Study reveals how they utilize these grants to earn more money

Leila Patel is funded by her university, the University of Johannesburg, and previously from the DSI/NRF to fund her chair on Welfare and Social Development, Centre for Social Development in Africa, University of Johannesburg.

South Africa has the most extensive social grant system: 47% of the population depends on an annual grant. Of these 18 million, there are 18 million who have permanent benefits, while around 10 million are eligible for the temporary Social Relief of Distress Grant. This was announced in the context of the COVID-19 epidemic for adult workers who do not have formal social protection like unemployment insurance or those working in non-formal work.

Most grant funds comprise child-support grants (R500 or about US$27 per month) that are paid to the primary caregiver for the child by a means test.

There is plenty of proof that these cash transfers have many positive results. They can, for instance, help reduce hunger among children, increase children’s attendance at school, and reduce the poverty rate.

While Social grants tend to be typically used to purchase food, there is growing evidence to suggest that they are employed to make profitable investments in livelihood-related activities. They are the actions that people take for their basic needs, such as food, shelter, and clothing. Beneficiaries find different options to “grow” their grant through informal work or other income-generating activities.

However, there isn’t much information about the scope of these programs or how the government, along with other social partners such as development agencies, NGOs, and corporate social investment (CSI) initiatives, can support the agency of the recipients and enhance their strategies to improve their lives. This is important to consider when considering the country’s 32.8 percent unemployment rate.

To fill in this knowledge gap, we quantitatively analyzed beneficiaries of social grants’ working status based on household surveys between 2008 and 2021. We wanted to learn more about how many grant recipients – caregivers of older people, children disabled, and unemployed adults – engage in informal employment and income-generating activities.

Read more: South Africa’s relief grant: how it can help young people get jobs.

We found that 31% of grant beneficiaries engage in informal work. These are jobs with no written contract and where the businesses are not registered for tax. They include care work, casual trading, or self-employment. In 2021, grant beneficiaries were 13% more likely to be doing informal work than formal work. There was a greater probability of child support grant beneficiaries engaging in survival-oriented business activities (11%), followed by 9% of beneficiaries of the Social Relief of Distress grant and 4% of old-age pensioners.

While the study revealed that the percentage of self-employed social grant recipients is small, this is not the case when you compare it to self-employment (10 percent) as a proportion of the employment total. In this respect, South Africa is far poorer than other countries with higher middle incomes, like Turkey, Brazil, and Mexico.

The second was that we synthesized the results from three qualitative research studies done by post-graduate students at the Centre for Social Development in Africa and the Department of Anthropology and Development Studies at the University of Johannesburg.

The stories of grant recipients that emerge from these studies reveal an intense desire to achieve their goals, for example, getting a job or even starting a business of their own and finding ways to increase their income and their personal and family well-being. They also encountered significant obstacles in encouraging living conditions, reducing poverty, and improving their psychosocial well-being. These findings suggest the need for multi-pronged strategies for reducing poverty that integrate grants and livelihood assistance services.

Livelihood activities

The participants in the three studies expressed the desire to make a difference in their lives. Some expressed a desire to be independent, productive, and active.

In the three studies, regardless of the amount awarded and its value, respondents said that more than the grant money was insufficient needed to fulfill their requirements.

They discovered a variety of methods in which to “grow” their grant. Sure of them were income-generating, such as selling and buying products, providing services like painting, building and photography, operating establishments or restaurants, renting accommodations, and traditional healing. Some engaged in Fahfee (a kind of betting) or participated in gardening for the community, sewing, recycling, and beadwork.

Others invested in future income strategies, such as helping children in their jobs looking. Others used their grants to the seed money to finance business starting costs, to purchase new equipment like chip fryers or beads to enhance their work in the arts, or to expand their current activities.

We also observed that a few recipients were investing a percentage of their grants via Stokvels (a kind of credit union that is informal) or savings plans. They planned to invest their savings into their businesses or use the funds to fund an emergency. Through the three qualitative research studies, participants said that households with several income sources were financially secure.