Financial and Fiscal Commission technical report: Submission for the division of revenue 2022/23

Type Book Section - Chapter 6: Testing the means test: Social assistance in South Africa in the time of COVID-19
Title Financial and Fiscal Commission technical report: Submission for the division of revenue 2022/23
Publication (Day/Month/Year) 2021
Page numbers 178-216
Publisher Financial and Fiscal Commission
City Midrand
Country/State South Africa
The COVID-19 pandemic has forced the South African government to rely more heavily on social grants in order to offset the negative income shocks experienced by poor households and individuals. To this end, existing grant payments were temporarily increased in the latter half of 2020, and a new COVID-19 Social Relief of Distress (SRD) Grant was introduced to cover unemployed individuals who currently fall outside the pre-existing social assistance net. In addition to the regulatory requirements set out in the law, the accurate implementation of a means test is essential both to ensure that the poor can access social grants and to limit leakages to the non-poor. However, implementing the means testing of grants has implications for the overall cost of administering the system due to the administrative burden it imposes – where more complex means testing regimes are more expensive. This fact, in combination with a situation of relatively high rates of grant coverage in South Africa, has in the past led to calls to scrap the existing means tests entirely. Having no means testing would be ideal if it were only the eligible poor who collected grants. However, given that this is unlikely, and considering the constrained state of the country’s fiscus, scrapping means testing is arguably
not feasible at present, as it would significantly expand coverage. This outlines the main problem referred to above, and is the focus of this paper – how to ensure efficient means testing that includes the poor, excludes the non-poor and does not pose an excessive administrative burden. This paper reflects on South Africa’s current means testing regime considering this problem.

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