This study explores the extent to which South Africa's social assistance programme can constitute a building block of a developmental state. Using a critical research approach and Taylor's conceptual framework (2002) that draws on Sen's understanding of development as freedom, I explore the impact of cash transfers on households, on access to socio-economic opportunities and to the overall development of local democracy. Sen's capability approach and theoretical analysis of development helps to link different dimensions of poverty with human and institutional capabilities. There are five research objectives: examining whether a cash transfer has a developmental impact on the people who receive it; establishing whether cash transfers improve opportunities for households to take part in socio-economic activities; investigating how cash transfers promote civic participation and local democracy; ascertaining ways in which cash transfers promote development; and ascertaining the extent to which a cash transfer could be a significant feature of a developmental state.