The impact of government grants on poverty in Sharpeville

Abstract

South Africa, like international countries, has been experiencing an increase in the levels of poverty over the years. Poverty affects vulnerable groups of society more intensely and these groups include children, the old, disabled people and women, especially those who are single parents. This dissertation studies the role social grants have on the level of poverty in households of Sharpeville. This study focuses on two areas namely the theoretical background of poverty and social grants; and what the impact is of income from social grants. The South African government provides its citizens with eight different social grants to help those in need and/or vulnerable. From these social grants only six are investigated for the purpose of this study. These grants include the old age grant, child dependency grant, foster care grant, child support grant, disability grant and the war veteran grant. Poverty is defined as the inability to attain a minimal material standard of living by the World Bank. The different indicators used in this study to profile poor households in Sharpeville include the Household Subsistence Level (HSL) as the poverty line, the poverty gap ratio, the headcount index and the dependency ratio. This dissertation shows that poverty within the township has increased over the five years. And to do this the results from the data survey conducted in 2009 are compared to the results from Sekatane‘s 2004 data. The poverty gap ratio and the headcount index for the township in 2009 were estimated at 0.86 and 0.654 respectively. In the year 2004 the headcount index was estimated at 0.431 indicating a 22.3 percent increase in the number of people living in poverty. This means that an estimated 5 477 households in Sharpeville, in 2009, were regarded to be poor When government grants are excluded from the household‘s income within the township both the poverty gap ratio and the headcount index decrease to 0.93 and 0.705 respectively. This means that when government grants are excluded from households‘ income within Sharpeville, the depth of poverty within household‘s increases. The income from government grants might be regarded as minimal, however it assists in moving households further from the poverty line. This study recommends that activities within the informal sector should be encouraged as this will increase employment opportunities for those unemployed in the township. As the vast majority of the unemployed people have skills from trading/retail sector; employment creation should be focused in this sector. Lastly, the income threshold used in the means test equation to check affordability of social grant applicant should be decreased as people meeting the current criteria are already living in dire poverty.