means of small focus group

discussions and in depth interviews by experienced fieldworkers. This qualitative work

will seek to compliment and further explore some of the findings obtained from work

done in phase 1 and 2. All four areas of concern to the Social Cluster would be

covered during this phase. In addition, the qualitative research would seek to explore

the following issues:

Current perceptions and attitudes about grants and their recipients.

The social, cultural and family circumstances that shape household finances and

budgeting.

The administrative arrangements that affect access to and utilisation of grants.

Views about whether social grants empower recipients to participate as active

citizens or deter them from productive activities.

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6. STRUCTURE AND CONTENTS OF THIS REPORT

This report discusses only Phases 1 and 2 above. Phase three will be carried out as

an independent study to this report.

The structure of this report is as follows:


Chapter 2: Understanding Incentives

Chapter 3: Literature Review on Perverse Incentives

Chapter 4: Findings of the Quantitative Study on Incentive Structures of Social

Assistance Grants in South Africa

Chapter 5: Examination of the Grant Administration System

Chapter 6 Summary of Findings and Conclusion

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Chapter 2:

Understanding Incentives1

1. INTRODUCTION

This chapter attempts to clarify the concept of “incentives” and “perverse incentives”.

Professor Paul Spicker from the Robert Gordon University wrote a paper on

“Understanding Incentives” (Spicker, 2005) in which he suggested a few concepts on

incentives. A few important issues have been extracted from this document in order to

gain a better understanding of incentives and to place incentives in the context of the

South African Social Security Grant System. The complete paper written by Professor

Paul Spicker is attached to this report as Annexure 1.

2. CHARACTERISTICS OF INCENTIVES

According to Spicker (2005), an incentive consists of three characteristics. The three

characteristics are:

Incentives are about potential gains, rewards, pay-offs or desired outcomes.

The gain that people stand to receive might be money, social status, better health

or any of a wide range of benefits: the test is something people want to have, and

it affects the choices they make.

Incentives are marginal approaches. This implies that they are not

determinants of behaviour but rather contributory to behaviour. Therefore it is

necessary to consider and understand the influence of other factors on a person’s

behaviour in order to evaluate the impact of an incentive. When a firm offers to

sell a service, it is not an “incentive” to purchase the particular service; but when it

lowers its price to draw in customers, it is.

Incentives are about motivation. It is understood that incentives influence

action, that the actions are capable of being influenced, and that the choices are

eligible, or capable of being chosen. The availability of free medical care is not an

1

This chapter is based on an extraction from a report written by Professor Paul Spicker (2005), “UnderstandingIncentives”. Some sections of this report have been copied directly. See Annexure 1 for a copy of the full report.

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incentive to have a tracheotomy, and the cost of residential care is not an

incentive to murder your aged parents.

In summary an incentive ought to meet the following three criteria:

Potential gain – that the supposed incentive implies a desired change in

outcomes;

Marginal effect – this implies that they are not determinants of behaviour but

rather contributory to behaviour. It is therefore necessary to consider and

understand the influence of other factors on a persons behaviour in order to

evaluate the impact of an incentive; and

Influence on motivation – that people have a choice, that the incentive is capableof being chosen, and that the incentive is capable of influencing action.

All three elements are necessary when understanding the concept of incentives. If

there is no gain, if the gain is not in the future or expected, or if the gain does not

affect people’s choices, there are no “incentives”.

3. UNDERSTANDING INCENTIVES IN TERMS OF COSTS AND BENEFITS

Spicker (2005) stated that incentives cannot be understood in isolation and that they

vary according to the context in which they are applied. If incentives are concerned

with a potential gain (getting pregnant to access R190 CSG money, etc), the first

question is whether or not people are gaining. This will depend on a balance of

factors, taking into account losses as well as gains (a teenager may gain R190 per

month for a child, but may loose in terms of opportunity costs later in life). Each

person is faced with an individual choice that can be represented in terms of a

balance sheet. In other words, incentives should be understood in terms of a

calculation of costs and benefits of the decision.

Spicker (2005) further stated how a cost-benefit approach can be applied through

arguments about incentives to work (dependency on grants). He continued to state

that when we read that unemployment benefits (or in the South African context, social

grants) are a disincentive to work, we are being told that being unemployed is a

desirable outcome (a potential gain), that unemployment benefit (social grants) has a

noticeable small effect on choices about working, and that unemployment benefits

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influence motivation, outweighing other factors. Each of the following propositions, as

it stands, is questionable:

Being unemployed is a desirable outcome. This view dismisses issues of

stigma, boredom, lack of direction, and the consequences of unemployment for ill

health, exclusion and poverty (Spicker, 2005).

Unemployment benefits have a noticeable effect on choices about working.

Overall, a substantial majority of people do choose to work, and the vast majority

of people who experience unemployment subsequently return to work. If

unemployment benefits have an effect, the effect is limited. Unemployment

benefits tend to be limited both in financial terms and through a series of

conditions imposed on receipt (for example, suspension of benefit on leaving workwithout “good cause” or on refusal of employment opportunities (Atkinson, 1995)).

Systems are designed to limit their relative attractiveness, and if there is a

potential to tip the balance, it has not been realised in practice (Spicker, 2005).

The influence of the unemployment benefit outweighs other factors.

Unemployment is structured and conditioned by a range of economic factors.

Some unemployment may be voluntary, but much is not. The forms of non-

voluntary unemployment include, amongst others, frictional, seasonal, casual,

demand-deficient, structural and exclusionary unemployment. Where people are

able to make decisions about work, there are many other factors besides benefits

that influence decisions – typically financial rewards in employment, social status,

social pressure and the desirability of roles related to work (Spicker, 2005).

In summary, Spicker (2005) says that understanding incentives in terms of costs and

benefits makes it possible to understand that for incentives to work is not a simple

choice between working and not working, but a calculation of the costs and benefits

of working or not working. The costs of working are principally the opportunity cost of

time, the loss of unemployment assistance and the associated costs of work,

including e.g. travel and child-care. The benefits of working are financial, in terms of

earnings, social (in terms of social inclusion), status and personal (in terms of self-

actualisation).

The costs of not working are not only financial; they also include stigma, degradation,

isolation, boredom, the denial of opportunities and social exclusion. Since the benefits

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of employment are large, the benefits of being unemployed are small, and costs of

unemployment are considerable, the balance, which leads overwhelmingly to people

working, is easily identified, predictable and unsurprising. This does not mean that

unemployment assistance will have no incentive effects, but the conditions in which

that may apply are relatively restricted, and tend to be confined to the limited cases

where unemployment is voluntary, work is done for a very low income and financial

decisions outweigh social ones.

This example illustrates the complexity of understanding incentives in the context of

human behaviour and the factors that can influence behaviour. The decision to

change your behaviour in order to change your characteristics to become eligible for

a grant is not a simple straight forward decision. For instance the decision to become

pregnant when you are a teenager in order to access R190 a month is not necessary

an easy one. Yes, there will be a financial gain, but other factors (costs and benefits)

will influence that decision. There are certain costs to that decision and certain

benefits. The question is what tips the scale in favour to get pregnant or not to get

pregnant.

4. SCOTT KERR’S MODEL

Spicker (2005) uses Scott Kerr’s model to further illustrate the complexity of

understanding human behaviour in terms of incentives where he examines patterns

of claiming social security benefits. According to Spicker (2005), Kerr suggests that

people have to go through several steps before claiming social security benefits and

each one has to be passed before proceeding to the next level (step). The steps are:

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Step Implication of step

Perceived need People had to feel there was a need

Basic knowledge People needed enough basic knowledgeto know where to go

Perceived eligibility They had to think they might be eligible

Perceived utility They had to think it worthwhile

Beliefs and feelings Claiming had to be acceptable, despitestigma or personal beliefs

Perceived stabil ity of circumstances They had to think their condition would lastlong enough to make it worthwhile

Claiming They had to go through the process of applying

Source: Spicker, 2005

Table 1: Steps involved before applying for social security benefits

Spicker (2005) further says that although Kerr’s Model has been useful, because it

led to research, which looked at a series of influences, it also has a conceptual

defect. (See Annexure 1 for further details). What we can learn from this Model is that

people do not respond immediately and directly to incentives or stimuli; for many,

there are delays, hesitations and doubts before they act.

5. SUMMARY

In summary of the above, the following statements are made:

Incentives are signals about the potential effects of taking a possible course of

action: a person has the potential to be better off if they take one course of action

rather than another.

Incentives are perverse when an individual would be better off if they took a

course of action of which someone else – normally a person or body in authority –

disapproves.

In the context of the social security or grant system, being ‘better off’ means being

financially better off. The incentives associated with the SA grant system are

created by the provision of (extra) grant income only to people with particular

characteristics, characteristics that people can acquire through changing their

behaviour and hence potentially become better off financially.

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This potential can only ever be realised if the incentive signals are received and

understood, and if people are able to change their behaviour and decide it is

worth doing so in order to be better off financially.

Although incentives exist in theory this does not mean that they operate in

practice. Incentives are purely theoretical constructs that need have no real world

effects.

Even if some people do change their behaviour, it does not mean that incentives

operate for every individual.

An incentive is unlikely to be an incentive for everybody and, even if it is, it is

unlikely to be equally strong. Some people may not prioritise being better off

financially as much as others and may attach greater importance to the non-

monetary costs associated with changing their behaviour (Cost/Benefit). Incentive effects are marginal factors and there is therefore a need to understand

the other influences on a person’s decision before the impact of an incentive can

be assessed.

Other influences that need to be understood with respect to people’s behaviour about

social grants include grant administration, family structures, individual and family

strategies for making ends meet, and the interaction between all three.

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Chapter 3:

Literature Review on Perverse Incentives

1. INTRODUCTION

The literature review overall reveals a mixture of opposition to excessive social

security on the one hand and advocacy in its favour, on the other. Most researchers

on the subject take a position somewhere between the two extremes. The approach

of countries to social security can be categorised into three broad types (adapted

from Walker, 2005): liberal, conservative and social democratic. The three types are

exemplified by:

Liberal – United States; where the free market is prominent and only when people

are unable to participate in the money economy for reasons beyond their control,

are social grants used to relieve poverty;

Conservative – Germany; where corporates and other employers provide for

social security and local communities fulfil the function for people not currently or

previously linked to an employer; and

Social Democratic – Sweden; where generous universal provision is made by the

state in order to achieve comprehensive social security and equality.

Most of the literature available pertains to the developed world, where poverty is

limited in comparison with its prevalence in South Africa. As hinted at in the typology

above, arguments in favour or against grants are premised upon ideological

predispositions about whether grants serve the purpose of providing relief to those

trapped in poverty or whether they discourage initiative and the desire for economic

self-sufficiency. Whereas many of European countries (notably Sweden and the

United Kingdom) tend to be fairly generous and comprehensive in their social security

systems, the United States is far less so inclined.

Social protection, in the form of cash payment allocated on the basis of financial and

other qualifying circumstances, is an important dimension in the reduction of poverty

and multi-dimensional deprivation (Shepherd et al., 2004). Social protection policies

should always be part of a broader set of policies – on macro-economic stability,

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enterprise and employment development, health, and education – aimed at reducing

risk and vulnerability and encouraging pro-poor growth.

A social protection approach can make a strong contribution, alongside other

approaches, both towards preventing the slide into poverty and assisting with

recovery, and towards the long-term reduction of poverty and multi-dimensional

deprivation, as one way for chronically poor people or their children to escape poverty

(Shepherd et al., 2004). It can also contribute to the achievement of human rights if a

state progressively takes on social protection as the obligation of ensuring that

citizens have an adequate standard of living, backed up by social security in case of

loss of livelihood through disability, sickness, old age or other causes. Well-designed

social protection programmes can have a positive, rather than a restraining impact on

economic growth. They can help to shape the pattern of economic growth in favour of

the poor, such that the poor benefit at least as much as, if not more than, the

average. The primary purposes of social protection are seen as:

To prevent, mitigate and enhance the ability to cope with and recover from the

major hazards faced by all poor people;

To contribute to chronically poor people’s ability to emerge from poverty,

deprivation and insecurity, and to challenge the oppressive socio-economicrelationships which could be keeping them poor, by increasing livelihood security

and linking such increases to the promotion of enhanced livelihoods; and

To enable the less active poor to live a dignified life with an adequate standard of

living, such that poverty is not passed from one generation to the next.

Social protection can relieve some of the market failures that prevent or slow

economic growth and prevent poor people from taking advantage of the opportunities

growth provides. It can also make strong contributions to the protection and building

of the human, financial, natural and physical assets of poor people, which enable

them to grow out of poverty. A combination of strengthened safety nets, conditional

transfers to support human capital development and basic social assistance

measures is the most effective method of protecting the poor.

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2. INTERNATIONAL EVIDENCE

2.1 The Existence of Perverse Incentives

Perverse incentives probably exist in all social security systems although they are

most frequently discussed in the context of systems reliant on means-testing.

Available literature reveals numerous configurations, dynamics and possible perverse

incentives in the area of social security and welfare systems internationally. The issue

is thus certainly not unique to South Africa.

With regard to older persons, Anrig (undated) and Aaron (2005) suggest that

providing a basic minimum grant to all pensioners in the United States instead of

aiding people in relation to their original salaries would disadvantage the middleclass, and create perverse incentives. Larin and Greenstein (1998) have pointed

similar adverse effects of a reduction in social security retirement and disability

benefits and made suggestions about how such effects could be minimised. Carlson

(2005) suggests that reduced state pensions create a perverse incentive to have

fewer children in working age, if the same pension is given to all people.

Perverse incentives can sometimes have effects, which depending on one’s policy

perspective, can be considered to be beneficial. Examples from the United States

include instances in which women in abusive relationships might be encouraged to

separate from their spouses and women living in their parental homes, to start out

independently in the event of unemployment benefits being made available by the

state.

In the United Kingdom, Cackett and Green (2005), point out that while more people

have started work since 1997, many people have also fallen out of the labour market

altogether. In December 2004, 7,835,000 people of working age in the United

Kingdom were neither looking, nor available, for work, and were thus deemed to be

‘economically inactive’. This was an increase of 285,000 since May 1997 (from

7,550,000). Although the inactivity rate among all working age people has remained

relatively stable over this time, approximately 21 per cent, this marks a rise in

inactivity among working age men. The authors (Cockett and Green, 2005) further

indicated that “historically, inactivity rates have always been higher among women,

reflecting women’s greater role in child raising. However, over the last twenty years,

there has been a convergence in inactivity rates between men and women, with

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women’s inactivity rates falling and men’s rising. Since 1984, female inactivity rates

have fallen by around 7 per cent, while male inactivity rates have risen by around 5

per cent. Since 1997 alone, 300,000 more men of working age have become

economically inactive, a rise in the inactivity rate for men from 15,3% in 1997 to

16,3% in 2004. This change is attributed to increased access to social security in the

form of the Incapacity Benefit or other social grants”.

SUMMARY OF ISSUES POLICY RESPONSES

Older persons provide false informationin order to access state pensions

Old age grants calculated in relation topre-retirement salaries

Early retirement from being

economically active owing to generousstate pensions

Promotion of job opportunities for older

persons

Incidence of divorce in order to accessbetter unemployment benefits

Unemployment benefits irrespective of marital status

Not making an effort to find work owingto generous unemployment benefits

Unemployment benefits valued at lessthan the average minimum wage

Table 2: Summary of issues pertaining to international evidence on perverse incentives

2.2 Children, Lone Parenthood and Fertility

A strong case is made in favour of state provision for child support. The argument is

that children do not choose to be born and brought up by poor parents. The reason

for their poverty (unemployment, sickness, divorce, indolence of the parents) is seen

to be irrelevant to children’s circumstances or as a criteria for determining eligibility for

a social security grant, and the state is obligated to provide for such children.

Another rationale for state-sponsored child support is pronatalism, where fertility rates

are almost below replacement level and the state perceives the need to encouragethe rearing of children, and to support working women who have children.

The incidence of teenage pregnancy is high in the United States and United Kingdom

where benefit levels are low. The link between social grants and pregnancy is most

discussed in the United States and the United Kingdom where, ironically, the

incidence of teenage pregnancy is high and benefit levels are low. In the United

States, Charles Murray (1984) advocated the ending of benefits to lone parents

although his analysis has been refuted (Walker, 2005) by evidence that increases in

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lone parenthood and teenage births were trends that were well established prior to

the provision of higher benefits in the 1960s and 1970s (Christensen & Rosen, 1996).

Nevertheless, the focus has continued because, unlike many advanced economies,

the United States welfare system is categorical (like that of South Africa) rather than

universal. Social assistance is therefore payable only to families with children (and to

the aged), hence lone parents are the main recipients since they are typically the

poorest group. Disproportionate numbers of recipients were also African-American.

The United States debate focuses primarily on never-married mothers since, divorced

and separated mothers typically have slightly higher incomes and often more work

experience (Weaver, 2000). In Britain and most other OECD countries most lone

mother recipients of benefits have previously been married (or with the increasing

demise of marriage) or partners in a long-term relationship. There have been political

discussions that the existence of benefits provides mothers the financial security to

end a marriage. In much of Europe, this is generally seen as a positive development

especially given that domestic violence is very widespread and women’s ability to

escape abuse is enhanced (possibly protecting children in the process). In the United

States, however, the strong pro-marriage lobby has successfully promoted the

adoption of measures to prevent the breakdown of marriage funded through the

welfare grant system; for the most part these initiatives are still being evaluated.

Hartman (1997) analyses how the United States has gradually increased its public

spending on social grants. This amounted to almost nothing in the late 1700s, when

religious and other private organisations provided a widespread network of welfare

services in an age of high levels of volunteerism. In 1902, only 2,7% of government

spending, as a percentage of personal income, was spent on social welfare. This had

increased to 24,5% in 1992. He argues that the United States government provides a

powerful incentive for unmarried motherhood among low-income families. Anunmarried mother has a higher social grant entitlement from the state than she would

receive were she married to a low-income husband. He suggests that social welfare

“seduces” many lower income people into operating as individuals while placing

increasing tax burdens on economically productive families. As a policy response he

suggests several measures to incentivise family formation:

Personal tax should not exceed one-third of income;

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Welfare should be limited to those who are truly incapacitated, with temporary

relief for the capable as a last resort;

Welfare grants should never exceed minimum wage levels;

No taxes should be hidden;

Married couples should have the same tax privileges as single people; and

Older people should pay tax on all income, including social grants.

Hartman (1997) is further of the view that such measures would promote a

preference for the family as the fundamental social unit and would discourage

divorce, remaining single or living together.

Policy responses to the phenomena of teenage births and lone parenthood have

been varied:

These include sex education at school level and the legalisation of abortion.

In the United States, abstinence programmes are advocated as an effective

preventative measure.

With respect to childcare and lone parent groups, a policy response is to facilitate

continued education, ongoing support and employment.

In the United States, the right to grants is not unconditional. There are time limits

to being a recipient and receipt of a grant is conditional on participation in

employment or employment related activities.

In respect of lone parenthood, the individuals concerned are encouraged to find

work.

The provision of childcare is promoted in order to facilitate employment for the

parent.

It is policy to recover child maintenance payments from absent parents

(predominantly fathers); sometimes the money recovered is offset against

expenditure on grants.

Maintenance payments are not means-tested means, thus helping to reduce the

unemployment and poverty traps.

2.3 Fertility

There is no evidence that pro-natalist policies based on high family allowances have

increased the birth-rate (Spicker, 2006). This suggests that financial considerations

do not loom large in the decision (if there is one) to have children. There is some

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discussion in the United States about mothers having multiple children with multiple

fathers (“welfare mums” and “dead-beat dads”). Large families do feature in

discussions of poverty in OECD countries because they tend to be the most

disadvantaged. This is partly because a normal wage is not generally sufficient to

support a large family but also because benefits are high in relation to wages since

they reflect the large family size.

In the United Kingdom there is suspicion that equivalence scales used to adjust for

differences in household size when measuring poverty are not well suited to

assessing the circumstances of low-income families. In China under the one-child

policy, families received no additional benefit for a second child and lost benefit for

and subsequent children (along with other sanctions).


Pregnancy and childbirth in order toaccess child grant benefits

o Sex education

o Abstinence programmes

o Legal abortion

o Childcare facilities

o Lone parent support groups

o Limited duration of grant in order to

encourage employment

o Strict claiming of maintenance from

non-custodial parent

o No benefits for second and

subsequent children

Table 3: Summary of issues and policy responses on fertility

2.4 Dependency

Bane and Ellwood (1994) examined the problem of “creating” dependency in the

United States system. They argue that there are various competing models of

response to a system of social security:

The first is the rational choice model, whereby the recipients of grants weigh the

costs and the benefits thereof;

The second is the level of belief in being able to control one’s destiny by being

proactive in dealing with one’s circumstances; and

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The third is prevalent culture in relation to personal, family and community values.

The authors argue that the first (rational choice) is the most effective one in explaining

behaviour in respect of grants, although anomalies suggest that the other two models

have some validity. They also argue the importance of ensuring that social grants are

never worth more than wages earned through employment.

2.4.1 Unemployment trap

An argument against generous social grants is the “unemployment trap”. If a

household is able to access social benefits that exceed the value of wage income that

might be earned by members of the household who could be employed, this could

serve as a perverse incentive to abstain from working. Anomalies of this sort resultfrom the value of grants being determined in relation to the need of the household (in

terms of its size), whereas wages are determined by supply and demand for labour.

2.4.2 Reservation Wage

It is also “generally presumed” that individuals in search of employment set a

“reservation wage” for less than which they would not be prepared to take on paid

work. Research in the United Kingdom has shown that this can exceed the value of

social benefits that are obtainable in the event of unemployment. However, there is

empirical evidence that people often do work for less than their stated minimum wage

because they work for reasons other than money (Walker, 2005).

Policy Responses

A response to potential dependency on the state is an Activation Policy (often

termed “welfare to work or workfare in the United States” (Lodemel and Trickey,

2001)), in terms of which receipt of a grant is conditional on activities including a job-search, and training for work experience. Such a policy is ubiquitous within

OECD countries.

Also, wage subsidies and refundable tax credits have been designed in Europe

and the United States to increase work incomes in relation to those social benefit

incomes.

Basic Income Guarantee/Social Dividend/Negative Income Tax - All of these

involve fixing a support level (usually based on some measure of need) taxing

people above this level and paying out money through the tax system to people

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with less (negative tax). These schemes have seldom been implemented

because of the difficulty in reaching everybody through the tax system and in

paying out of negative tax payments in real time to ensure people avoid poverty

(refundable tax credits are a form of targeted negative income tax). In Sweden

and Germany, benefits have been marginally reduced since the 1990s.

2.4.3 Poverty Trap

This is a situation where a high proportion of any marginal addition to gross income

that is lost to the combined effect of taxation and reductions in benefit. South Africa

avoids this problem by not insisting that people report increases in income and/or not

policing changes in circumstances and requesting over payments of grants to be

repaid.

Policy Responses

Reduce rate of benefit withdrawal – the benefit is reduced less than Rand for

Rand of increased gross income. This is common in many system;

Increase period of income assessment – income is assessed over a long period

so periods of relative prosperity are offset by periods of low income;

Better-off calculations – providing benefit recipients accurate information showing

that they would be better off financial working.

2.4.4 Income security versus income level

Evidence, especially qualitative research in the UK suggests that low-income families

place much weight on the security of income and swapping benefit for employment is

viewed as risky.

Policy responses

Reduce risk by: providing information, making return to benefit risk free; providing

childcare; providing employment mentoring schemes, etc.

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2.4.5 Accommodation (dependency)

There is some evidence (OECD countries) that people accommodate to living on

benefits even if income is low. They find strategies for making ends meet and benefit

from secure low income. It has been proposed that people choose to live on benefits

rather than to seek employment. This is sometimes inferred from evidence that the

probability of leaving benefit increases with the length of time that someone has been

on benefit but this is an error. The reason is that the falling probability of leaving

benefit is the product of two processes: “state dependency” (i.e. accommodation) and

“heterogeneity” the process by which people with little chance of leaving benefit

because of low human capital are left behind after their better qualified

contemporaries have already left (Walker and Ashworth, 1994). It is very difficultindeed to disentangle these two processes and hence to identify the extent of

accommodation or true dependency. There is also evidence of people trying very

hard to find work and leave benefit and taking jobs paying less than benefit grant

incomes.

Policy responses

Activation enforced by sanctions (reductions in benefit).

2.4.6 Informal Economy - underclass

This is the extreme variant of accommodation when grant recipients supplement their

grant income with undeclared earnings and/or other forms of crime. These ideas have

been much discussed in the US mainly by writers on the ideological right opposed to

welfare benefits. In this context, the debate has been fused with issues of race. Black

ghettos have been characterised as communities inhabited by lone parents and

unattached men with economies fuelled by benefit grant income and the proceeds of

crime, especially drugs. William Julius Wilson (not of the political right) has opined

that in such areas where jobs are scarce and men have poor education and few

skills, women choose not to enter long-term relationships with unreliable men but to

bring up their children alone or within female dominated family networks of support

(Wilson, 1987). The concept of the underclass is highly contested with many on the

ideological centre and left challenging that the phenomenon exists or is tied to the

provision of welfare grants.

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Policy responses

Economic regeneration and urban renewal;

Activation;

Enhanced benefit security: more identity checks, linkage of benefit grant and tax

records etc; and

Anti-fraud campaigns.


Financial dependency on the state o Grants never to be worth more than

minimum level of wages for

employment

o Grants only for incapacitated

o State creation of employment

o Grants conditional on recipient

actively looking for work

o Grants conditional on recipient

receiving skills training

Accommodation, i.e. becoming used to

and taking state support for granted

o Activation, i.e. recipient is required to

seek work and benefit is reduced if he/she does not

Continued claiming of grant whilereceiving income from informal (illegal)economy

o Increased identity checks

o Anti-fraud campaigns

o Urban renewal

o Employment creation programmes

Table 4: Summary of issues and policy responses regarding dependency

2.5 Disability and Incapacity Benefits

Disability relates to some form of debilitating illness or impairment while “incapacity

benefits” describes grants that are paid to people who are unable to work (or work to

full capacity) on account of a disability.

These topics are of increasing salience amongst much of the OECD world because of

the increased prevalence of disability and incapacity. There have been several

international conferences on the topic and a number of trilateral meetings involving

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the United Kingdom, United States and Canada. It is unclear why disabilities are

increasing and more people are claiming incapacity benefits. Some possibilities

include:

Efficiency demands of the labour market make less productive workers

unemployable (they therefore claim benefits);

Incapacity benefit is a form of disguised unemployment;

Stigma associated with disability (especially mental illness) has declined and

people are less inhibited about revealing a disability;

Industrialisation has increased disability through industrial accidents, stress,

pollution; and

Disability (like poverty) is relative and people are less prepared to “put up” with adisability.

In the United Kingdom, the numbers claiming incapacity benefit are almost at a

historical high with caseloads three times greater than for unemployment benefit

(called Jobseeker’s Allowance). Conversely, more disabled people are in employment

than ever before.

Incapacity benefits are typically higher than unemployment and other benefits,

because they are envisaged to be long-term rather than temporary. They may meet

the additional costs of disability and they may have a compensatory component.

Other things being equal, there is an incentive for grant recipients to migrate to

incapacity benefits in order to increase their income.

Between the 1970s and 1990s, many countries in the OECD adopted anti-

unemployment policies that sought to reduce labour supply by encouraging early

retirement and a migration to incapacity benefits. As unemployment was structural

and geographically clustered this generated high local concentrations of people

claiming incapacity benefits. Increasingly these policies have been re-thought with

attention given to measures to activate the unemployed to find employment. There is

some concern that the earlier policies have left a legacy of high levels of incapacity

benefit receipt – especially in areas subject to structural unemployment - and a

culture in which individuals (and their doctors) expect long-term unemployed people

to migrate onto incapacity benefits. The United Kingdom has begun to apply large-

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scale activation policies to recipients of incapacity benefits (Alcock, Beatly et al .,

2003). These were initially voluntarily but have become increasingly mandatory.

There does not appear to be any discussion in international literature of persons

infecting themselves so as to claim disability benefits. Rather the discussion is framed

in terms of malingerers. Moreover, medical opinion has also changed with an

increasing belief that it is better to treat muscular-skeletal ailments with continued

exercise (and hence work) rather than with rest. Similarly, conditions such as

depression and anxiety are also thought to be best treated by maintaining a person’s

normal activity. Associated with this, assessments of incapacity for the purpose of

assessing eligibility for benefits based on what a person cannot do are being replaced

by assessments of what a person can do. However, one emergent element in the

debate on disability is the enormous diversity in conditions and in their

consequences, both between individuals and for single individuals over time.

It is important to recognise that circumstantial evidence of migration onto incapacity

benefit is not always easy to interpret. For example, the coincidence of high levels of

incapacity benefit receipt in areas of high unemployment is not necessarily evidence

of shirking. Job queuing theory indicates that, in areas of slack labour demand,

employers have an enhanced choice of high productivity recruits such that disabled

people (perceived as less productive) will be a long way back in the job queue.Conversely, a higher proportion of disabled people will be employed in the labour

force during a boom than during an economic recession. Furthermore, a proportion of

people who are working will be incapacitated in terms of the definitions used for

benefit purposes. If they lose their jobs, they will become eligible for both

unemployment and incapacity benefit and may choose the latter or to migrate from

the former to the latter to receive the higher benefit.

There is also evidence of employer prejudice (often based on ignorance) and alsospecial difficulties for small employers in accommodating disabled people with

fluctuating conditions that makes their attendance (or productivity) unreliable. Such

prejudice is counteracted by legislated affirmative action in favour of people with

disabilities in terms of the US Rehabilitation Act and Americans with Disabilities Act

(US Department of Labour, 2006).

There has been a range of policy responses to deal with the needs of people with

disabilities (Walker, 2005). These include:

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Anti-disability discrimination legislation that is applicable to employment;

Benefit eligibility assessments to determine level of employability;

Activation measures to encourage persons to seek employment. These include

rehabilitation, re-training, work trials, mentoring, and specialist job-placement;

Partial disability benefits, which supplement a person’s wages based on an

assessment of percentage incapacity or employability. In Sweden, Germany and

Korea, the value of the benefit granted is directly related to the degree of

disability;

Protection of the right to return to Incapacity Benefit if an attempt at employment

fails for reasons linked to incapacity; and

Occupational rehabilitation: the evidence is that it is advantageous to prevent

someone leaving the labour market through incapacity rather than relying on him

or her subsequently returning.


Physical or mental disability o Disability Benefit

o Rehabilitation programmes

Stigma resulting from disability o Advocacy of rights of people withdisabilities

Inappropriate claims for disabilitybenefits

o Medical assessment

Claims in order to avoid work o Mandatory search for appropriate

work if possible

o Measures to encourage as much

normal activity as possible

Partial disability o Partial disability benefit computed onproportional loss of income

Table 5: Summary of issues and policy responses regarding disability and incapacitybenefits

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3 SOUTH AFRICAN EVIDENCE

3.1 Child Support Grant

3.1.1 Incentive Concerns

“The CSG provides an incentive for especially teenagers to have a child in

order to access the grant”.

Having been initiated in 1998, the Child Support Grant (CSG) is now claimed on

behalf of over 3 million children aged 14 or lower. Beneficiaries are subject to a

means test in order to be eligible for a CSG for each child within the age limit. Louw

(2003) has pointed out the burgeoning numbers of beneficiaries and the increasing

burden on the national fiscus in the face of the HIV/AIDS epidemic. On the issue of

state provision for orphaned children, Meintjies et al (2003) has questioned the

principle of a means-tested CSG. They argue that a universal CSG for all children

regardless of their parental circumstances should be considered, as the most

equitable, accessible and appropriate way of childcare. This would draw more

impoverished children into the social security net without creating perverse

incentives.

Similarly, the Alliance for Children (2006) suggests that all children should be

beneficiaries of the CSG, thereby eliminating the need for a means test and in turn

the perverse incentivisation to access such grants. Likewise, the University of Cape

Town’s Children’s Institute (2003) has stated that “current provisions create perverse

incentives for poor children to live in foster care with caregivers who are not their

biological parents, and provide little if any support to biological parents to care for

their own children”. The Institute interprets this situation as a complete contradiction

of “the principles enshrined in the South African Constitution, the White Paper for

Social Development and the draft Children’s Bill, where family preservation is

accorded highest priority”. The resultant recommendation is an amendment to the

Social Assistance Bill, such that all children under 18 years should have access to the

CSG.

Van der Berg (2003) argues, for reasons similar to those discussed in Section 2.4,

that a social grant linked to a means test can create a ‘poverty-trap’. It can lead to

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change in behaviour such as reduced motivation to earn wages or save money; the

breaking of links with a spouse; or increased fertility. He suggests lower age limits for

the CSG, or that single-mothers should not be eligible; or even that the CSG should

be phased out. He further suggests that poverty in South Africa is a consequence of

“bad targeting” of social grants to the “wrong groups”; as well as an inadequate

provision of essential services; and insufficient social protection for poor and

vulnerable individuals.

Armando Barrientos and Jocelyn DeJong (undated) conducted an analysis of

childhood poverty benefit systems in South Africa, Mexico, Krygzystan and Chile.

They found that targeted conditional cash transfer programmes are vertically efficient

in poverty reduction – i.e. there are insignificant leakages of the benefits to the non-

poor. However, such programmes are not as efficient in horizontal poverty reduction,

i.e. the benefits are not successful in reaching all of the poor. Conversely, family

allowances are better at the achievement of horizontal than of vertical poverty

reduction in this sense. The South African CSG was reported to be most effective on

both counts, a desirable assessment that seems likely to be perpetuated until the

programme is fully implemented. They additionally report that targeted cash grants to

poor families have improved school attendance by up to 30% in Mexico, Bangladesh

and Nicaragua and have contributed to a reduced incidence of child labour.

In some areas significantly more requirements are imposed upon applicants for the

CSG than required by law. These include the pursuit of maintenance; and letters from

schools substantiating the relationship between the child and the grant applicant

(Goldblatt and Solange, 2005), therefore raising the threshold of eligibility.

3.1.2 Evidence

Research on beneficiaries of the CSG indicates that there has been huge growth

in the number of beneficiaries in recent years.

There is also evidence of an increase in teenage births between 1995 and 2005.

While pre-teen and early teen fertility has remained constant, fertility has

increased amongst girls in their late teens or early twenties (Udjo, 2003).

In half of the cases in KwaZulu-Natal where the primary care giver is not the

mother of the child, the mother is nevertheless the person receiving the grant.

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Additionally, one in seven (14%) of the children in receipt of the CSG in KwaZulu-

Natal do not have caregivers who fulfil the requirements of the means test.

In spite of these apparent irregularities, the CSG was reaching only 42% of poor

children in KwaZulu-Natal in 2004.

3.1.3 Counter-evidence

Take-up of the CSG for infants is very low in the province and many children

remain excluded from the CSG because they lack the required documentation

(Woolard et al. 2005).

Nevertheless, the CSG is effectively targeting children in poor households, as

revealed by a significant improvement in child health and nutrition (as measured

by height-for-age).

Further analysis reveals that whereas only 5,3% of CSG mothers are in the 15-19

age category, this category accounts for 18% of all mothers in the 2001 Census.

This implies that teenage mothers are under-represented amongst CSG

beneficiaries and thus in most cases unlikely to be deliberately becoming

pregnant in order to claim the CSG.

The high proportion of non-mother recipients of CSG on behalf of children in their

care can be accounted for by a culture of complex family networks with childcare

undertaken by women within extended intergenerational families. Fluid patterns of

childcare would explain the mismatch between mothers and principal caregivers.

Women may migrate to urban centres in search of work, while leaving their

children at home to be cared for by kin.

The uptake of CSG overwhelmingly by women rather than men is consistent with

the measure being perceived to be for children rather than to increase general

household income.

It is arguable that the increased uptake of the CSG is attributable to a growing

awareness of its availability and active measures by government to promote take-

up. The CSG reaching 93% of poor children whose carers/parents apply suggests

that the grant is effective.

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SUMMARY OF SOUTH AFRICAN RESEARCH ON THE CHILD SUPPPORTGRANT

Increased incidence pregnancy amongst late teens and early 20s (Makiwane &

Udjo, 2006)

Decline in marriage (Amoateng, 2006)

Young mothers receiving CSG but older person is actual caregiver (Woolard et al ,2005)

Teen mothers often not receiving CSG for their infants (Woolard et al , 2005)

Extra document requirements imposed on CSG applicants (Goldblatt & Solange,2005)

Table 6: Summary of South African research on the child support grant

3.2 Disability Grant


“Self infection with infected materials;


Failure to take health enhancing medicines”.

Regarding access to the Disability Grant (DG), it was stated at the People’s Health

Summit (2004) that in the event of nutrition subsidies being given to people with

HIV/AIDS and not to people without it, perverse incentives would be created. There

was also mention of the idea that people taking anti-retroviral drugs might be

encouraged to discontinue their medication in order to improve their chances of

accessing a DG. Research has been conducted to determine reasons for the

increase in the uptake of permanent and temporary DGs and CDGs (Delany et al,

2005). It was found that from October 2001 to September 2004, the number of

permanent DGs being disbursed increased by 143%, from 400,000 to 970,000. The

equivalent increases in temporary DGs and CDGs were 61% and 119% from much

smaller bases.

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PermanentDGs

TemporaryDGs

Care DependencyGrants

Oct 2001 400,000 233,000 37,000

Sept 2003 970,000 375,000 81,000

% increase 143% 61% 119%

Source: Delany et al, 2003.

Table 7: Increases in PDGs, TDGs and CDGs, 2001-2004

The study entailed an examination of a nationally representative sample of 3500 files

of beneficiaries of the three grant types. It was found that new beneficiaries of

permanent and temporary DGs in 2003 were more likely to be young, black Africanand female than was the case in 2001. Factors associated with the growth in

beneficiary numbers of all three grant types were:

the removal of the oversight role of Pension Medical Officers and the introduction

of assessment panels (APs) for applications in 2001;

the failure to institute a set of national guidelines to provide a framework for the

work of Medical Officers and APs;

an increase in the occurrence of chronic illnesses (particularly HIV/AIDS) and TB

as one of the diagnoses of the disability for which the grant was awarded;

an apparent reduction in the severity of the condition for which the disability grant

was awarded; and

the possibility of a less rigorous review of the means test aspect of the application

process.

Several possible explanations for the increase in the number of beneficiaries of these

grants were provided:

The high levels of poverty have meant that people who would previously not have

applied (partly because they had alternative forms of income) have now applied

for the grant;

The impact of the HIV/AIDS epidemic means more HIV+ people are applying for

the DG. This impact is indirectly inferred by the increase in the proportion of

female and younger beneficiaries, groups disproportionately affected by the

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disease. An increase was also found in beneficiaries with tuberculosis, a condition

often associated with HIV/AIDS;

A greater awareness of the grants (owing to publicity campaigns run by the DoSD

and other agencies) and a greater level of access to the grant; and

Lack of oversight (removal of PMO role) and absence of a consistent set of rules

whereby permanent DG applications can be assessed has allowed inconsistent

application of eligibility criteria by MOs and APs.

Additionally, in the case of temporary DGs, increased numbers are directly

attributable to a ruling in the case of Mashishi’s class action in February 2003. This

resulted in the reinstatement of overturned 35,529 temporary DGs, mainly in

KwaZulu-Natal and the Western Cape, subject to the implementation of appropriate

lapsing procedures for the temporary DGs.

The report (Delany et al , 2003) distinguishes between “push” and “pull” factors that

influenced the growth of permanent DGs. The “push” factors were increasing poverty

levels and the impact of HIV/AIDS. The “pull” factors were increased awareness of

the DG and access to the social security system.

The report notes that it did not take possible fraud or corruption into account. “In allprovinces the interviews conducted spoke of the presence of some form of fraud and

corruption, either on the part of beneficiaries withholding information or submitting

fraudulent applications, or on the part of syndicates and corrupt government officials.

For example, in the Eastern Cape interviewees spoke of the existence of ghost files

and syndicates that were working with government officials and medical officers to

obtain grants fraudulently. The Eastern Cape has recently undergone a forensic audit

and several arrests have been made. At Athlone in the Western Cape there was also

a problem of fraudulent medical forms, a problem noted in several other studies.

Interviewees also spoke of the intimidation of medical officers and assessment panel

members by applicants. In the Northern Cape site interviewees cited intimidation as

the reason for the failure of the assessment panel pilot. In the Eastern Cape the

medical officers are no longer required to make a recommendation in part because of

the intimidation they experienced (Delany, 2005: 96).

The loss of managerial control may not signal a behavioural change among

applicants. The implication is a reduction in the number of applications being rejected;

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inappropriate applications may indicate a failure adequately to communicate accurate

information about the grants and the eligibility criteria. The Mashishi Court ruling,

which led to authorities not lapsing grants highlight administrative failure rather than

perverse incentives.

3.2.2 Evidence

The highest and most consistent uptake of the PDG has been in poorer

provinces. Unemployment is a harsh reality in these provinces where the TDG is

being called ”the poor man’s grant” (CASE, 2005).

“I applied for the grant because I am unemployed, my children are educated but

also not employed and the other reason is that I am old, 58 years old. I also

explained to the doctor about my sickness, that he must understand that my

sickness is permanent. So he helped me to apply for the grant to support my

family” ( Delany et al, 2005:53).

Consistent upward trend in both grants since 2001 (Vorster, 2006).

Feminisation of caseload (Vorster, 2006).

Noticeable increase in young applicants (Vorster, 2006).

Marked increase in proportion of awards for chronic conditions especially

HIV/AIDS cases on PDG (CASE, 2005).

Apparent reduction in the severity of the condition for which TDG and PDG is

awarded (CASE, 2005).

Shift in TDG applications from repeat to new or first-time one (CASE, 2005).

In all provinces interviews spoke of the presence of some form of fraud and

corruption, either on the part of beneficiaries in terms of withholding information or

submitting fraudulent application, or on the part of syndicates and corrupt

government officials and those involved in assessment. For example, in the

Eastern Cape interviewees spoke of the existence of ghost files and syndicatesthat were working with government officials and medical officers to obtain grants

fraudulently (CASE, 2005: 96).

A loss of control and oversight following the termination of the PMO function and

no set of clear national assessment guidelines to replace it (CASE, 2005).

3.2.3 Counter Evidence

Increase in prevalence of HIV/AIDS in general population (CASE, 2005).

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Convergence between Provinces in the uptake of grants could indicate a growing

awareness among legitimate applicants as could the increase in first-time

applications (CASE, 2005).

Positive attempts to increase take-up including offices in previously un-serviced

areas (highest rate of increase is in such areas) (CASE, 2005).

No increase in proportion of TDG awards for chronic illnesses including

HIV/AIDS(CASE, 2005).

The loss of managerial control may not signal a behavioural change among

applicants. (The implication is a reduction in the number of applications rejected;

inappropriate applications may indicate a failure adequately to communicate

accurate information about the grants and the eligibility criteria) (CASE, 2005).

Mashishi Court ruling that led to authorities not lapsing awards highlightadministrative failure rather than perverse incentives (CASE, 2005).

Possible TDG beneficiaries are being awarded with HIV/AIDS related symptoms

but not explicitly noted (CASE, 2005).

SUMMARY OF SOUTH AFRICAN RESEARCH ON DISABILITY GRANTS

Increased proportion of young black female applicants for DG (Delany et al , 2005)

143% increase in DG recipients between Oct 2001 and Sept 2003 (Delany et al ,2005)

Increased incidence of TB and HIV-related opportunistic illnesses (Delany et al ,2005)

Greater lenience in assessment of DG applicants (Delany et al , 2005)

Table 8: Summary of South African research on the disability grants

3.3 Foster Care Grant


“To foster a child within the family in order to receive a higher grant

amount; and

To foster a child after the age of 14 years when the child is no longer

eligible for Child Support Grant”.

Foster care is a valuable form of alternative care for children whose parents are

unable to care for them. In South Africa, the legal and policy framework developed for

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foster care services were based on Western models of family life and child care

practises. This has resulted in a system of foster care that is inadequate in meeting

the needs of South African children. Evidence of this is the extent to which foster care

has been used as a form of income support for poor families rather than a form of

alternative care for children found in need of care due to parental unfitness. Factors

such as the impact of the CSG, growing numbers of children requiring care due to

HIV/AIDS and ineffective family re-unification services, have increased pressure on

the foster care system. At the same time it appears that the foster care system has

failed in adequately meeting the needs of children requiring placement outside the

family context (Vorster, 2006).

This system has come under pressure because of a huge increase in take-up, mainly

due to the growing awareness of the grant, poverty and the impact of HIV/AIDS. With

a value three times that of the CSG and a longer duration, it is argued the FCG can

create an incentive (not necessarily perverse) for impoverish families to put their

children in the care of others (Vorster, 2006).

3.3.2 Evidence

A study of trends in take up of the FCG from March 1998 until March 2004 revealed

an increase of 346% (Naicker, 2005). The number of FCG recipients was 43,906 in

March 1998 and 197,303 in March 2004. Table 2 shows that the annual rate of

increase was most dramatic between March 2002 and March 2003 (117%), having

been below 7% from 1998 to 2001 and 25% in 2001-2. In the most recent year

included in the study, 2003-4, the rate of increase declined but remained high, at

42%.

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Prov Mar-98 % incr Mar-99 % incr Mar-00 % incr Mar-01 % incr Mar-02 % incr Mar-03 % incr Mar-04

WC 14677 0.71 14781 -6.52 13817 -5.42 13068 3.30 13499 57.04 21199 8.76 23057

EC 8152 3.70 8454 5.65 8932 6.25 9490 22.24 11601 112.38 24638 44.68 35646

NC 3578 4.39 3735 -2.30 3649 4.28 3805 12.46 4279 70.72 7305 11.92 8176

FS 3175 10.27 3501 8.97 3815 9.86 4191 43.02 5994 149.87 14977 53.10 22930

KN 5024 19.41 5999 22.45 7346 4.59 7683 55.67 11960 163.87 31559 44.76 45686

NW 1571 3.69 1629 13.51 1849 13.25 2094 29.08 2703 158.64 6991 79.36 12539

GP 5737 8.56 6228 13.44 7065 6.79 7545 21.67 9180 106.34 18942 37.98 26136

MP 1120 3.48 1159 8.11 1253 5.19 1318 13.20 1492 132.51 3469 89.33 6568

LP 872 15.83 1010 34.85 1362 33.33 1816 71.70 3118 210.55 9683 71.07 16565

Total 43906 5.90 46496 5.57 49088 3.92 51010 25.12 63826 117.41 138763 42.19 197303

Source: Vorster, 2006

Table 9: Take up of Foster Care Grants, 1998-2004

Increases in unemployment and poverty would have increased the relative

demand for FCGs in the poorer provinces (Naicker, 2005).

An audit of children’s services (Naicker, 2005) found that in 2004 the FCG was

increasingly being regarded as a poverty reduction measure rather than a childprotection intervention.

Sharp increases in the number of applications for foster placements occurred in

the period 2002-3 and the audit reports claim that some misuse of the FCG is

evident in that “foster parents utilize it for their own benefit and not to properly

(sic) provide and care for the foster child”. Such situations cannot be adequately

verified owing to massive caseloads on social workers (Naicker, 2005).

A further factor was the increase in backlogs in the completion of reviews of foster

child placements and the obtaining of extensions to enable the continuation of the

FCG. This could be an indication that the FCG is regarded more and more as a

permanent grant and not as a temporary measure to create a safety-net for

vulnerable children (Naicker, 2005).

One of the conclusions of the audit is that “Unemployment is one of the main

demands (sic) for foster care placements. Families experience dire poverty and

make false claims to access the grant” (Naicker, 2005: 426).

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During 1999 social security staff warned that the system would most probably not

be able to cope with the increased uptake. Social Workers and Children’s courts

are struggling to handle applications (Vorster et al , 2000).

During 1999 welfare staff reported an increase in applications for the FCG from

grandmothers caring for their grand children (Vorster et al, 2000).

Some social workers indicated then that they were overburdened and not eager to

work with Foster Care applications because it took up a lot of their time, time that

could have been spend on child protection services rather than poverty

alleviation. In the Northern Cape, for example, once social workers have

established that the child was of eligible age for the CSG, the social worker would

immediately apply for CSG ”just to get them off my back” regardless of whether

the caregiver could qualify for a Foster Care Grant (Vorster , 2000: 130).

Already during the 1980’s it was found that most children in formal foster care

were in “unplanned, long- term placements”.

3.3.3 Counter Evidence

The placement of children with relatives is a well-established child care practise in

South Africa, particularly in black families (Dlamini & Simkins, 1992).

One of the reasons is the occurrence of births out of wedlock: when a mother

subsequently marries a man who is not the father of her children, these men do

not necessarily want to care for another mans children, with the result that the

mother leaves the children in the care of her own mother or other relatives

(Vorster, 2006).

Another reason is that children in rural areas for example, have traditionally been

left in the care of relatives such as grandmothers, to allow biological parents to

obtain employment in cities. In an attempt to provide for the needs of these

children, and in view of their own economic hardship, these informal fostering

practises have increasingly become formal as placement in foster care would

enable a foster parent to obtain a FCG (Vorster, 2006).

There are also a growing number of children who are orphans mainly due to the

impact of HIV/AIDS. The majority of them are care for by relatives or other

member of their community. The government encourages people taking care of

orphans to apply for the foster child grant (Vorster, 2006).

The procedure for processing and supervising FCGs should be reviewed as a

matter of urgency so that it places less strain on the judicial system, on social

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workers, and on the time and resources of prospective and existing foster parents

(Lund Committee 1996:5).

The courts and provincial departments tasked with the approval of FCGs may

have become more efficient owing to the increase in resources at their disposal

(Naicker, 2005).

There was an increased demand for FCGs owing to greater public awareness as

a result of media campaigns, imbizo’s and welfare month (Naicker,2005);

It is suggested that the increase in demand was a consequence of increases in

the number of orphans and in the sexual and physical abuse of children (Naicker

2005).

There could have been deliberate delays in the processing of applications prior to

2002, in order to balance provincial budgets. Subsequent to an amendment to theRegulations, the payment of FCGs was to take effect from the date of the court

order rather than the date of application (Naicker, 2005).

A sample of 1068 foster parents revealed that a substantial proportion (57%) of

foster parents are aged 50 or older, possibly indicative of grandparents fostering

their grandchildren in the absence of the biological parents, possibly as a result of

HIV/AIDS mortality (Naicker, 2005).

Statistics on the number of children placed in foster care were reported for some

provinces in the audit report as detailed in Table 10:

Free State: 24000

Gauteng: 32143 (foster care services)

Eastern Cape: 6141 (lodged from July to December 2004)

Northern Cape: 40000

North West: 16600

Limpopo: 14454

Mpumalanga: 10176

Source: Naicker, 2005

Table 10: Foster Care Placements, 2004

Page: 38




SUMMARY OF SOUTH AFRICAN RESEARCH ON THE FOSTER CARE GRANT

346% increase in FCG take-up from March 1998 to March 2004 (Naicker, 2005)

Increased court efficiency in awarding FCG (Naicker, 2005)

More public awareness of FCG (Naicker, 2005)

Increased demand for FCG owing to child abuse (Naicker, 2005)

New regulation: FCG after court order rather than application date (Naicker, 2005)

Large proportion (57%) of FCG recipients aged over 50 (Naicker, 2005)

Table 11: Summary of South African research on the Foster Care Grant

4. CONCLUSION

The review of literature indicates that incentives to access social grants have existed

as long as means-test-based social security systems. Available literature reveals

numerous configurations, dynamics and possible perverse incentives in the area of

social security and welfare systems internationally. The issue is thus certainly not

unique to South Africa. Targeting is often a less than ideal approach to provide social

protection: it is difficult to avoid wrongful exclusion and inclusion, it is expensive and

administratively difficult to do well, and it reduces social solidarity. In a social security

system that is rather categorical (South African) than universal, and in the context of

high poverty levels, the incentives are there to change behaviour in order to gain an

income through one of the available grants.

Evidence from local research mainly confirm the increase in the uptake of the

disability, foster care and child support grants on the one hand, but on the other hand

this uptake is put in the context of poverty, impact of HIV/AIDS and a failure in the

grant administration system in some instances.

Page: 39



Chapter 4: Quantitative Study Findings

Chapter 4:

Findings of the Quantitative Study on IncentiveStructures of Social Assistance Grants in South

Africa2

1. INTRODUCTION

As part of this study, a quantitative analysis of SOCPEN data was undertaken by Jan

Vorster from DATADESK. The aim of the quantitative analysis was to utilise existing

data to contribute to the establishment of a proper profile of grant beneficiaries in

order to inform the debate on incentives of social assistance grants.

The analysis exploits administrative data from SOCPEN covering the period 1997 to

2005, in an attempt to understand the pattern of benefit receipt. It also draws on the

2005 beneficiary survey and other sources as appropriate. The analysis focuses on

the CSG, the FCG and the DG, which are benefits that have featured in discussions

of incentive effects. It reveals trends in the uptake of benefits while comparisons with

population surveys also provide evidence of the advancing coverage of the system

and hint at levels of take-up. Cross-benefit analysis reveals the extent of uptake of

multiple benefits while analysis of longitudinal data, tracks the migration of

beneficiaries from one benefit to another. When interpreting the findings, it was vital

to take into account the impact of legislative changes and grant administration as well

as the influence of poverty, unemployment, the HIV/AIDS pandemic and cultural

practices regarding childcare and marriage.

2. SOUTH AFRICAN GRANT BENEFICIARIES

Statistics South Africa (Stats SA) estimated the total population of South Africa at

46.9 million in July 2005 (Stats SA, 2005c: 9):

Based on the number of persons registered on SOCPEN it seems that 22% of the

South African population were receiving grants by October 2005;

Adult women (18 years or older) represent 39% of the South African population

and approximately a third (6.04 million) are either grant beneficiaries themselves

2

This chapter has been based on an extraction from Vorster, Jan (2006), “Quantitative Study on IncentiveStructures on Social Assistance Grants in South Africa”. Some sections have been copied directly.

Page: 40




(receiving disability grants or older person’s grants) and/or they are recipients of

grants on behalf of children;


Figure 1: Population pyramid of the South African population adults, 2005

120

100

80

60

40

20

0

A g e o f a d u l t b e n e f i c i a r y

1,000,000

800,000

600,000

400,000

200,000

0

Frequency

120

100

80

60

40

20

0

1,000,000

800,000

600,000

400,000

200,000

0

MaleFemale

Gender (adult beneficiary)


Figure 2: Population pyramid of the adult beneficiaries, including recipients of

child grants, October 2005

Page: 41




There is an increasing number of adult women recipients and beneficiaries of

grants due to the immense increase in uptake of grants for children as well as the

increase in the number of women accessing the DG.

Women represented just over half of all DG beneficiaries in October 2005.

120

100

80

60

40

20

0

A g e o f a d u l t b e n e f i c i a r y

400,000 300,000 200,000 100,000 0

Frequency

120

100

80

60

40

20

0

400,000300,000200,000100,0000

MaleFemale

Gender (adult beneficiary)


Figure 3: Population pyramid of the adult beneficiaries excluding

recipients of child grants, October 2005.

The majority of beneficiaries receiving “adult grants” (older person’s grants and

disability grants) are women (see Figure 2). Overwhelmingly, women are also the

recipients of child grants.

Ten percent of all beneficiaries receive more than one type of grant;

The most frequent combinations of grant types are the DG and CSG (5.7%),

followed by the OPG and CSG (2.1%) and the OPG and FCG (0.7%).

The proportion of recipients with multiple kinds of grants increased over time,mainly because more women accessed the DG and the eligible age for the CSG

was extended.

Page: 42




48%

26%

14%

6%

CSG OPG DG DG CSG OPG CSG Other


Figure 4: Type of grants received by adult beneficiaries (only major granttypes shown)

3. DISABILITY GRANTS

In their explanation of the rapid take-up of the DG, CASE (2005:116) identified

poverty, the impact of HIV/AIDS, increased awareness of the DG and increased

access to the social security system as important factors.

Changes in the administration and implementation of the disability grant system

resulted in the inconsistent application of assessment criteria.

Many people from previously under-serviced areas who should have been in the

system earlier, also started to exercise their rights to access social security.

Officials involved in the assessment and awarding of DGs cited, in qualitative

research, poverty and unemployment as probably the most common reasons for

the increase in uptake (CASE, 2005).

From international experience, it appears that virtually all new grant systems

experience an increase in take-up as awareness and knowledge begins to

permeate both formal and informal support and advice systems (Walker, 2006).

3.1 Disability in the South African Population

Although not the intention of the DG system, it appeared from qualitative

research findings (CASE, 2005, and Vorster et al , 2004) that those who were

awarding DGs, some were also considering applicants who might be able to work

and had the desire to work but could not find employment, to be suitable

recipients of a DG.

Page: 43




Many officials find themselves in an ambiguous situation: they recognise people’s

need and constitutional right to social security, but appreciate that the DG was

not intended to cater for the unemployed. Yet some administrators have awarded

the disability grant as a form of poverty relief.

The DG should be understood in the context of a categorical system that

provides no benefits for long-term unemployed people and where

disproportionate numbers of unemployed people report health problems and

disabilities.

The analysis of SOCPEN data covered the period 1997 to 2005 with data

available in alternate years. It confirms a rapid increase in take-up and indicates

that it started before 2001; with a rapid growth in temporary disability grants

(TDGs). The increase in the uptake of permanent disability grants (PDGs) did not occur

until after 2001 when it coincided with an apparent reduction in the severity of the

condition for which PDGs and TDGs were awarded.

CASE sited in Vorster (2006) a loss of control and oversight following the

termination of the Pension Medical Officer function in 2001 and the absence of a

set of clear guidelines to replace it at that stage.

The Mashishi court ruling regarding the TDG does not point to beneficiaries

changing their behaviour, but rather to problems in grant administration.

It is interesting to note that the number and percentage of rejected/not

recommended applications have dropped significantly since 1997. Fewer that 1%

(16 289) of applications were rejected in March 2005 compared to 8% (31,821)

during 1997.

3.2 Uptake of the Disability Grant

The feminisation of the DG population was also confirmed by the study (see

Figure 4). The majority of women tend to take up the DG later in life compared to

men.

Should other provinces follow the same path as KwaZulu-Natal where women

beneficiaries of the DG are in the majority, a substantial increase in up-take

among women can still be expected in the Western Cape, Northern Cape and

Limpopo provinces.

Page: 44




0

50000

100000

150000

200000

1 5 - 1 9

2 0 - 2 4

2 5 - 2 9

3 0 - 3 4

3 5 - 3 9

4 0 - 4 4

4 5 - 4 9

5 0 - 5 4

5 5 - 5 9

6 0 - 6 4

6 5 - 6 9

Female Male


Figure 5: Sex and age profile of DG beneficiaries on SOCPEN, October

2005 (Note: there is no uptake of DG figures for women aged 65 and above, seeing as women

are eligible to apply for an Older Person’s Grant at age 60; men are only able to at age 65)

3.3 Combination of the DG and other grants

Just over half of women receiving the disability grant are also accessing grants

for children (Figure 5); a phenomenon that is likely to continue for as long as

women continue to take the principal responsibility for childcare.

Should these caregivers not be fit to be employed, the question remains whether

they will be able to provide the proper care needed by their children.

The majority of these women received the child support grant before they

accessed the disability grant. However, there were provincial deviations in this

pattern.

0

100000200000

300000

400000

500000

600000

700000

D G D

G / C

S G

D G / C

D G

D G / F C

G

D G / F C

G / S

C G

O t h e r

Female Male


Figure 6: Types of grants per sex received by DG beneficiaries (onlycombinations of statistical relevance are shown)

Page: 45




3.4 Income from Grants

Reflecting the limited hours of paid work and low earnings of women, the

combined median monthly income of female DG recipients from all grants was

approximately on par with the median earnings for women in South Africa.

In the case of men, the income from the DG was less than half the median male

earnings.

3.5 Migration from Temporary to Permanent Disability

Excluding cases that became eligible for the older person’s grant, it appeared

that the majority of DG beneficiaries have remained on the system, irrespective

of whether they received a TDG or a PDG.

The biggest migration from the TDG to the PDG (28%) happened during 1999 to

2001 and again from 2003 to 2005 (18%).

A very low percentage of DG beneficiaries reported being employed, indicating

both that the DG is well–targeted and that few people are illicitly supplementing

their grant income with earnings.

Of those who registered as rejected in March 1999 and who reapplied later, 60%

were successful in claiming a DG (either a PDG 5% or TDG 55%) by March

2001.

4. CHILD SUPPORT GRANT

4.1 Introduction

Before the introduction of the CSG, South Africa already had a relatively high

teenage fertility rate. Demographers point out that while the total fertility rate for the

country has declined, the teenage fertility rate has remained relatively high and has

not shown the same decline. It appears that there is currently no consensus amongst

demographers whether the teenage fertility rate is increasing or decreasing. Both

Makiwane and Udjo and Moultrie and Dorrington as cited in Vorster (2006) reported

an increase in the proportion of births in certain categories of teenagers. While

Makiwane and Udjo as cited in Vorster (2006) found an increase in the proportion of

births during the late teens (18 to 19 years), Moultrie and Dorrington as cited in

Vorster (2006) found an increase in the proportion of births to teenage mothers (15

to 19 years) in four of the nine provinces. However, they differ on whether the

national teenage fertility rate is increasing or decreasing. Moultrie and Dorrington’s

Page: 46




(2005) study covered the period from Census 1995 to Census 2001 and found a

decrease in teenage fertility nationally, while Makiwane and Udjo (2006) study

covered the period 1995 to 2005 and reported an increase.

4.1.1 Children in poor households

Nearly two thirds or 12 million children below the age of 18 years live in

households with a monthly income of R1200 or below (Childrens Institute,

2006:1).

By October 2005, 59% of all poor children were receiving social assistance

grants. The majority received the CSG (6.6 million) while approximately 300000

received the FCG and 91 000 the CDG.

4.1.2 Profile

28% of all mothers receiving the CSG were teenagers at the time of birth.

Comparing the number of teenagers receiving the CSG with the incidence of

teenage births in the national population suggests that the take-up rate of the

CSG by teenage mothers is low. Teenagers (younger than 20 years) represent

5% of all recipients in October 2005).

Nearly all (98%) of caregivers of CSG beneficiary children are woman.

The proportion of teenagers claiming the CSG was considerably lower (13%

lower) than the proportion of teenage mothers in the South African population

(mothers younger than 30 years) (Census 2001).

There appears to be no consensus whether teenage fertility is increasing or

decreasing, however, demographers agree that the levels remain high.

Before the introduction of the CSG there was already a relatively high incidence of

births to teenage mothers.

Page: 47




18

5.3

4440.338

45.4

100 100

0

20

40

60

80

100

120

Mothers : Census 2001 Mothers : SOCPEN

15-19 20-24 25-29 Total


Figure 7: Age of mothers less than 30 years on SOCPEN and Census 2001

4.2 Recipients and Caregivers

From SOCPEN data it appears that the CSG is mainly claimed by the mothers

(94%) of eligible children. The rest of the claimants act as guardians (mainly

grandmothers) and custodians.

The 2005 beneficiary survey confirmed that the majority of child beneficiaries live

with their mothers who are also recipients of the CSG (De Koker et al , 2006).

There was a low incidence of recipients not living with the CSG beneficiary

children and nearly all recipients were the first recipient of a CSG within the first

three years after the child’s birth.

4.3. Marital Status and Teenage Fertility in South Africa

Reasons for teenage fertility and family formation are complex and culturally

embedded.

Having children out of wedlock and teenage births were well-established

phenomena under certain sections of the population long before the introduction

of the CSG (Preston-Whyte, 1993).

For a large section of our population, marriage does not occur without bride

wealth and impoverished men find difficulty in obtaining it.

Page: 48




The domains of marriage and childbirth do not need to coincide. While premarital

births are disapproved of in many circles, the stigma attached to it is relatively

low as it is partly mitigated by the much valued demonstration of fertility.

In this context it can be argued that the CSG probably lessens the negative

financial consequences of existing social practices especially for children.

Before the introduction of the CSG, research indicated that even where women

had husbands, many raised their children with minimal financial assistance from

biological fathers.

The majority (75%) of CSG mother recipients at the time of application for the

CSG have never been married. However, it appeared from the 2005 beneficiary

survey that the proportion of women who had never married was lower than the

proportion registered on SOCPEN, probably indicating a change in the maritalstatus of these woman after they started to receive the CSG.

71.99

24.79

3.22

No Yes, 1 child yes, > 1 child


Figure 8: Percentage teenage mothers (<20 years at time of birth of CSG, mother caregivers only)

Page: 49




0% 20% 40% 60% 80% 100%

WC

EC

NC

FS

KZN

NW

GAU

MPU

LIM

Yes >1 Child Yes 1 Child No


Figure 9: Percentage of teenage mothers (per province (mother caregiversonly)

4.4 Uptake of the CSG

When the CSG was introduced for younger children only, one of the main

motivations was to provide financial support during the “window of nutritional

opportunity” period (within the first three years); when good nutrition has the most

significant effect on the development of the child.

Moreover, Woolard et al, (2005) established the positive impact of an early

receipt of the CSG on the development of children.

However, the majority of recipients successfully applied for the CSG when their

children were older; 53% recipients applied for the CSG after the so-called

“window of nutritional opportunity” period.

Reasons for the relatively late uptake probably include the fact that caregivers

struggle to get the right documentation and do not always have the necessary

knowledge about the CSG.

Care givers who were not the mothers of the CSG beneficiary children tended to

apply later for the CSG than mothers did.

Both mothers who were teenagers at the birth of the CSG beneficiary child and

those who were not, tended not to claim the CSG within the first year after the

child’s birth.

Page: 50




The proportion of mothers who were teenagers at the birth (not necessary at

application) of their eldest child to be registered on SOCPEN from 2000-2004,

increased from 23% in 2000 to 32% in 2004.

It appears that 15% of teenage mothers (19 and younger) claimed the CSG when

they were 20 and 41% claimed it when they were 21 to 25 years old. 12% claim the

benefit when they were 19. 7% when they were 18 and 4% when they were 17 or

younger. Those claiming a CSG before they were 18 represent only 1% of all

mothers receiving a CSG.

4.5 Income and Employment

The CSG is directed at children of low income caregivers and means-tested. It is

therefore not surprising that many CSG caregivers were unemployed and were

living in the poorest areas and in households with low incomes.

The labour absorption rate of women CSG recipients was lower than that of the

population South African women; 18% CSG women recipients was involved in

employment, compared to 33% women from the national population.

Those with jobs were usually low paid and not employed for a whole year. Fewer

than 40% of those employed received a regular income. It seems that the CSG is

well-targeted and does not leak to many non-poor caregivers and households.

Without an income from the CSG, many children and their households will be

destitute.

4.6 Number of CSGs per Caregiver

There is no evidence that the majority of CSG recipients are claiming grants on

behalf of many children. The majority claim for one child only (see Table 12).

The proportion mothers accessing more than one CSG is much lower than the

number of children per woman in the national population. 58% of CSG recipients received only one CSG.

Less than 1% of CSG recipients claimed for five children or more.

Page: 51




Nr of Children receiving CSG %

1 58%

2 30%

3 10%

>4 2%


Table 12: Number of CSGs per caregiver, shown as percentage.

4.7 Uptake and Income from other Grants

The proportion of caregivers who are receiving the disability grant in combination

with the CSG has increased such that, by October 2005, ten percent of all CSG

recipients received a DG and CSG.

It is especially grandmothers of CSG beneficiary children who are receiving an

OPG and CSG (4% of all CSG recipients).

Sixteen percent (16%) of CSG recipients receive an income from grants higher

than the 2003 national median employment amount for woman.

Those receiving both a DG or OPG and a CSG have a monthly income

approximately on par with the median income for employed women in South Africa.

5. FOSTER CARE GRANT

5.1 Introduction

Neither the SOCPEN data nor the 2005 Beneficiary Survey were specifically

designed to investigate whether biological parents leave their children in the care

of relatives in order to claim a FCG, which is three times the value of the CSG and

payable for a longer period. However, what was apparent from the 2005 beneficiary survey was that for many

it was not an option, because the majority of foster children are orphans (see

Table 13).

Page: 52




Reason Percentage

Double Orphan 45.1%

Mother deceased, father not available 33.2%

Abandoned 9.7%

Children neglected, parents unfit 6.3%

Parent(s) in jail 0.5%

Other 3.7%

Father deceased 1.5%

Source: Vorster, 2006Table 13: Main reasons why children were placed in foster care, shown aspercentage

Informal kinship care is a well-established practice for which formal

intervention through the child protection system is in many cases

unnecessary.

It is mostly grandmothers or other relatives who act as foster parents and, during

the 1990s, those who were on the state maintenance grant system were actively

encouraged to apply for a FCG.

Grandmothers claiming the FCG are therefore not a new phenomenon. From the

2005 beneficiary survey it appeared that there were children who had also lost

one or both of their parents and whose grandmothers were looking after them

who received a CSG, while others in the same circumstances received a FCG.

5.2 Foster Care System

Even though the foster care system, a system based on Western models of

family life and child care practices, was primarily designed to provide protection

to children, it appears that it is also providing poverty relief to children not

necessarily in need of the formal intervention of the child protection service.

This poverty relief is going mainly to relatives of foster children. This is not a new

phenomenon and already during the 1980s the Government recognised this.

The foster care system is under pressure, resulting in backlogs and some

children are not getting the protection that they should receive. There are too few

Page: 53




social workers and commissioners at Children’s Courts to handle the many

applications.

Many cases are channelled through the child protection system that does not

necessarily need protection but rather financial support.

It also appears that the foster care system is failing to adequately meet the needs

of children requiring placement outside the family context.

There has been a major shift since the 1990’s in terms of both the racial and the

geographical composition of foster parents. The overwhelming majority of foster

parents are now African. A larger proportion is now living in rural areas and/or in

informal dwellings.

9

19.5

3.4

12.2

21.5

12.5

7.3

4.9

9.7

WC EC NC FS KZN GT NW MP LM


Figure 10: Percentage take up of FCGs per province

The majority of foster parents are related to their foster children. 41% of cases,

the foster parent was the grandmother. In 30% of the cases the foster parent was

the aunt. And in 12% of cases other relatives or family are the foster parents (De

Koker et al , 2006).

Only in 9% of the cases, the foster parents are not related to the foster child (De

Koker et al , 2006).

The majority of foster parents are older woman and 41% is grandmothers of the

foster children.

Informal fostering is a well-established practice in certain sections of the South

African population.

Page: 54




Nearly two out of three foster parents receive more than one type of grant. Many

are also recipients of the OPS, the DG and or the CSG.

The majority of foster children are orphans, many of whom have lost both their

parents. The majority fathers of those children who have lost their mothers don’t

make contact with them.

Because the majority of foster children are orphans, it is to be expected that

foster placements will be long term.

Should the majority of caregivers of orphans take up government’s invitation to

apply for FCG, a massive increase in the demand for FCG can be expected. By

October 2005, 300,317 foster children were registered, while there were already

in 2004 533,746 maternal orphans and 512,684 double orphans in South Africa

(Jacobs et al, 2005: 53). Children enter formal foster care mainly when they are older than 7 years. Fifty

two percent (52%) of foster children were 13 years or older. Only 10% were

younger than 7 years and 8% were older than 17 years.

27348

97164

65548

0 to 7 8 to 14 15 to 21

Source: Vorster, 2006)

Figure 11: Age of Foster children grouped

The majority (65%) of foster children had been in formal foster care for less than

three years, while 90% had been in foster care for less than three years. Only

10% of children had been in foster care for longer than five years.

The majority of foster children fell into the age group 7 to 14 years at the time

their applications were registered on SOCPEN.

Approximately 50% of foster children had been staying with their foster parents

for ten years or longer before becoming beneficiaries of the FCG, 26% had been

staying for 2 years or less while 19% had been staying for three to nine years.

Four percent were direct placements.

Page: 55




It is thus evident that the majority of foster children were most probably not in

need of protection, but that their caregivers were applying for income support.

There appears to be an inconsistent application of stipulations regarding the legal

placement of children in kinship care.

There are huge backlogs regarding new applications, which is not to the benefit

of neglected or abused children in need of care.

A shortage of social workers and commissioners of Child Welfare, as well as an

increase in demand mainly cause backlogs.

For many years foster care has been regarded by applicants as a poverty

alleviation measure rather than a child protection measure. Even among some

professionals this appears to be a commonly held view.

From the 2005 beneficiary survey it appeared that a small percentage of childrenwere being fostered while their mothers formed part of their household. However,

it is unclear whether these mothers were suited to taking primary care

responsibility for the care if these children.

6. MIGRATION FROM ONE TYPE OF GRANT TO ANOTHER

6.1 Introduction

A very low proportion (1%) of child beneficiaries migrated from one grant to

another.

The main migration took place from the CSG to the FCG (39.6%), followed by

migration from the CSG to the care dependency grant (CDG)(20.3%).

Few (5%) child beneficiaries were transferred from one caregiver to another.

The SOCPEN dataset did not include sufficient detail on the reasons but, in most

cases, the death of a caregiver was the main reason.

Page: 56





Figure 12: Beneficiary migration across grants, shown as percentage

6.2 Changes in Caregiver

Only 2% of children who ever received the CSG were transferred from one

recipient to another

Currently the CSG lapses with the death of the caregiver and the new caregiver

must reapply, leaving vulnerable children without financial assistance when it is

very much needed.

Children did not directly migrate from the CSG to the FCG; there was a time lag in

the majority of cases.

There were a small proportion of cases where children were on the CSG and

unsuccessful applications were made for the CDG.

6.3 Migration from the Social Maintenance Grant

A small percentage (16%) of child beneficiaries of the terminated State

Maintenance Grant (SMG) reappeared on the grant system; most of them were

beneficiaries of the CSG.

Predictions were that many former SMG beneficiaries will end up on the foster care

system but it appeared not to have happened.

A very low percentage of these children were later beneficiaries of the FCG. It was

assumed that in the absence of the SMG many single mothers would have had no

other option than to leave their children in the care of others so that others could

claim a FCG for the children.

Page: 57

CSG-FCG-FCG CSG-CDG-CDG SMG-CSG-CSG CDG-CSG-CSG

SMG-FCG-FCG CSG-CDG-CSG other




7. CONCLUSION

The analysis of the SOCPEN data confirmed that a rapid increase in take-up of the

TDG commenced prior to 2001. The increase in the uptake of the PDG did not occur

until after 2001 when it coincided with an apparent reduction in the severity of the

condition for which the PDG and TDG were awarded. Further to this it was found that

the number and percentage of rejected/not recommended applications have dropped

significantly since 1997. Fewer than 1% (16,289) of applications were rejected in

March 2005, compared to 8% (31,821) during 1997. This is most likely to reflect the

new more relaxed benefit conditions although one would expect some fall in the

number of rejected claims as people become more familiar with the grant system.

The feminisation of the DG population was also confirmed by analysis of the

SOCPEN data. The majority of women tend to take up the DG later in life compared

to men. Just over half the women receiving the DG are also accessing grants for

children; whether women who cannot work are able to provide adequate personal

care to children will depend on the health condition and individual circumstances but

it is a phenomenon that is likely to continue even among those who are not, for as

long as women continue to take the principal responsibility for childcare.

Excluding cases that became eligible for the older person’s grant (OPG), it appeared

that the majority of DG beneficiaries have remained on the system, irrespective of

whether they received a TDG or a PDG. The biggest migration from the TDG to the

PDG (28%) happened during 1999 to 2001 and again from 2003 to 2005 (18%). A

very low percentage of DG beneficiaries reported being employed, indicating that the

DG is well–targeted and that few people are illicitly supplementing their grant income

with earnings.

The quantitative analysis revealed that there had been huge growth in the number of

CSG beneficiaries in recent years. However, if a comparison is made with the number

of teenagers receiving the CSG with the incidence of teenage births in the national

population, the quantitative analysis suggests that the take-up rate of the CSG by

teenage mothers remains low. Teenagers (younger than 20 years) represent 5% of all

CSG recipients registered at October 2005. These teenagers claiming the CSG were

considerably lower (13% lower) than the proportion of teenage mothers in the South

African population (mothers younger than 30 years).

Page: 58





provide financial support during the window of nutritional opportunity period (within

the first three years of a child’s life) when good nutrition has the most significant effect

on the development of a child. However, the majority (53%) of CSG recipients only

apply for the CSG when their children are older. Reasons for the relatively low uptake

probably include the fact that caregivers struggle to get the right documentation and

do not always have the necessary knowledge about the CSG.

The quantitative analysis reveals that the very majority of FCGs are paid with respect

to children who have lost one or both parents and the majority of foster parents are

related to their foster children. In 41% of cases, the foster parent was the

grandmother, in 30% of the cases the foster parent was the aunt, and in 12% of

cases other relatives are the foster parents. Only in 9% of the cases are the foster

parents not related to the foster child. The majority of foster parents are older woman

and 41% are grandmothers of the foster children. Nearly two (2) out of three (3) foster

parents receive more than one grant type. Many are also recipients of the OPG, the

DG and or the CSG. Because the majority of foster children are orphans, their

placements may be expected to be long-term. However, the majority of orphans are

not supported through receipt of FCG and FCG caseloads could rise substantially if more families took this course of action in the event of parents dying.

The quantitative analysis further found that children enter formal foster care when

they are older than seven (7) years. Fifty two percent of foster children were 13 years

or older. Only 10% were younger than seven (7) years and 8% were older than 17

years. The majority of foster children are in the age band where they are no longer

eligible for the CSG.

Given the high levels of unemployment and poverty, the impact of HIV/AIDS and the

growing awareness of citizen’s rights to social security, there will be huge demands

on the social assistance system. While the current categorical approach is resulting

in holes in our social security system, the disability grant and foster child grant are

under pressure to cater more widely than was originally intended when the systems

were designed. Most of the concerns about perverse incentives are related to

impoverished people requiring income support within a system that does not provide

universal coverage. It appears that within these limitations, local officials were, for

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years, already responsive to this need, sometimes beyond the intention of the

particular grant.

The relatively high incidence of children in kinship care and teenage births were well

established phenomena before social assistance was available to large sections of

our population. The child support grant and foster care systems seem to be

protecting the vulnerable – children – from the worse financial consequences of

existing behaviour. However, there is no conclusive evidence from SOCPEN data

and other quantitative sources that grants contribute to an increase in any of these.

The Department of Social Development currently plays a crucial role in securing

social assistance to low-income households through a non-comprehensive social

grant system. Alternatives are needed for those who are able and prepared to work,

but who end up receiving grants that are not intended for the long-term unemployed.

Part of the solution would be for central government to implement an integrated plan

for poverty alleviation, which has, at its core, an emphasis on job creation.

Furthermore the impact of HIV/AIDS on the social assistance system should be

thoroughly evaluated. Currently the Department of Social Development is, among

other things, also footing the bill for the high levels of unemployment and the impact

of HIV/AIDS.

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Chapter 5:

Examination of the Grant Administration System

1. INTRODUCTION

An effective and efficient Social Security Administration system should be an

instrument through which policy is implemented in such a way that the correct cash

benefit is transferred to every person eligible at an appropriate time. Such a system

should have adequate controls in place to be able to exclude persons not eligible from

accessing Social Security benefits, and also limit any unintended effects that may

occur.

It is for this reason that the South African Social Security Grants Administration

System has been examined in the context of the occurrence of possible unintended

effects. The focus will be on administrative problems during grant applications and

approval and loopholes in the SOCPEN System to understand the context in which

these issues possibly exist.

2. SOUTH AFRICAN SOCIAL SECURITY ADMINISTRATION SYSTEM

2.1 SOCPEN as a Grant Administration System

The administrative system of the South African Social Security grants system is called

the SOCPEN system (The Social Pension System). The SOCPEN system

administers the follow grant types:

Old Age Pension;

Child Support Grant;

Disability Grant;

Foster Child Grant;

Care Dependency Grant;

War Veterans Grant;

Grant in Aid (given only in combination with OAP and DG if qualify); and

Social Relief of Distress.

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In order to understand the functioning and operation of the SOCPEN system, the

different levels of operation as well as the processes within the administration system

are briefly explained.

The SOCPEN administrative system functions at 2 levels: at an application and

process level (the value chain) and at a maintenance, verification and information-

monitoring level. The application process is a Provincial function and is decentralised.

The maintenance, verification, voucher generation and monitoring is a centralised

function and controlled by SASSA at a national level.

2.2 Provincial Responsibilities

The main responsibility at provincial level is to receive, capture and approve grantapplications. Some of these processes are further decentralised to district level in

order to improve service delivery. Although norms and standards are in place,

currently provinces administer these processes differently. With the establishment of

SASSA, uniformity in the administration process should be reached in the near future.

2.3 National Responsibilities

Once an application has been approved and put into payment at a Provincial level,

the responsibility of voucher generation, validation and information-monitoring

becomes a SASSA function at national level.

The SOCPEN system at a national level generates the vouchers for payment to

beneficiaries. Once the vouchers are generated, the funds are transferred via the

provincial offices to third party pay contractors who administer the cash benefits on

behalf of the SASSA. At a national level, payments are monitored and a number of

mechanisms are implemented to limit loopholes in the system. If for instance

exceptionally large payments are detected in a month, Provinces are informed and

payments can be stopped if irregularities are detected. The maintenance and

enhancements of the system is also a national responsibility and undertaken on an

ongoing basis to ensure sustainability, stability and the effective delivery of services to

clients.

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2.4 Management of the administrative system

The management of the South African Social Security System is the responsibility of

SASSA.

SASSA is a newly established agency and started functioning autonomously from 1

April 2006. The responsibility of the Department of Social Development (formerly

responsible for the implementation of the grants) is now only responsible for the

development of policies for the implementation of the administrative system and the

monitoring of the implementation of these policies.

The management of the administration process is realised through a service level

agreement signed between the Department of Social Development, SASSA and

Provincial offices. There are currently nine (9) service level agreements in place

governing the delivery of cash benefits and the management of the administration

system. This in itself can pose a risk in terms of weaknesses in the management of

the administrative system, since there is no single document governing management.

This however is only an interim arrangement until SASSA becomes fully functional.

Apart from the service level agreement, monitoring of the implementation of the

administration system by both the National Department of Social Development and

SASSA is an important management instrument that will assist and improve the

management of the system at all levels of implementation.

Although monitoring is done frequently by the Department of Social Development, the

recommendations made in the monitoring reports are not being implemented at the

moment and this can be seen as a challenge in terms of administration due to the fact

that mistakes made are not being rectified or remedied.

3. CHARACTERISTICS OF AN EFFECTIVE AND EFFICIENT GRANT

ADMINISTRATION SYSTEM

3.1 Delivery and Volume

When planning for ability of delivery and coping with volumes, the technical ability of

the system as well as the implementation thereof by personnel at an implementation

level should be taken into account and strategies should be developed to incorporate

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the optimal functioning of all aspects that the administrative system of a cash benefit

system comprise of. According to Robert Walker (2005), the predominant objective is

the efficient processing of applications and delivery of benefits. Any administrative

system concerned with the delivery of benefits must be adequate to meet the volume

of delivery of cash benefits. Failure to deal successfully with these volumes could

result in delays and often a compromise in accuracy on the delivery side of cash

benefits. (Walker, 2005: 230) On the recipients’ side, these delays could add to

uncertainty in people’s lives and often destitution in the case of cash benefits aimed

at poverty alleviation.

The SOCPEN system as a transfer and payment system can quite successfully carry

the volume of transactions without any noticeable problems or causing any delays in

payment due to incapacity of the system. This is due to the vigorous planning in terms

of frequency to deal with any possibility of large take-up rates of the grants that was

not anticipated by the sections responsible for implementation of the grants. This

planning and continuous enhancement in terms of delivery and volume happens at a

national level. The system currently carries approximately 11 million active

beneficiaries with ease and should a sudden rapid increase occur, provisions have

been made to deal with the increase without compromising the delivery of services.

Apart from the ability of the system to support the delivery and volume at a national

level, provincial level’s responsibility to deal with these issues is also critical. Although

the SOCPEN system has the ability to sustain a large number of applications rather

effortlessly, delays are currently being experienced in terms of the capturing,

validation and approval of applications. In the South African context this is a provincial

responsibility and the delays are caused by a number of factors such as the lack of

sufficient human resources, lack of technological resources and the large amounts of

backlogs to be dealt with. The delays vary between Provinces, and in some casesapplicants can wait up to more than 120 days for their first payment. This could lead

to immense frustration and hardship amongst applicants.

3.2 Speed of Service

Speed and response in the delivery of services is important and beneficiaries of cash

benefits generally dislike having to queue and wait in offices or at pay points. Delays

are inconvenient and stressful, especially to those recipients accompanied by

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children, older persons and those beneficiaries with disabilities. Applicants want

processing times to be short and payments to be prompt.

Due to the decentralised administrative system, there are several areas in the

application process where speed of delivery can be a frustration to applicants. During

the process it can also be possible that an applicant experience several different

delays during the delivery of the service applied for (Delays can occur for example at

the capturing phase, approval stage and with the first payment).

As is the case with delivery and volume, speed of service depends not only on

technical ability to provide the service applied for promptly, but human resources,

availability of infrastructure and the application process will all have an effect on the

speed of service.

3.3 Accuracy and Adequacy

It goes without saying that recipients expect to be paid their correct entitlement and

an adequate level of benefit. An adequate level of benefit is a policy issue, but the

correct entitlement is an administrative one. Both considerations link to customer

satisfaction. Certainly, measures of customer satisfaction are linked to the outcome of

an application. People most likely to complain or show dissatisfaction are those

whose applications have been rejected. The associations between the outcome of an

assessment and satisfaction means that benefit levels are likely to constrain the level

of customer satisfaction that an administrative system can attain. This is almost

irrespective of the quality of other aspects of the service (Walker, 2005).

While an applicant places a premium on accuracy, when benefit rules are complicated

they are unlikely to be aware of assessment errors that occur, especially in the case

of illiterate applicants and applicants with limited literacy. In such cases, a general

feeling of injustice might lead to an appeal being lodged against the decision (i.e., the

disability grant in South Africa), instead of acceptance due to the understanding of the

assessment process (Walker, 2005).

Another aspect to mention with regards to accuracy in social security administration

systems is the recovery of funds from benefit recipients, which can result in long-term

indebtedness (Walker, 2005: 232).

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The National Treasury largely determines the South African Social Security grant

amounts and the amounts are adjusted annually in order to provide adequate cash

benefits to the vulnerable. As mentioned above, the accuracy of cash benefits is

administrative and often mistakes can be made in the calculation of individuals’ cash

benefits.

Large communication campaigns and chasing targets, such as the targets of the child

support grant, may put administrators at an implementation level under a lot of

pressure to reach set targets. Accuracy is easily compromised and can be to the

disadvantage of the applicant/beneficiary, especially if the beneficiary has been

underpaid.

Policies for the recovery of funds from beneficiaries due to overpayment are in place.

These policies are implemented differently in various provinces. In some provinces,

recovery of funds is viewed as an administrative burden. In very few cases funds are

actually recovered. In cases were recoveries do take place, this can often place the

beneficiary in debt to the Department for years. Since the grant programme is

targeted at the poorest of the poor and the most vulnerable citizens, the burden of

indebtedness to the Department can weigh heavily on these beneficiaries and their

families.

3.4 User Efficiency

According to Walker (2005), from an application perspective, user efficiency is

defined as obtaining the maximum benefit for the minimum effort. This does not

necessarily correspond with technical efficiency when defined narrowly in the short-

term interests of administration systems. Internationally, recipients require ease of

application, simplicity of rules and procedures, good communications and avoidance

of repetition in providing information to agencies. (Walker, 2005: 232) Applicants

interpret simplicity in terms of being readily able to discover the benefits available, the

level of their entitlement and the application procedure that needs to be followed.

Simplicity has definite advantages for administration in terms of ease of

computerization, less staff training, reduction in error and lower advertising costs.

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The Administration system of the South African Grant system can be described as

somewhat cumbersome for both the applicant and the administrator. The forms used

for most grants are detailed and often quite technical and this could result in

applicants feeling frustrated with the process of applying for a grant. It must also be

noted that a large number of beneficiaries are only semi-literate and some even

illiterate and these beneficiaries can feel intimidated by the process.

Administrators on the other hand can also feel intimidated by the process, especially

in cases where no proper training has been provided to administrators on the

application processes. Difficulty in especially the application of the means test can be

detrimental to user efficiency and circumstances of beneficiaries.

In the case of the South African Social Security grant administration system, it is not

entirely a disadvantage that the administration process is long and tiresome, as this

may also be instrumental in closing possible gaps where unintended benefits can

come about.

4 WEAKNESSES IN THE GRANT ADMINISTRATION SYSTEM

In this section, an attempt is made to examine some aspects of the system to

determine possible loopholes and weaknesses that may exist and could add to the

occurrence of unintended effects in the grant administration system.

Concerns with regard to unintended effects, are mostly concerned with:

Foster Child Grant;

Child Support Grant; and

Disability Grants.

4.1 Foster Care System

4.1.1 Introduction

The foster care system was designed to intervene on behalf of children needing

protection, especially neglected and abused children. The FCG is linked to the foster

care system.

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Foster care is supposed to be a temporary arrangement until such a time as the child

can be reunited with his or her biological parent, or until, in the case of an orphan, is

adopted by either the foster parent(s) or other individuals or families. The FCG is not

means tested as its objective is not poverty alleviation but to provide financial support

to protect children for a short-term or on a temporary basis pending the rehabilitation

or reconstruction of the child’s natural environment for their safe return. According to

the Child Care Act, placement of foster care is usually two (2) years, and placements

beyond this time period require an extension of the court order.

FCGs are paid to registered foster parents for children who have been placed in their

care. The placing of children in the care of a foster parent is a legal process and is

dealt with by the children’s court. The process of placing a child in foster care is

complicated, costly and usually a lengthy process which involves interviews with the

applicant and the child in question. Foster parents and subsequent placements are

recommended by Social Workers who then present each case in a Children’s Court.

The Commissioners of Child Welfare through a court order then formalise the foster

placements.

4.1.2 Social Workers

There is currently a shortage of Social Workers who have to deal with the ever

increasing number of FCG applications (See Figure 13 below). They are overloaded

with work and do not have time to review cases, resulting in the huge backlogs that

exist in the system across the country. According to Acess (2006) the foster care

system is collapsing under the strain of the number of applicants.

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0

10

20

30

40

50

60

70

80

90

WC EC NC FS KZN GT NW LM MP

Grants per Social Worker Supposed norm of 6

Figure 13: Number of Foster Care Grants per Social Worker per province

In terms of access to the FCG the following 2 scenarios exist:

CSG provided instead of FCG due to workload of Social Workers. Since 1999

social workers have reported an increase in applications for the FCG by

grandmothers caring for their grandchildren (orphans). Social workers further

indicated then that they were overburdened with work and were not eager to workwith these applications due to an already high load of work. Social workers seem

to believe that time spent on child protection services rather than poverty

alleviation is more important. In the Northern Cape social workers recommend to

FCG applicants that they should rather apply for the CSG as this is quicker and

less complicated. One of the social workers stated that this was done “..just to get

them off my back” (Vorster, 2006)

FCG applied for instead of CSG due to higher monetary value. During an

interview with a Social Worker in Pretoria North, similar facts to the above were

stated and that an increase in applications for the FCG was apparent. They

further stated that many applications for the FCG were based on the fact that

others care for people’s children because their parents live and work far from their

children. Caregivers, mostly grandmothers and other relatives, then apply for the

FCG because of its higher monetary value. Many people see the FCG as a way of

poverty alleviation. Most applicants do not understand the legal implications of the

grant.

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4.1.3 Identity Numbers

With regard to the SOCPEN system, some weaknesses do exist that could allow

people to be entered onto the system fraudulently. One of these weaknesses is the

field on SOCPEN where the child beneficiary’s ID needs to be captured. Provision is

made for this and the although Act requires an ID number because foreign children

can also be fostered through the foster care system, the child’s ID-number field on

SOCPEN is not validated. This means any number can be entered into this field, eg.

12345679 or 0000000. Therefore it is difficult or in some cases, even impossible, to

verify child ID-numbers or birth dates. This could lead to the same child being used to

access more than one foster child grant, or a child staying on the system for any

period of time because age cannot be verified.

4.1.4 Court Order Number

The court order number field is currently also problematic, as no uniform court order

numbers are utilised, which creates a huge challenge for the administrators in terms

of verification of valid court order numbers. The Social Security Grant administration

system often relies on the administration systems of other Departments in order to

validate beneficiary data. There is currently no centralised database of court orders

where these can be verified. The impact of this is that the court order cannot be

authenticated.

4.1.5 The Lapsing of Grants

The administration of the foster care system is a welfare responsibility whilst the

payments of these grants are administered through the SOCPEN system. Limited

contact exists between these two administration systems, which create many

challenges, and risks. The welfare processes of moving children from homes to

families are not very often communicated to the payment administrators, and

therefore grants are not lapsed accordingly. This could lead to foster parents

receiving payments where children are no longer in their care.

Another challenge is that FCGs are not lapsed automatically when court orders expire

after 2 years. Administrators of the SOCPEN system are not responsible for the

notification of lapsing of these grants, since this has to be done by Social Workers.

After a period of two years, the court order for fostering a child expires and legally the

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State becomes the guardian of the child in question. Without a valid court order, in

theory, the foster child grant cannot be paid to a child.

Currently there are huge backlogs with regard to the reviews of FCGs due to the

already mentioned problem of lack of sufficient social workers to undertake reviews.

This results in children staying in the foster care system until the age of 18 or 21, (if

child is still of a school going age) due to non-lapsing of grants after 2 years.

4.1.6 Adoptions

The FCG is meant to be only a temporary measure of placing a child in a safe, stable

environment until parents are rehabilitated or until children are adopted. The majority

of children currently receiving FCGs are orphans and therefore, rehabilitation is notan option and adoption of these children is rare. A reason for this could be that there

are no incentives for the fostering family to adopt a child who is fostered, since no

monetary compensation is given to a family who adopt a child.

Another reason why children might not be adopted is the fact that, according to the

Act, strict checks are done on various aspects of living conditions of prospective

parents, one being the ability to provide for children financially. However, due to the

high poverty level amongst most families in South Africa, these criteria are often not

met by families.

4.2 Child Support Grant System

To determine whether the administrative system contribute to the decision of a

teenager to get pregnant, is almost impossible, as this is a personal choice and not

an administrative function. This issue will be researched in detail during phase 3 of

the project.

4.3 Disability Grant System

4.3.1 Introduction

According to the Act (13 of 2004), a person becomes eligible for a DG, if he/she:

(a) has attained the prescribed age (18 years); and

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(b) is, owing to a physical/mental disability, is unfit to obtain by virtue of service,

employment or profession the means needed to enable such a person to

provide for their own maintenance.

According to Regulation 2(3)(b) a person only becomes eligible for a disability grant if

the disability results in them becoming incapable of entering the labour market.

Furthermore, the applicant must not refuse employment, which is within their

capabilities, or to receive treatment, which may improve his/her condition. In lieu of

this, the disability grant is supposed to be a grant that replaces employment income

amongst people with a disability and is not a grant awarded on the basis of the

presence of a disability (or ailment) alone.

4.3.2 Assessments of Disability Grants

When applying for the DG, an applicant does not specify whether they are applying

for a permanent or a temporary DG. The decision resides with the medical doctor

conducting the assessment of the applicant. The doctor decides whether the ailments

afflicting the applicant warrant a permanent or a temporary grant. These doctors are

either doctors from the State, or doctors approved by the State (or in some provinces,

assessment panels are utilised) to conduct the examinations. These doctors or

assessment panels are required to complete certain forms pertaining to the

applicants’ medical condition and provide recommendations as well. A problem arises

when doctors or assessment panels are not adequately trained for assessing

beneficiaries for the DG. This could lead to errors pertaining to information of the

applicant as well as inaccurate diagnoses being made.

Another problem is that doctors tend to prioritise very sick patients and set aside

certain days or times to examine DG applicants. This causes backlogs with the

processing of applications. Also, problems concerning doctors vary between the

provinces. In provinces, such as Gauteng and the Western Cape, there are sufficient

numbers of doctors and backlogs aren’t such a problem. In provinces where doctors

are few and far between, such as Limpopo, immense backlogs of applications are

reported.

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4.3.3 Security measures in place

Various security measures have been implemented to prevent fraudulent disability

grant applications being made. After the doctor or assessment panel has conducted

their examination, the prescribed form is completed (with recommendations) and sent

directly to the district office where the applicant applied; this is done to prevent

applicants from copying the medical form and distributing it to other people. According

to the norms and standards of the Department of Social Development, forms are also

supposed to be numbered in order to prevent the duplication of such forms; this is

done as a measure against both internal and external fraud.

4.3.4 Lapsing of TDGs and Backlogs

A TDG is only valid for a period of six months, with a possible extension of another

six-month period, pending the positive outcome of a review. Lapsing of the TDGs (6

or 12 months) may only occur after the appropriate notification has been given to

beneficiaries (3 months). Due to administrative problems, such as unreliable address-

fields, it is not always possible to notify beneficiaries well in advance of the lapsing of

their grants. This results in grants not being lapsed and overpayments occur.

The lapsing of grants also differs across the provinces. Gauteng, Western Cape and

Northern Cape provinces all laps grants automatically; Gauteng is the province with

the least amount of backlogs and all three provinces notify beneficiaries by post. The

problem with this however, is that notifications don’t always reach their intended

destinations. Other provinces, like the Eastern Cape and Free State receive list of

possible grants to be lapsed and beneficiaries are then lapsed manually.

Mpumalanga, Limpopo and North West have extreme backlogs in the processing,

and hence lapsing, of grants, whilst KwaZulu Natal has a system of manual lapsing in

place that worked well in the initial stages, but has become bottlenecked and lapsing

of grants do not take place timeously.

4.3.5 Other Administrative problems

Other administrative problems also encountered are:

Fraudulent doctors, who only endorse grants for 6 months. This can be seen as a

problem because every time the doctor makes an assessment, the doctor gets a

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fee. So, instead of making a recommendation of a permanent grant and getting a

once-off fee, the doctors have patients coming back every 6 months and receive

payment for each visit;

Collusions of staff, who forge applications or forms in order to obtain money;

Inconsistency in the completion of the forms; this refers to the criteria not being

applied uniformly. This should be understood in the context of social factors,

which are not supposed to be considered in the making of a recommendation.

4.3.6 Medication and the disability grant

From interviews held at various clinics with health workers, it became apparent that

some beneficiaries discontinue their medication in order to stay impaired to continue

receiving the TDG. At the Pretoria North Clinic a system has been implemented

whereby recipients must take their medication for 6 months consecutively in order for

an extension to be recommended. This has been implemented through the

monitoring of recipients files and medication uptake records and has proven to work

quite successfully. If a person fails to take medication for 6 months consecutively, the

respective doctors do not recommend recipient applications. Although this system

works well in this specific clinic it may not be the case for other clinics due to large

volumes of patients, management problems and time constraints.

During interviews held at the Pretoria Academic Hospital, a nurse who was asked

about medication stated the following. “…. Although transport may be a problem for

some people, they ‘forget’ their medicine and stay sick for longer so they can keep on

getting the grant. But then again, some people may really have trouble in getting to

the hospital in order to get their medication because of a real lack of money for

transportation. It is sad, because instead of getting better, they only want money….’

4.3.7 HIV/AIDS, TB and other ailments

HIV/AIDS affects a large portion of the population, and the progression of the

condition has a large impact on whether an applicant is eligible for a disability grant or

not. Although rumours have been received that people are infecting themselves

deliberately, interviews with staff at the Pretoria North Clinic indicated no incidences

of this nature that they are aware of. According to Acess (2006) cases have been

reported where HIV mothers stop taking their ARV in an effort to drive their CD4 count

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down so as to access the grant. Further research needs to be conducted in order to

substantiate such rumours.

4.3.8 Poverty

From the interviews conducted with several health workers and social workers it

appears that a lot of people who are unemployed apply for the DG because the grant

is seen as a means of acquiring a regular income. This is further supported by the

submission of Acess (Acess, 2006). It was stated that people with minor conditions,

like very slight high blood pressure, apply for the grant (although often rejected) since

there is a misconception amongst the populace that even the slightest impairment

makes one eligible for the grant.

A health worker at the Pretoria Academic Hospital also stated that a lot of applicants

are turned away because of non-recommendations, but they return with new illnesses

“…it appears that they will do anything to receive the grant …”.

From the quantitative analysis of beneficiaries, it appears that there has been a sharp

increase in the take-up of the DG for people between the ages of 50-59 for females

and 54 -64 for males. This is the period where people are most vulnerable in terms of

losing their jobs due to physical demands and also age, but they are still too young to

access the Older Person’s Grant.

5. Conclusion

In conclusion, possible weaknesses can be summarised as followed:

The FCG is intended to be a temporary arrangement, but in practice it is being

utilised as a permanent/long-term arrangement as a result of the high number of

orphans and in the context of poverty alleviation.

Due to the high caseloads of social workers, the CSG is often recommended in

cases were FCG is appropriate.

In other cases the FCG is applied for by caregivers instead of the CSG due the

higher monetary value of the FCG.

It appears that applicants of FCG do not understand the legal implications of

applying for FCG.

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A valid 13-digit South African ID-number is not compulsory for foster children, and

therefore, it is not possible to validate the existence of these children, whether the

individual is still alive or to determine the age of the individual.

The huge backlogs with regard to the review of FCGs due to the lack of sufficient

numbers of social workers, result in children staying in the foster care system until

the age of 18 or 21.

The lack of a uniform court order numbering system contributes to insufficient

controls of the system, which in turn opens-up possible areas where unintended

effects can occur.

The FCG is utilised as an alternative to adoption (orphaned children), and the

majority of families do not fulfil the financial criteria to adopt a child.

Inexperienced doctors or assessment panel members can lead to errorspertaining to information of the patient as well as inaccurate diagnoses being

made.

Various security measures are in place to address the possibility of unintended

effects and fraud, which are implemented by the Provinces.

TDGs are not lapsed according to the Regulations in all provinces, due to

inaccurate address information of beneficiaries, huge backlogs and the required

notification of pending lapses.

In the context of poverty and HIV/AIDS and unemployment, it appears that some

doctors and assessment panel members are sympathetic toward applicants when

making recommendations for DGs.

Cases have been reported where beneficiaries discontinue their medication in

order to retain incapacity benefits.

The Department of Social Development does monitoring on a frequent basis, but

very few of these recommendations are implemented.

The SOCPEN system can sustain large volumes of applications rather effortlessly,

but the lack of sufficient human and technological resources at provincial and

district level hampers the speed and volume of processing of applications. Due to

the fact of the diverse populations across the country, a decentralised system for

the dispensation of social assistance grants is the only feasible option for such an

enterprise, but due to the above mentioned lack of resources, this contributes in

its own way as no uniform control is exercised on a national level.

Chasing of targets in terms of beneficiary numbers can put administrators under

pressure and this easily compromises accuracy.

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The complicated nature of the application forms can be cumbersome to both the

applicants and the officials, especially with regards to the application of the means

test. This, however, is instrumental in closing possible gaps where unintended

effect can occur.

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Chapter 6: Summary of Findings and Conclusion

Chapter 6:

Summary of Findings and Conclusion

1. Introduction

In South Africa, the provision of social assistance benefits constitutes the largest part

of the government’s poverty alleviation programme. By December 2005, a total of

10.6 million people, including approximately 7.7 million children, were benefiting

directly from the various grant types. Grant beneficiaries represent 22% of South

Africa’s population, excluding other family members that may also benefit directly or

indirectly because of them staying in the same household.


On the one hand, stakeholders have applauded the government for the increase

in grant uptakes but have also indicated that many people who should be

benefiting from social assistance still do not.

On the other hand, both within the government and amongst the public, some

concerns have been raised about the increase in grant uptakes. These concerns

are mainly about financial sustainability, corruption and some unintended effects

(perverse incentives) within the current South African Social Security System.

This report is the first part of an ongoing programme of research concerning the

incentive structures created by the configuration of social assistance grants in South

Africa. Many of the potential perverse incentives created by the South African Social

Security System result from its categorical nature in which benefits are provided to

certain categories of people in financial need but not to others and, in addition, some

grants have a higher monetary value than others. In the context of high

unemployment, poverty and HIV/AIDS it is expected that the South African Security

System will be under continuous pressure.

2. Understanding Incentives

The incentives associated with the South African Social Security System are created

by the provision of grant income only to people with particular characteristics. Some

of these characteristics can be acquired through changing their behaviour in order to

Page: 78




be able to successfully apply for grants with the prospect of becoming better off

financially. It is therefore important to understand the complexity of human behaviour

and other factors that can influence this behaviour in terms of incentives. The

decision to change behaviour in order to change ones characteristics to become

eligible for a grant is not a simple and straightforward one. In any decision (for

instance to get pregnant to access an amount of R190) there are always certain costs

as well as benefits involved. People further do not respond immediately and directly

to incentives; for many there are delays, hesitations and doubts before they act.

Incentives become perverse when an individual would be better off if they took a

course of action in which someone else – normally a person or body in authority –

disapproves.

3. Disability Grant

The incentive concerns associated with the DG were as follows:

Self infection with infected materials;


Failure to take health enhancing medicines or operations in order to stay sick and

continue claiming disability grants.

International evidence, especially in the UK, US and Canada indicates that the

increase in claiming disability benefits is a worldwide phenomenon. It is important to

recognise that circumstantial evidence of migration into incapacity benefit is not

always easy to interpret. For example, the coincidence of high levels of incapacity

benefit receipt in areas of high unemployment is not necessarily evidence of shirking.

No evidence could be found in the international literature of persons infecting

themselves, or not taking life saving medicines in order to claim disability benefits.

International literature further suggested that incapacity benefits are typically higher

than unemployment and other benefits because they are envisaged to be long term

rather than temporary. They often also meet the additional costs of disability and may

also have a compensatory component.

Local evidence suggests that the growing take-up of the DG should be seen in the

context of poverty, unemployment, the impact of HIV/AIDS, increased awareness of

the DG and the increased access to the South African Social Security System.

Further to that, changes in administration and the implementation of the DG system

Page: 79




has resulted in the inconsistent application of assessment criteria. Also many people

from previously under-serviced areas who should have been in the system, started to

exercise their rights to access social assistance benefits.

Further local evidence also suggests many instances where applicants change their

behaviour in order to obtain the DG, although much of the evidence remains

anecdotal. Moreover, such evidence needs to be interpreted with care. When, for

example, a medical officer at a tuberculosis (TB) clinic opined that ”…..it seems

sometimes to me that developing TB is a kind of a blessing for some of them, that

they now stand a chance of getting a grant” he was not necessarily suggesting illicit

behaviour on the part of beneficiaries but instead remarking on the ironic

circumstance of people needing to be sick in order to have access to a stable and

more adequate income. It was further stated that in some of the poorer provinces,

the DG is known as the “poverty grant” because it is such an important source of

income, sustains so many households, and may be mistakenly viewed by some as a

generic anti-poverty measure rather than as a grant for persons with disabilities.

The analysis of the SOCPEN data confirmed that the rapid increase in uptake of the

TDG commenced prior to 2001. The increase in the uptake of the PDG did not occur

until after 2001 when it coincided with an apparent reduction in the severity of theconditions for which the PDG and TDG were to be awarded. Further to this it was

found that the number and percentage of rejected/not recommended applications

have dropped significantly since 1997. Less than 1% (16,289) of applications were

rejected in March 2005, compared to 8% (31,821) during 1997. This is most likely to

reflect the new more relaxed benefit conditions although one would expect some fall

in the number of rejected claims as people become more familiar with the grant

system.

The feminisation of the DG beneficiaries was also confirmed by the analysis of the

SOCPEN data. The majority of women tend to uptake the DG later in life compared to

that of men. Just over half the women receiving the DG are also accessing grants for

children; whether women who cannot work (disabled) are able to provide adequate

personal care to children will depend on the health condition and individual

circumstances but it is a phenomenon that is likely to continue even among those

who are not, for as long as women continue to take the principal responsibility for

childcare.

Page: 80




Excluding cases that became eligible for the OPG, it appeared that the majority of DG

beneficiaries have remained on the system, irrespective of whether they received a

TDG or a PDG. The biggest migration from the TDG to the PDG (28%) happened

during 1999 to 2001 and again from 2003 to 2005 (18%). A very low percentage of

DG beneficiaries reported being employed, indicating that the DG is well–targeted

and that few people are illicitly supplementing their grant income with other earnings.

According to the Social Assistance Act (Act 13 of 2004) the DG is intended to be a

compensatory grant and not an unemployment or poverty alleviation grant. It appears

that many officials and doctors find themselves in ambiguous situations where they

recognise both the financial and health needs of people and constitutional right to

social security and award the grant believing it to be a form of poverty relief. This is

further legitimated by the fact that the DG is not linked to a person’s incapacity but

rather to an illness.

Another administrative problem encountered was the fact that the TDG is not, as a

rule, lapsed and therefore beneficiaries tend to stay on the system for long periods of

time. This could act as a factor encouraging people to enter the grant system through

the TDG, knowing that they would get financial assistance for a substantial period of time. It was further reported that even if people are unsuccessful on first application,

they return with new ailments until such time as their applications are approved.

The issue of people discontinuing the taking of their medicines in order to stay in the

grant system was tested at a few clinics in Gauteng and although in most cases

officials confirmed this behaviour, this phenomenon will be investigated in greater

detail when the proposed qualitative research study is launched.

In summary, the quantitative analysis of the SOCPEN data did not provide any

evidence of people changing their behaviour in order to access the DG. It only

confirmed the increase in uptake and the feminization of DG beneficiaries. Local

evidence and interviews held, however, suggest that perverse behaviour has become

apparent amongst some beneficiaries. Further to this, it appears that in some

instances, the DG is used as a poverty alleviation grant rather than a compensatory

grant.

Page: 81




4. Child Support Grant

The incentive concern associated with the CSG was as follows:

The CSG provides an incentive for especially teenagers to have a child in order to

access the grant, and therefore creating an increase in teenage pregnancies.

International evidence found that the incidence of teenage pregnancy is high in the

United States and United Kingdom where benefit levels are low. It also indicated that

the link between social grants and pregnancy is most discussed in the United States,

where Charles Murray advocated the ending of benefits. However, his position was

challenged by evidence that increases in lone parenthood and teenage births were

trends that were well established prior to the provision of higher benefits in the 1960

and 1970.

Local evidence suggests that South Africa already had a relatively high teenage

fertility rate before the introduction of the CSG. Demographers pointed out that

although the total fertility rate for the country had declined, the teenage fertility rate

remained relatively high and did not show the same decline. Some demographers

indicated that there was evidence of an increase in teenage births between 1995 and

2005, while others indicated that pre-teen and early teen fertility had remained

constant, fertility had increased amongst girls in their late teens or early twenties. In

lieu of this, it appears that there is no consensus whether teenage fertility is

increasing or decreasing, however they agree that levels remain high.

Reasons for teenage fertility and family formation are complex and culturally

embedded. Having children out of wedlock and teenage births were a well-

established phenomena under certain sections of the population long before the

introduction of the CSG.

The quantitative analysis revealed that there has been a huge growth in the number

of CSG beneficiaries in recent years. However, if a comparison is made between the

numbers of teenagers receiving the CSG with the incidence of teenage births in the

national population, the quantitative analysis suggests that the take-up rate of the

CSG by teenage mothers remains low. Teenagers (younger than 20 years) represent

5% of all CSG recipients registered at October 2005. These teenagers claiming the

Page: 82




CSG were considerably lower (13% lower) than the proportion of teenage mothers in

the South African population (mothers younger than 30 years).


provide financial support during the window of nutritional opportunity period (within

the first three years of a child’s life) when good nutrition has the most significant effect

on the development of a child. However, the majority (53%) of CSG recipients only

apply for the CSG when their children are older. Reasons for the relatively low uptake

probably include the fact that caregivers struggle to get the right documentation and

do not always have the necessary knowledge about the CSG.

From the analysis of SOCPEN data, no link could be established between the

availability of the CSG and the fertility behaviour of teenagers in the South African

population. Furthermore, it was evidenced that the percentage of teenage mothers on

the system were low, and that most caregivers only apply later for the CSG. In

addition, the majority of caregivers only receive one CSG, and resultantly the issue of

“farming with children” could also be ruled out.

4. Foster Child Grant

The incentive concerns associated with the FCG were as follows:

To foster a child within the biological family context in order to receive a higher

grant amount; and

To foster a child after the age of 14 years when the child is no longer eligible for

the Child Support Grant.

Local evidence reveals that informal fostering is a well-established practice in certain

sections of the South African population. It further suggested that foster care is a

valuable form of alternative care for children whose parents are dead or unable to

care for them. However, the legal and policy framework developed in South Africa for

foster care services were based on Western models of family life and childcare

practices. This has resulted in a system of foster care that is inadequate in meeting

the disparate needs of South African children. Evidence of this is the extent to which

foster care has been used as a form of income support for poor families rather than a

form of alternative care for children found in need of care due to parental unfitness.

Page: 83




Factors such as the impact of the CSG, growing numbers of children requiring care

due to HIV/AIDS and ineffective family reunification services, have increased

pressure on the foster care system. At the same time it appears that the foster care

system has failed in adequately meeting the needs of children requiring placement

outside the family context.

The quantitative analysis revealed that the majority of FCGs are paid to children who

have lost one or both parents and that the majority of foster parents are related to the

foster children. In 41% of cases, the foster parent was the grandmother, in 30% of the

cases the foster parent was the aunt, and in 12% of cases other relatives were the

foster parents. Only in 9% of the cases were the foster parents not related to the

foster child. Nearly two (2) out of three (3) foster parents receive more than one grant

type. Many are also recipients of the OPG, the DG and or the CSG. Because the

majority of foster children are orphans, their placements are expected to be long-

term. However, the majority of orphans are not supported through receipt of the FCG

and the FCG caseloads could rise substantially if more families took this course of

action in the event of parents dying.

The quantitative analysis further found that children enter formal foster care when

they are older than seven (7) years. Fifty two percent of foster children were 13 yearsor older. Only 10% were younger than seven (7) years and 8% were older than 17

years. The majority of foster children are in the age band where they are no longer

eligible for the CSG.

The FCG was not intended to substitute the CSG in the case of orphans and the

extent to which it does could partially be explained by the weaknesses in the

administration system for foster care. There are too few Social Workers and

Commissioners at the Children’s Courts to handle the high load of cases. Thecaseloads of social workers are high, which results in reviews (every two years) not

being carried out and therefore the FCG almost becomes a permanent grant until the

children reach the age of 18. The fact that ID numbers for foster children are not

required on the SOCPEN system makes it difficult to verify the age of the foster

children. The loopholes in the administration system also makes it possible for

children to claim both the CSG and the FCG since the FCG does not require a child

ID-number.

Page: 84




The foster care system is also designed to make provision for the rehabilitation of

parents (where applicable) with the intention to reunite the child(ren) with their

biological parents. From interviews with social workers, it appears that the

rehabilitation of parents does not always take place as a result of the shortage/high

workload of social workers. This increases the notion that foster care is seen as a

permanent arrangement rather than a temporary arrangement.

Informal kinship care is a well-established practice for which formal intervention

through the child protection system is in many cases unnecessary. Many cases are

channelled through the child protection system that does not necessarily need

protection, but rather financial support. It is mostly grandmothers or other relatives

who act as foster parents. Grandmothers claiming foster care are therefore not a new

phenomenon. It was also found that children who lost one or both their parents and

whose grandmothers were looking after them were receiving CSG in one instance

while others under the same circumstances received the FCG.

In summary, the quantitative analysis confirmed that family members foster most

children currently registered on the SOCPEN system. Due to the fact that most

children are orphans and no incentives exist to adopt, it can be expected that the

foster care could become a permanent arrangement. Further indications point to thefact that most children under the foster care system are in need of financial

assistance rather than child protection.

6. CONCLUSION

The review of literature indicated that incentives to access social grants have existed

as long as means-test-based social security systems have been around. Available

literature reveals numerous configurations, dynamics and possible incentives and

perverse incentives in the area of social security and welfare systems internationally.

The issue is thus certainly not unique to South Africa. In a social security system that

is rather categorical (South African) than universal, and in the context of high poverty

levels and the impact of HIV/Aids, incentives exist for people to change their

behaviour in order to gain an income through one of the available grants. These

incentives are not necessarily perverse.

Further to this, local evidence also indicates that given the high levels of

unemployment and poverty, the impact of HIV/AIDS and the growing awareness of

Page: 85




citizen’s rights to social security, huge demands on the South African Social Security

System will continue. For as long as the current categorical approach of the South

African Social Security System continues to exhibit gaps in coverage, the DG and

FCG do provide incentives (not necessarily perverse) for people to access these

grants.

Although no evidence could be found in the quantitative analysis of the Socpen data

that link the FCG, CSG and DG to the perverse issues that were researched, it is

realised that especially the FCG and the DG are creating incentives for people to use

these grants as a form of poverty relief in poor areas.

These grants will remain under pressure to cater more widely than was originally

intended when the systems were designed. Most of the concerns about possible

perverse incentives are related to impoverished people requiring income support

within a system that does not provide universal coverage. This opens the system to

persons who falls outside the respective age groupings. It appears that within these

limitations, officials were for years already responsive to impoverishment, sometimes

beyond the intention of the particular grant.

Page: 86



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http://www.effwa.org/highlighters/v07_n4.php

http://www.effwa.org/highlighters/v07_n4.php



Annexure 1

Understanding incentives

By Paul Spicker

Although the idea of "incentives" is widely used in economic a discussions, there has not

been much thought about what an "incentive" actually is. There are three core elements in

the way that the idea of incentives is used.

First, Incentives are about potential gains, rewards, pay-offs, or desired outcomes. When

there are incentives, people get something different from their choices than they would if

there was no incentive. The gain that people stand to receive might be money, social

status, better health, or any of a wide range of benefits: the test is that it is something they

want to have, and so that it affects the choices they make. A disincentive, conversely, is

about a potential loss or penalty.

Second, incentives are marginal approaches. An incentive implies the introduction of a

motivating factor -that is, something different, or something new -which changes the patern

of existing choices. When a firm offers to sell a service, that is not an "incentive" to buy; but

when it lowers its price to draw in custom, it is. Incentives are about the things that make a

difference to choices. They are about potential gains -about what will happen (or at least,

what is expected to happen) if people behave differently. The idea of "gain" is still important

-a marginal change which alters the patterns of consumption (such as repositioning a

product in the market) is not an incentive -but not all gains have an incentive effect.

Because incentives are about future prospects, they depend crucially on information and

expectations. A gain that people did not realise might be there is not an incentive. A reward

that is introduced after the event is not an incentive.

If something has already happened, it is not an "incentive". Changes in circumstances before

a decision is made can also affect the choices people make, but they change the basis of

decisions rather than the outcome. Parenthood, bereavement and divorce lead to people

acting differently from the way they did before, but they are not incentives. Equally, changing

the conditions under which a decision is made is not usually thought of as an incentive,.

Good weather can encourage to people going to tourist destinations, and a perception that

there is increased competition in the labour market can encourage people to go into higher

education, but these are not "incentives". For the same reason, it is not usually thought of as

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an incentive to remove an obstacle to action -for example, making discrimination illegal, or

providing child care for someone who has not been able to work otherwise. These actions

make choices possible, rather than changing the outcome of the choice. (This point is not

universally accepted -EU documents identify child care as an "incentive" (Council of the

European Union but I think that is because they treat "incentive and support structures" as a

single issue.)

Third, incentives are about motivation. It is implicit in the idea that incentives. influence

action, that the actions are capable of being influenced, and that the choices are eligible, or

capable of being chosen. An inducement to do something that people cannot do is not an

incentive. We do not usually talk about incentives in fields where patterns of behaviour are

settled beyond thinking. The availability of free medical care is not an incentive to have a

tracheotomy, and the cost of residential care is not an incentive to murder your aged parents.

Beyond the question of feasibility, motivation necessarily depends on a range of conflicting

and competing considerations, including personal preference, conflicting and competing

incentives and the context in which an incentive is instituted.

For an action to be an incentive, then, there are three criteria which ought to be met:

These are:

• potential gain - that the supposed incentive implies a desired change in outcomes;

• marginal effect - that the factor has a marginal influence in the context where it is

applied; and

• influence on motivation - that people have a choice, that the incentive is capable of

being chosen, and so that the incentive is capable of influencing action. All three

elements are necessary to the concept. If there is no gain, if the gain is not in the

future or expected, or if the gain does not affect people's choices, there are no

"incentives".

Incentives in theory

In public policy, incentives are primarily a method of operation. This reflects the use of the

term in ordinary language, where an incentive is a way of stimulating and encouraging

someone to do something - like a competition prize, a reward for good behaviour, or a carrot

for a donkey. The popular sense of the term "incentive" is based in the intention which guides

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the offer; a prize is offered as an "incentive" even if no-one enters the competition. Incentives

make a contribution to motivation, rather than being the only reason, and the effectiveness of

incentives depends on the relative contribution they make. In economics, by contrast,

incentives can be any potential gain, or any marginal factor influencing choices through

altering outcomes. The economic approach encompasses the ordinary use of the term, but

because the term is used so generally it goes well beyond it. The language of incentives in

economics treats incentives as effects rather than as intended actions: wages, prices, taxes

and profits are commonly construed as offering incentives or disincentives, even if no-one

intended them to be used that way. The economic approach can include a wide range of

factors which influence behaviour, including personal situation, circumstances, and

calculations of likely benefit.

The idea of incentives in economics is used in two main senses. The primary use relates to

the analysis of aggregate behaviour. Changes in the behaviour of an aggregate group of

people happen throughout the process of economic interaction. Supply and demand curves

generally represent aggregate preferences, rather than individual action. Because the idea of

incentives is used so widely in economics, the kinds of function which are described in this

way are many and varied. On one hand, many incentive functions are concerned with supply

functions. Samuelson and Nordhaus suggest that incentives typically "denote adequate

returns to working, saving and entrepreneurship." (Samuelson, Nordhaus, 1995, p 617) Onthe other hand, incentive analysis can also used to refer to prices and consumption. When

prices go up, demand typically falls; when prices fall, demand increases. It makes perfectly

good sense to say that lower prices act as an incentive to buy the item, and that higher

prices act as a disincentive. We might say, for example, that an increase in petrol prices acts

as an incentive to leave cars at home and take alternative forms of transport instead. It is

always possible to qualify statements of this sort - there are commodities where higher prices

act as an incentive to buy - but the broad statement is well-founded: price is generally

understood as a motivating factor.

Price is an important signal, but it is not the only consideration. The idea of 'elasticity' refers

to the propensity of an aggregate population to respond to different conditions. Elasticity can,

in some cases, be zero, or almost zero. Life insurance or the costs of care create a potential

gain for surviving relatives, but no financial inducement is going to get people to murder their

parents in any large numbers. Economics may be a dismal science, but it is not as cynical as

some people seem to assume. There is no necessary assumption that people must respond

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directly to financial stimuli. Whether or not a measure has an incentive effect must, then,

depend on the context in which the incentive is applied.

The way that people behave is shaped by many factors, and changes in any of them can

affect the way that people respond. Ordinarily, aggregate functions (like demand and supply

curves) depend on the contribution of a range of influencing factors. The composition, and

the responsiveness, of aggregate behaviour to change depends on the issue and the

conditions where it occurs. Changes in the contributory factors affect the shape and the

position of the curve. Equally, the responsiveness of such functions depends on the context

and the thing which is demanded. The assumption that an increase in tax or benefits is likely

to have a disincentive effect should not be taken as self-evident. Where a function is

inelastic, even a large change might have little effect.

Changing the behaviour of people in aggregate, or on average, is not the same as changing

the behaviour of every individual. An incentive might not affect many people; it only has to

affect some. When prices change, the key decisions are made by people at the margins, the

people whose decisions are likely to be altered. A prize competition can be used to promote

cultural activity, but relatively few people will enter. Incentives, in this sense, fit with a general

approach which is concerned to shift people in a desired direction, rather than to alter the

behaviour of each and every person.

The other main economic use of the term "incentives" is, by contrast, strongly expressed in

individualistic terms. Statements made about "individuals" are based, not on individual

psychology, but on the behaviour of an "average" individual, "homo economicus". Both

analytical welfare economics and "rational choice" models attempt to analyse issues like

preference, cooperation and relationships to groups in terms of the "rational" utility-

maximising individual. "Incentive theory" is concerned with issues like competing incentives

and conflicts between principals and agents; assessments of potential gains are modelled todetermine the effect of rewards and punishments in influencing negotiations, I have not

referred to this literature - directly in this paper, because despite its name it has very little

direct application to the issues in public policy I am concerned with. The existence of rewards

and payoffs is not sufficient to understand incentive motivation, which is marginal and

depends on context; there are logical problems in moving from the analysis of individual

behaviour and motivation to group behaviour, or vice-versa; and the use of rewards and

punishments by government is rarely done solely with the intention of producing - incentive

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effects. It is in the nature of the analysis, then, that it leaves out important dimensions in the

understanding of policy.

Although both rational choice and game theory are capable of incorporating pre-existing

motivation and social norms, the concept of the self-interested individual tends to be taken

ceteris paribus, which means that the existence of an inducement is taken as sufficient

reason for action. In the process, some of the reservations attached to aggregate analysis -

in particular, the importance of elasticity of response - are likely to be lost. This is the core

problem with the analysis used by Charles Murray in Losing Ground, which attempts to

explain the behaviour of welfare recipients. He writes:

1. People respond to incentives and disincentives. Sticks and carrots work.

2. People are not inherently hard working or moral. In the absence of countervailing

influences, people will avoid work and be amoral.

3. People must be held responsible for their actions. ..." (Murray, 1984)

It is difficult, however, to imagine in what circumstances people can exist "in the absence of

countervailing influences." Murray's ideal couple, "Harold" and "Phyllis", are not affected by

the social, economic or cultural issues that affect other people. They seem to have no

opinions about work, unless it is that work is undesirable. They have no parents, noschooling and no socialisation. In Murray's world, it is not just true that people respond to

incentives and disincentives; they seem to respond to nothing else.

This reductionist view of individual behaviour has its origins in the idea of "psychological

hedonism". "Nature has placed mankind", Jeremy Bentharn wrote, "under the governance of

two sovereign masters, pain and pleasure." (Bentham, 1789, ch 1 para 1.) Bentham's view

was profoundly influential in its day: it was the core principle behind the idea of the

penitentiary, and it has been seen as the founding principle of the reformed Poor Law, andthe decision to make the condition of paupers "less eligible" than the position of the

independent labourer. The view means, in a nutshell, that if you want people to do things,

you make it pleasant; if you want them not to do it, you make it unpleasant. However, the

belief that people will do whatever is pleasant, and avoid what is unpleasant, is at odds with

reality. People clearly do not seek pleasure and avoid pain, which has led economists to

substitute the general idea of "utility". There is no evidence that individuals do, either

individually or on in aggregate, maximise utility, but if they do, it is because the idea is

circular: "utility" is identified as the quality of what people have actually chosen.

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The Benthamite view has come down into several common economic saws: that people will

maximise utility; that they will always prefer to increase their material welfare; that people will

respond to inducements by pursuing them, and that they will respond to negative effects by

avoiding them. Murray's assertion that "sticks and carrots work" is based in the same

philosophy. If people were built like Skinner's pigeons, responding automatically to

predetermined stimuli, this might be true. If we accept that people do respond to stimuli,

which is uncertain, we do still not know that they will respond in the particular circumstances

where the incentives and disincentives are applied. We do not know that other things are

equal: we do not know the alternatives, the costs, the constraints. But even if other things are

equal, we cannot tell from the knowledge that people stand to gain from a change in

conditions what their response will be. Sticks and carrots might work, but they might not.

Recasting incentives

Incentives cannot be understood in isolation. They have a marginal influence. That must

mean that they vary according to the context where they are applied. If incentives are

concerned with a potential gain, the first question is whether or not people are gaining. That

is not self-evident, because it is not the same question as whether they are gaining when

"other things are equal". It depends, necessarily, on a balance of factors, taking into account

losses as well as gains. Each person is faced with an individual choice, that can be

represented in terms of a balance sheet. In other words, incentives can be understood in

terms of a calculation of costs and benefits.

From the opening section, certain conditions ought to be satisfied if a measure or change in

circumstances is to be held to have an incentive effect. Explaining behaviour in terms of

costs and benefits meets all the criteria.

1. Potential gain. The desired change in outcome is identifiable in terms of the balance

of costs and benefits.

2. Motivation. The contribution made by the incentive in the context of the individual

calculation depends on the other factors which are taken into account.

3. Marginal effect. Incentives and disincentives are marginal factors, not determinants;

they have the potential to tip the balance, but they will not do so in every case.

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An illustration of how a cost-benefit approach can be applied might be arguments about

incentives to work. When we read that unemployment benefits are a disincentive to work, we

are being told that being unemployed is a desirable outcome (a potential gain); that

unemployment benefit has a discernable marginal effect on choices about working, and that

unemployment benefits influence motivation, outweighing other factors. Each of these

propositions, as it stands, is questionable.

(1) Being unemployed is a desirable outcome.

This view dismisses issues of stigma, boredom, lack of direction, and the

consequences of unemployment for ill health, exclusion and poverty (Gallie, 1999).

There is some evidence of detachment from the labour market for a minority of older

men, and within that group, some people - mainly more affluent people choosing totake early retirement - do consider not working desirable. Most, however, do not.

(Alcock et al, 2003)

(2) Unemployment benefits have a discernable effect on choices about working.

Overall, a very substantial majority of people do choose to work, and the vast majority

of people who experience unemployment subsequently return to work. If

unemployment benefits have an effect, the effect is limited. In relation to long-term

unemployed people, "the level of unemployment benefit has no explanatory value in

considering the labour market behaviour of the long-term unemployed." (L Dawes,

1993, cited Alcock et al, 2003, p 13) There is some evidence in the UK which

suggests that there may be an impact on the position of low-paid wives of husbands

who are in receipt of benefits (Davies et al, 1994). Unemployment benefits tend to be

limited both in financial terms and through a series of conditions imposed on receipt

(for example, suspension of benefit on leaving work without "good cause" or on

refusal of employment opportunities: Atkinson, 1995). Systems are designed to limit

their relative attractiveness, and if there is a potential to tip the balance, it has not

been realised in practice.

(3) The influence of unemployment benefit outweighs other factors.

Unemployment is structured and conditioned by a range of economic factors. Some

unemployment may be voluntary, but much is not. The forms of non-voluntary

unemployment include, amongst others, frictional, seasonal, casual, demand-

deficient, structural and exclusionary unemployment. Where people are able to make

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decisions about work, there are many other factors besides benefits that influence

decisions - typically financial rewards in employment, social status, social pressure

and the desirability of roles related to work.

Understanding incentives in terms of costs and benefits makes it possible to identify the main

issues more clearly. Incentives to work are not a simple choice between working and not

working, but a calculation of the costs and benefits of working and not working. The costs of

working are principally the opportunity cost of time, the loss of unemployment assistance and

the associated costs of work, including e.g. travel and child care. The benefits of working are

financial, in terms of earnings, social, in terms of social inclusion, status, and personal, in

terms of self-actualisation. The costs of not working, which are equally benefits of working,

are not only financial; they include stigma, degradation, isolation, boredom, the denial of

opportunities and social exclusion. Since the benefits of employment are large, the benefits

of being unemployed are small, and costs of unemployment are considerable, the balance

which leads overwhelmingly to people working is easily identified, predictable and

unsurprising. This does not mean that unemployment assistance will have no incentive

effects, but the conditions in which that may apply are relatively restricted, and tend to be

confined to the limited cases where unemployment is voluntary, work is for very low income

and financial decisions outweigh social ones. The calculation implies that such effects would

be small - which is consistent with the empirical evidence. (Atkinson, Mogensen, 1993)

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Figure 1 shows a simple graphical representation of incentives in terms of a cost-benefit

decision. The horizontal axis shows the balance between costs and benefits. As the surplus

of benefit over cost increases, so does quantity: the function is curved because of

diminishing marginal returns. Conversely, an excess of costs over benefits (the dotted line)

will lead to a reduction in quantity demanded or supplied. Incentives increase the balance of

benefits over costs; disincentives increase the balance of costs over benefits.

As with any generalisation, this representation embodies some assumptions. The first is that,

ceteris paribus, people respond to benefits by doing more rather than less. This is tenable,

but it is not necessarily true: for example, some people may respond to increased rewards by

relaxing their efforts (implying that the right-hand part of the curve dips downward). The

actual shape of the function depends on the context, norms and circumstances it is being

applied to. The second assumption is that costs and benefits can be set directly against each

other. There may however be circumstances where the values of cost and benefit are

interdependent; according to the psychology of "cognitive dissonance", people's perception

of benefit depends on the number and intensity of costs, and vice-versa (Festinger, 1957).

Third, the function has been assumed to be continuous: this is more likely to be true in

aggregate than it may be at individual level, where there may be discontinuities, There is

some evidence, too, to suggest that responses to economic stimuli may be delayed by initial

inertia, reflecting the time, trouble and effort of gathering information, making judgments andmaking alternative arrangements (Madrian, Shea, 200 1). Fourth, the function describes

marginal change; from an initial equilibrium, the origin would represent the status quo ante. If

the origin represented zero instead - that is, the position which each person took when cost

and benefits were equal - the function could in principle pass through a number of points on

the positive axis.

The graphical representation also prompts three further observations. First, it is possible to

increase or decrease quantity demanded or supplied by shifting or altering the shape of thefunction, which other forms of persuasion or dissuasion may do. Second, as the function is

drawn, the functions of individuals do not necessarily cease to apply when their personal

consumption reaches zero: there may be circumstances in which people are determined, not

just that they should not do something (like smoking) but that other people should not do it

either. Third, although it is represented in individual terms, there is no need to make any

assumption about the behaviour of the "average" individual. Subsequent calculations can be

aggregated or disaggregated to represent the position of different groups and categories of

people.

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The value of this kind of cost-benefit approach is intuitively clear, and it is disappointing that

the literature has little to say about it - more so when there are so many examples of CBA

from the perspective of people who are offering the incentives. My main source for the

approach, though the connection with incentives may seem indirect, was a paper by Burton

Weisbrod on the problems of getting people to claim social security benefits. (Weisbrod,

1970) In stark contrast to the assumption that people are strongly motivated to claim

benefits, the general experience of social assistance systems is that people who are entitled

often fail to claim and that attempts to persuade them to do so are very limited in their

effectiveness. (Van Oorschot, 1995) Weisbrod suggested that the demand for services

should be seen in terms of an assessment of the costs and benefits of receiving payments.

The costs included the costs of information, the time and trouble of claiming, and the cost of

shame and humiliation. The benefits of claiming have to be judged against the level of

payment, but more importantly (because claimants are often very unclear about how much

money they might gain) against their perception of the needs they hope to meet.

The limitations of the model

There are some important conceptual limitations in the approach. Potential gain, motivation

and marginal effect, are central to understanding incentives. There are reservations to make

from the perspective of each.

Potential gain. The evaluation of potential gain strictly in terms of costs and benefits may be

misleading; there may be a hedonic difference in utility which is not directly revealed by cost-

benefit analysis. Norms and pre-existing influences may affect motivation. Kreps argues that

extrinsic incentives may at times conflict with norms and other intrinsic motivation, leading

perversely to the effect that incentive schemes may have the opposite effect from that

intended. (Kreps, 1997)

Motivation. Motivation is complex, and establishing that the balance of costs and benefits

lies in a particular direction does not establish that people will be motivated to take action.

Bonner and Sprinkle identify four principal theories of motivation.

These are:

expectancy theory - people act to maximise expected satisfaction;

agency theory - people act rationally to maximise their welfare or utility;

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goal-setting theory - people act to meet personal goals, even if the specific action has

negative consequences; and

social-cognitive theory - people's effort relates to their perceptions of self-efficacy in

task performance. (Bonner, Sprinkle, 2002)

The main dimensions which determine how employees respond to tasks are based in

personal characteristics, developed skills, the nature of the task to be undertaken and the

environment they are functioning in. Monetary incentives are particularly poorly associated

with people's responses. (Bonner, Sprinkle, p 3 10)

Marginal effect . Sometimes people have to take not one action, but several. If people have

to make, not one, but many decisions, the calculation of costs and benefits is liable to be

erratic. Scott Kerr, examining patterns of claiming social security benefits, proposed an

influential "threshold" model (Kerr, 1983), which dominated much of the research on take-up

done in the 1980s. (see Craig, 1991) Kerr suggested that people had to go through several

steps before claiming, and each one had to be passed before they would go on to the next.

The steps were:

• perceived need: people had to feel there was a need; they had to have enough basic

knowledge to know where to go;

• perceived eligibility: they had to think they might be eligible;

• perceived utility: they had to think it worthwhile;

• beliefs and feelings: claiming had to be acceptable, despite stigma or personal

beliefs;

• perceived stability or circumstances: they had to think their condition would last long

enough to make it worthwhile; and

• claiming: they had to go through the process of applying.

Kerr's model has been useful, because it led to research which looked at a series of

influences, but it has a conceptual defect: the steps are neither sequential nor distinct. What

people know about benefits is not distinct from what they think about them; some people

suppose that benefits are not for people like them, and some do not want to know. This does

not, however, vitiate the main point, which is that dealing with complex, progressive decisions

does not lend itself to a simple static representation in term of costs and benefits.

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People do not respond immediately and directly to stimuli; for many, there are delays,

hesitations and doubts before they act. Some of the circumstances in which concepts of

"incentives" are applied are concepts of that kind - for example, on the putative effect of

unemployment benefits on the speed of return to work. (Nickell, 1979) In so far as this is

predictable, it could possibly be represented in terms of the shape of the cost benefit function

in figure 1 - implying relatively inelasticity near the origin - but if responses are not

immediate, there is also the risk that assessments of costs and benefits may give a

misleading view of the nature of the calculation being undertaken.

All this implies that, even if an incentive is capable of being analysed in terms of costs and

benefits, the balance may not be enough to establish the effects. The assessment of costs

and benefits performs a more limited role, but it can be argued to serve some useful

purposes. First, identifying costs and benefits is an useful step in operationalising empirical

research problems in order to examine the influence of different factors on patterns of

behaviour. The incentive effects of different factors within the calculation can be identified,

and where the balance of costs and benefits can be established, it provides a summary

figure against which preferences and utility can be weighted. Second, the balance of costs

and benefits yields useful information for policy, relating to both the direction and the strength

of incentives in context. Third, the balance of costs and benefits is potentially important for

many of the other issues that discourses about incentives are concerned with - issues likefairness, morality or the distribution of rewards.

References

P Alcock, C Beatty, S Fothergill, R Macmillan, S Yeandle (2003), Work to welfare,

Cambridge: Cambridge University Press.

A B Atkinson, G Mogensen (1 993) Welfare and work incentives, Oxford: Clarendon.

A B Atkinson (1995), Incomes and the welfare state, Cambridge University Press.

J Bentham (1789), An introduction to the principles of morals and legislation, Oxford:

Blackwell 1960.

S Bonner, G Sprinkle (2002), The effect of monetary incentives on effort and task

performance, Accounting, Organizations and Society 2002 27(4-5) pp 303-345. Council of

the European Union (2004), Opinion of the Social Protection Committee, 6509104 SOC 80,

http://ue.eu.int/ueDocs/cms~Data~docs/pressDatalen/misc/79687.pdf

P Craig (1991), Costs and benefits, Journal of Social Policy 20(4) pp 537-566.

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R Davies, P Elias, R Penn (1 994), The relationship between a husband's unemployment and

his wife's participation in the labour force, in D Gallie, C Marsh, C Vogler (eds) Social change

and the experience of unemployment, Oxford: Oxford University Press.

L Festinger (1957), A theory of cognitive dissonance. Evanston, IL: Row, Peterson.

D Gallie (1999), Unemployment and social exclusion in the EU, European Societies l(2) 139-

167 1999

S Kerr (1983), Making ends meet, London: Bedford Square Press

D Kreps (1 997), Intrinsic motivation and extrinsic incentives, American Economic Review

Papers and Proceedings 87(2) 359-364.

B Madrian, D Shea, 2001, The power of suggestion, Quarterly Journal of Economics 116(4)

pp 1149-1 187.

C Murray (1 984), Losing Ground, New York: Basic Books.

S Nickell (1979), The effect of unemployment and related benefits on the duration of

unemployment, Economic Journal 89 pp 34-49.

W van Oorschot (1995), Realizing rights, Aldershot: Avebury.

P Sarnuelson, W Nordhaus (1995), Economics, 1 5th edition, New York: McGraw Hill.

R Titmuss (1968), Commitment to welfare, London: George Allen and Unwin.

P Townsend (1976), Sociology and social policy, Penguin, Harmondsworth.

B.A. Weisbrod (1970) On the stigma effect and the demand for welfare programmes =-

Madison, Wisconsin: University of Wisconsin Institute for Research on Poverty

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Annexure 2

SUBMISSION BY THE ALLIANCE FOR CHILDREN’S ENTITLEMENT TO SOCIAL

SECURITY (ACESS) REGARDING THE DEPARTMENT OF SOCIAL DEVELOPMENT’S

STUDY ON THE POSSIBLE EXISTENCE OF PERVERSE INCENTIVES IN THE SOCIAL

GRANT SYSTEM - July 2006

I INTRODUCTION

ACESS is an alliance of more than 1000 member organizations working on a wide range of

children’s issues. It also works with a number of affiliated organizations in civil society such

as COSATU, the Treatment Action Campaign, the Basic Income Grant Coalition and many

others. Through its work with its members ACESS has a detailed understanding of the

experience, needs and concerns of poor children and their parents within the social

assistance system in our country.

In May 2006 ACESS was approached by the Department of Social Development and asked

to respond to a study on the possible perverse incentives in the social grant system. The

Department explained that following a quantitative study which had failed to provide any

causal links between grants and people’s behavior in response to these, a qualitative study

would now be undertaken in the hope that it would shed light on the issues being

researched. The Department noted that such a study could not ‘provide definite evidence or

fact about what people do, it is however envisaged to shed valuable explanatory light on the

attitudes, perceptions and experiences of some key sectors of society’. ACESS was asked to

comment on the following four issues:

The alleged increase in teenage pregnancy relating to the child support grant;

The possible fostering of children in the biological family context in order to access the

foster care grant;

The believed reluctance to take medicines to control certain ailments that can lead to

permanent disability in order to access the disability grant; and

The supposed tendency of beneficiaries accessing grants not to take part in the formal or

informal labour market and therefore creating a culture of economic dependency.

Elsewhere in the letter of request the Department says that it wishes to study perceptions

about grants and the beneficiaries; perceptions of fraud and misuse; and views about

whether benefits deter beneficiaries from productive activities and from being active citizens.

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This submission tries to address the issues and areas of enquiry identified by the

Department based on ACESS’s own research and experience in the area.

II CONTEXT AND GENERAL COMMENTS

It is frequently noted that the social assistance system in South Africa is very extensive for a

developing country. Approximately 10 million poor people access the system at significant

cost to the state. According to the Minister of Social Development (based on research

commissioned by government) the social grants have a critical role in reducing poverty,

contribute to social cohesion and impact positively on economic opportunities of households

receiving grants.3 Social grants (according to the EPRI study commissioned by the

Department of Social Development) reduce hunger and malnutrition, increase school

attendance and job searching, and have a positive impact on macroeconomic development.4

It is also widely acknowledged that grants impact positively, beyond the recipient, on other

household members.

The social assistance system is premised on providing for those who cannot work in the

employment sector. Thus, old people, people with disabilities and children under 14 are seen

as vulnerable and therefore deserving of state support. This system is based on the

assumption that a person who does not fall within any of these categories is not deserving of

social assistance. However, given the very high levels of structural unemployment in our

country, many millions of able bodied people who wish to work are nevertheless destitute or

very poor (about 50% of the poor are not covered by grants). These are the people who

desperately look to the social assistance system for help. Their expectations of support are

not unfounded. The Bill of Rights of South Africa provides ‘everyone’ with a right of access to

‘social security, including, if they are unable to support themselves and their dependents,

appropriate social assistance’.5

It is in this context that we need to understand the discourse around social grants in our

country. Understandably, there are those who are not entitled to grants who view those who

are with envy. Scarce resources sometimes lead to mistrust and conflict. Anger against the

state is also a by-product of extreme poverty, particularly in a society such as ours where the

disparities between rich and poor are massive. Fraud and corruption are also unfortunately

3 Z Skweyiya (10 December 2004) ‘Opening Remarks at the Launch of the Report on the Economic and Social

Impact of Social Grants’ Pretoria, press release issued by the Department of Social Development.4 M Samson et al (EPRI) The Social and Economic Impact of South Africa’s Social Security System 30

September 2004.5 S 27 of the Constitution of the Republic of South Africa Act 108 of 1996.

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found in many areas of our society and social grants are no exception – the investigation into

widespread fraud in the social grant system, often by officials has been publicized by the

Department of Social Development. For those of the middle class and working class who

have jobs, the poor are frequently seen as ‘scroungers’ who are lazy. There are many

complex reasons why grant recipients are viewed negatively and why myths, stereotypes

and misconceptions develop around grants. This situation is not unique to South Africa with

many welfare beneficiaries in developing countries facing negative labeling and stigma.

Understanding this discourse and the possible variety of responses by the public to the grant

system as it is presently structured is helpful in improving the design and reach of social

grants. Evidence of perverse incentives (if any is found) as well as perceptions of such

incentives should not be used to cut back existing benefits. Any changes must be made with

a view to widening the social assistance net to all who need and are entitled to it. It is

ACESS’s belief that the establishment of a comprehensive social security system (as

proposed by the Taylor Committee of Inquiry) is a necessary vehicle for addressing extreme

poverty in our country. Where misconceptions exist about grants, the government should

provide education and information to the public to correct these views. (A note on the use of

the term 'active citizenship' by the Department in its letter inviting comment on its research

project - a person can be poor and in receipt of a grant and still be an active citizen. The term

implies that they participate actively in the civic and political life of the society and not just inthe economic sphere. Many grant recipients and other very poor people are giving of their

time and effort to support others, work in community organizations, on social projects, in

politics and many other areas of community life).

III TEENAGE PREGNANCY AND THE CHILD SUPPORT GRANT

There is no increase in teenage pregnancy that corresponds to the introduction of the Child

Support Grant (CSG) and the problem of teenage pregnancy predates the grant by many

years.6 Lund shows that there was also no link between increased fertility and the State

Maintenance Grant which predated the CSG.7 The reasons for high levels of teenage

pregnancy in the African population include lack of adequate knowledge on sex and

reproductive health, disempowerment, sexual violence and coercion and the lack of

6 B Goldblatt (2003) ‘Teen pregnancy and abuse of the Child Support Grant. Addressing the myths and

stereotypes’ Agenda 56, 79-83; P Martin ‘Exploding the myth that social security breeds dependency’ SundayTimes 24 April 2005.7 F Lund (2006) ‘Gender and social security in South Africa’ in V Padayachee (ed) The Development Decade? Economic and Social Change in South Africa, 1994-2004 HSRC, 160-179.

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adequate role models for boys.8 While teen pregnancy and its causes point to important

social problems, these cannot be placed at the door of the CSG.

It is unlikely, given that the costs of raising a child (in terms of time, energy, the physical

strain and the financial consequences) far outweigh the small monthly sum of the CSG, that

a person would make such a decision. Thus, even if a small number of teenagers are falling

pregnant to access the grant, this must be understood to be irrational behaviour.

Interesting research conducted in Hlabisa9 found that of the 12 865 children resident in the

study area 4 684 children under the age of seven were in receipt of the CSG and that only

3.67% of these children had teenaged mothers. The same study found that 8.65% of the

children not accessing the grant had teenaged mothers. Thus children of teen mothers

appear to be less likely to benefit from grants than those with older mothers.

Another issue that is often associated with teenage motherhood is that these mothers do not

live with their children but simply hand them over to grand mothers. The Hlabisa study found

that in fact 82% of the children receiving grants were living in the same household with their

mothers.

In many studies of the CSG, researchers are confronted with the view by members of thecommunity, that mothers abuse grant money, spending it on themselves rather than their

children. But as the EPRI study shows, the CSG is being spent almost entirely on food with a

direct impact on the nutritional status of the children in CSG households. A range of poverty

alleviation, health, educational and other benefits flow to children (and others) in households

where there is a CSG. The misconception of incorrect use of grant money seems to stem

from the same assumption that informs the fertility myths ie: that young women are

irresponsible, grasping and selfish. It is not borne out by any research into the way the grant

is actually being used.

IV FOSTERING IN THE FAMILY TO ACCESS THE FOSTER CARE GRANT

There has been a dramatic increase in the take up and application rate for the Foster Care

Grant in the last few years. It seems likely that HIV/AIDS is the major reason for this since

increasing numbers of children are losing parents. This means that increasing numbers of

8 F Lund, ibid, 166, P Martin op cit, B Goldblatt op cit, 81.9 A Case et al (2003) The Reach of The South African Child Support Grant:

Evidence from the Hlabisa area of KwaZulu-Natal in 2002. www.nu.ac.za/csds/publications

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http://www.nu.ac.za/csds/publications

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children are being looked after by people other than their parents. In this context, it is quite

understandable that family members faced with the burden of caring for these additional

dependents will look to the grant system for support. This is precisely what the legislation

creating the FCG was intended for and allows. Rather than berating these people and

accusing them of misusing the system, we should be celebrating the fact that so many of our

people are prepared to look after their child relatives.

It is possible that there may be parents who hand over their children to relatives to care for

them so that they can access the FCG, when the parents themselves are present. This could

indicate the levels of desperation that poor people feel when faced with hungry children. The

fact that the FCG grant is pegged at a higher amount than the CSG might lead to this

desperate behaviour. It may reflect a real inability to care for and support children by their

parents, particularly since children over the age of 13 are not provided for in terms of the

CSG. Parents sick with Aids might also hand over children to other relatives when they

become unable to care for them.

Obviously, where people are giving incorrect information to officials to access grants this is

fraudulent behaviour and can be dealt with in terms of the regulations to the Social

Assistance Act and other laws. Ultimately, however, government’s approach must be to solve

the root cause of this behaviour which, as outlined above, is more likely to be motivated bydesperation than greed.

In a recent workshop hosted by ACESS with respect to the future of the foster care system

(FCS), participants noted the following:

1. The FCS is collapsing under the strain of the numbers of applications for a foster care

order and grant by family members taking care of children orphaned (through the death

of one or both parents or the death of one and abandonment by the other).2. For many applicants, the motivation for applying for a foster care order is to a) have the

caregiver relationship recognised and made official, b) to allow the child access to the

various forms of psycho-social support that comes with the foster care placement (in

theory), and c) to access the foster care grant.

3. The FCS cannot accommodate the current and definitely not future numbers of such

applicants. The FCS cannot be fixed to make it work for this purpose. An alternative

solution needs to be found which provides the benefits but not the problems and

disadvantages that go hand in hand with the use of the FCS for these purposes.

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In light of the foregoing ACESS proposes a dual system for addressing the care and support

needs of orphans and other vulnerable children.

One system for children who need short-term care in order to facilitate rehabilitation – a

court process with professional social work supervision is envisaged as at present. The

aim is to facilitate family reconstruction work.

Another system is needed for children who will require long term alternate care – Here it

is proposed that a system in which there will be some form of formal registration of a

child’s placement with a caregiver is facilitated via the DSD. Caregivers would need to be

registered and meet some minimum criteria. This would not necessarily require a court

order.

V RELUCTANCE TO TAKE MEDICINE TO STAY ON THE DISABILITY GRANT

The Disability Grant (DG) has grown dramatically in recent years because of the Aids

epidemic. There are many rumours around behaviour and the grant. These include the

following:

That people deliberately try to become infected so as to access the grant;

That people fail to take ARVs to stay on the grant or that people stop taking ARVs prior to

review of their grants so as to ensure a reduced CD4 count;

That HIV+ people have unprotected sex in the belief that this will lower their CD4 count

and ensure that they get grants or keep existing grants.

That doctors are selling HIV+ blood to people who wish to defraud the DG system.

There are a number of recent studies that explore these issues and argue that the DG as

currently structured may in fact create perverse incentives where people are having to

choose between extreme poverty and their own health.

Leclerc-Madlala,10 in a study in Durban, found evidence of a number of perverse incentives

regarding ARV treatment. She gives the example of a 26 year old single mother who has

stopped taking ARV s in an effort to drive her CD4 count down so as to access a grant.

10

S Leclerc-Madlala (2006) "'We will eat when I get the grant": negotiating AIDS, poverty andantiretroviral treatment in South Africa' African Journal of AIDS Research forthcoming.

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Hardy and Richter also point to the worry of the DG creating perverse incentives with regard

to HIV treatment. 11

Nattrass12 explains that the DG is seen as a form of poverty relief - thus, desperation

because of joblessness leads many to look to the grant as a possible means of survival. She

quotes research by CASE, commissioned by the Department of Social Development on the

DG, where an official in a clinic says 'It seems sometimes to me that developing TB is a kind

of a blessing for some of them, that they now stand a chance of getting a grant’.

ACESS recognizes the dire consequences to the individuals themselves and the country as

a whole, should the DG indeed be providing such a perverse incentive. However, the solution

to this problem cannot be to “tighten the net”. On the contrary, the existing safety net must be

widened to ensure that those people living in poverty, who are not covered by the current net

(people over 14 years and not eligible yet for a pension), are not driven to make such

devastating choices.

VI GRANTS AND ECONOMIC DEPENDENCY

There is a fear, articulated by certain people in government, that grants will create

dependency as people will rely on state support rather than using their own efforts to find

work or create economic opportunities for themselves. There are a number of responses to

this:

1 In the case of the CSG, R190 is not sufficient to prevent a person from wishing to

earn other income. It is barely enough to feed a single child, let alone the other

hungry people in the household.

2 As the EPRI study shows, grants have a developmental effect in that they provide the

resources for people living in households with grants to engage in job seeking activity.

Conversely, people in poor households without a grant have less opportunity to job

seek.

3 Social assistance, because it increases access to education is also developmental,

since a greater number of educated people is a key indicator of development in any

country.

4 Grants do not stop people from working – the lack of viable employment options do.

11 C Hardy and M Richter (2006) 'Disability grants or antiretrovirals? A quandary for people with

HlV/AIDS in South Africa' African Journal of Aids Research 5(1) 85-96.12

N Nattrass (2006) 'Disability and Welfare in South Africa's Era of Unemployment and AIDS' CSSR Working Paper No 147, Centre for Social Science Research, University of Cape Town.

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Martin points out that the poor do not have the freedom to choose between social

security and employment. 13

5 Those who receive grants are already seen by the state as dependent ie: old people,

the people with disabilities and children. It is their circumstances rather than the

grants that has made them dependent.

6 Grants and pay points create economic opportunities. Lund documents the creation

of micro economies around pension day markets. 14

The social assistance system is a lifeline to many starving people who would, in all likelihood

rather be holding down regular jobs than sitting at home relying on meager handouts. The

dependency discourse undermines the dignity of those who are poor and requiring of state

assistance. Research conducted by Lund and others on the impact of the Social Assistance

programme points to the fact that our Social Assistance system is well targeted in that it

reaches poor, rural. barely literate or undereducated women. It is these very people who will

not find it easy to access the labour market.

VII CONCLUSIONS

While job creation and economic growth strategies are critical in South Africa they have thus

far proved inadequate to address large scale poverty and unemployment and seem unlikely

to do so in the near future. Desperation by millions of the poor who have no safety net

means that they will go to great lengths to somehow qualify for support. It is pointed out by

Noble et al that the real perverse incentive is the absence of a comprehensive safety net

rather than the presence of any element of the current social grant system.15

How government should respond:

1 Increase the CSG to 18;

2 Review the means test which currently renders many people living in significant

poverty ineligible for support;

3 Progressively implement the right to social assistance to all who need it;

4 Consider alternatives such as a BIG, the public works linked to grants system being

rolled out in India, and other such options to address extreme poverty and develop

poor areas;

13 Op cit.14 Op cit, 172-3.15 A Whitworth, G Wright and M Noble (2006) ‘A Review of Income Transfers to Disabled and Long Term Sick

People in Seven Case Study Countries and Implications for South Africa’ Working Paper 5, Centre for theAnalysis of South African Social Policy, University of Oxford.

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5 Consider creating a chronic illness grant separate from the DG that provides a

package of services to those who are HIV+ or face other serious illnesses including

money for food, transport to clinics and basic services such as shelter, water and

electricity so that people can get to clinics to access ARVs, eat enough appropriate

food to complement their medication and have clean water, warmth etc necessary to

cope with their illnesses;

6 Improve access to education so that people are not forced to use the grant system to

ensure their loved ones are educated.

With regards to the FCG, create a dual system for addressing the care and support needs of

orphans and other vulnerable children:

One system which facilitates family reconstruction and would involve a court process with

professional social work supervision;

Another system for children who will require long term alternate care – with the formal

registration of a child’s placement with a caregiver taking place outside of the court

system.

Finally, the DSD should consider commissioning more valuable and relevant research which

helps us to understand the impact of the grants on children’s well being as well as onunderstanding what concerns young people have and what informs their choices.

social security: incent

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