percent were over the age of 60 (Stats SA, 2014a). Current plans to universalize the old age and child support grants are likely to change the incidence of the program going forward.<sup>43</sup> How much are incomes of the poor increased by cash transfers? Direct transfers are more than 10 times larger than market incomes of those in the bottom decile, mostly on account of old-age, disability and the child support grants (figure 11 and Appendix Table A3.3). This is larger than other middle-income countries. For instance, direct transfers in Brazil—at 4.2 percent of GDP—are larger than in South Africa, and include expenditure on the wellknown Bolsa Familia conditional cash transfer program. Yet these transfers ‘only’ raise the market incomes of the bottom decile by a factor of 2 (figure 11B). However, there are some transfers in South Africa directed to individuals in higher income groups by design, with nearly 18 percent of old age pensions and 11 percent of disability grants going to households with incomes above US$ 10 a day at PPP (table 6).

<!-- Start of picture text --> Figure 11. South Africa’s direct cash transfer programs in national and international perspective<br>A. South Africa: Incidence of direct cash transfers B. Middle-income countries: Incidence of direct<br>(Share of market income by decile) cash transfers<br>(Share of market income deciles)<br>1200% 1200% 4.5%<br>1000% 1000% 4.0%<br>3.5%<br>800%<br>800% 3.0%<br>600% 2.5%<br>600%<br>400% 2.0%<br>200% 400% 1.5%<br>1.0%<br>0% 200%<br>0.5%<br>0% 0.0%<br>Old -age pension Child support grant<br>Disability grant Child care dependency grant<br>Child foster care Grant-in-aid<br>Poorest decile Richest decile Share of GDP (right axis)<br>Other grants<br>Share of market income<br><!-- End of picture text --> Sources: Argentina (Lustig and Pessino, 2014), Armenia (Younger and Khachatryan, forthcoming); Brazil (Higgins and Pereira, 2014), Mexico (Scott, 2014), Uruguay <u>(Bucheli et al, 2014), and own estimates for South Africa based on IES 2010/11.</u> Table 6. Share of benefits going to each income group <u>(Percent of total, by level of market income, y, in US $ PPP a day)</u>

||y< 1.25|1.25 <y< 2.5|2.5 <y< 4|4 <y< 10|10 <y< 50|y> 50|Total|
|---|---|---|---|---|---|---|---|
|Old age pension|46.7|13.4|8.0|14.3|14.7|2.9|100|
|Disability grant|50.4|14.6|8.0|16.0|9.9|1.1|100|
|Child support grant|55.1|16.3|9.4|14.3|4.7|0.2|100|
|Care dependency grant|64.5|13.3|5.3|14.2|2.2|0.6|100|
|Foster care grant|53.3|17.1|10.7|11.7|6.5|0.6|100|
|Grant-in-aid|41.8|13.9|8.4|21.0|12.7|2.2|100|
|Other grants|32.5|7.5|10.2|20.0|17.9|11.9|100|
|Free basic services|40.9|12.7|7.7|17.5|16.2|5.0|100|
|Population shares|40.3|16.2|9.0|16.2|14.4|4.0|100|
|Source: Own estimates b|ased on IE|S 2010/11||||||

43 The main argument for universalizing the old age grant is that while there are transfers at the bottom and tax rebates at the top, ‘midincome’ older adults are missed out. Mid-income adults are currently not covered by existing social pensions. Low income older adults (those with individual income of less than R61,800 per annum for an unmarried person) receive the non-contributory Older Persons Grant, and high income older adults benefit from additional tax rebates which raises the PIT threshold from R70 700 (for persons below the age of 65) to R110 200 for persons aged 65-74 and R123 350 for persons aged 75 and over. The intention is to provide by 2016 a universal grant to all older adults and to do away with the tax rebates. The additional revenue from the scrapping of the secondary and tertiary rebates will be insufficient to finance the pension reform, however. There has not been a firm proposal to universalize the child support grant; such a proposal seems unlikely to emerge unless significant fiscal space opens up in the future.

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