Social protection and cash transfers: To strengthen families affected by HIV and AIDS

POVERTY IMPACTS OF CASH TRANSFER PROGRAMS 75 Samson et al. (2004) analyzed the role of three of South Africa’s six social

grants—the State OAP, the CSG, and the Disability Grant—in reducing poverty at the national level. The study used a microsimulation model developed by the Economic Policy Research Institute (EPRI) to assess the three grants, both in their current form and under different scenarios with variations in take-up and transfer size. Samson et al. (2004) used an absolute poverty line that was created based

on the cost of basic needs method, employing data from South Africa’s House- hold Subsistence Level (HSL) survey on the cost, in urban areas, of food, housing, transport, clothing, and necessary household items. Notably, educa- tion costs were excluded, even though school expenses were among the basic needs of many South African families. The HSL accounts for variation in con- sumption requirements by age and gender and for regional food price varia- tion (Samson et al. 2004, 18). Using these data, EPRI constructed an absolute poverty line specific to each province in South Africa using several poverty lines, including scaled (adjusted for economies of scale and adult equiva- lency) and unscaled poverty lines (Samson et al. 2004, 24–25, 31).2 To estimate the impact of existing social grants on poverty, Samson et al.

(2004) simulated a scenario of no social assistance by calculating the income of all grant-receiving households exclusive of grants and estimating the result- ing headcount and poverty gap measures based on income with and without grants. The results showed that at the national level, social grants would reduce headcount poverty by 7.2 percent and the average poverty gap by more than 22 percent.3 This masks considerable variation across provinces, from the highest rate of household poverty headcount reduction in Western Cape at 21.9 percent to the lowest rate in the Free State at 3.9 percent. Nationally, social grants would reduce the poverty gap by 14.6 percentage points based on mean income and 13.6 percentage points based on median income and the rand poverty gap by 29 percent, or about $12.8 billion. This amount represents what it would take to eliminate poverty in South Africa. Overall, Samson’s (2004) results illustrate that South Africa’s social grants have contributed to poverty reduction but the impacts vary depending on the

2The convention in literature on poverty lines in South Africa has been to give children under age eighteen the weight of half an adult equivalent and to account for economies of scale with an exponential scale of 0.9. However, these numbers are not based on empirical studies for South African household economies (Samson et al. 2004, 23). The poverty lines are HSL poverty lines based on expenditure data from the HSL survey (R311 per person); Committee of Inquiry poverty lines based on the terms of reference of the Taylor Committee of Inquiry (R394 per adult equivalent) (variations: scaled and unscaled; based on both income and expenditure); the destitution poverty line, the lowest 20 percent of households in the income distribution (scaled) (R180 per person per month); and the relative poverty line, the lowest 40 percent of households

(based on expenditure and scaled). 3These numbers vary by poverty line used.

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