grant, foster-care grant and other grants like the care dependency grant. We also examine free basic services (water, electricity, sanitation and refuse removal) provided by the government to the poor, under the assumption that they are a form of a direct transfer to the poor. Finally, our analysis also extends to include health and education spending.

# **Direct Transfers**

Direct cash transfers as a whole are strongly progressive. Which are the most and least progressive of the various cash transfers programs that exist in South Africa? We show the concentration curves program by program for the main cash transfers program in panel A and for the rest of the programs in panel B of figure 10. As can be observed, cash transfers in South Africa are progressive in absolute terms. From Section III.2, we know that absolute progressivity in the case of transfers is a higher standard than relative progressivity: it means that the _per capita absolute value_ of the transfers –and not just in proportion to market income--decreases with income. The fact that transfers are progressive in absolute terms is particularly important in the context of South Africa because – given the very unequal market income distribution— even badly targeted transfers would turn out progressive in relative terms. In both panels we include the concentration curve of direct transfers as a whole so it can be used as a point of reference. Based on this, there is one cash transfer program that is more progressive than the average progressivity of direct cash transfers as a whole: the child support grant. The disability grant is as progressive as the average for the bottom deciles. Among the larger programs, the next program in terms of progressivity is the old-age pension. Although somewhat less progressive than the other three, this pension program is still progressive in absolute terms. Among the smaller programs, the most progressive one is foster child care (panel B).

Figure 10.Progressivity of direct cash transfers by category: Concentration curves for transfers and Lorenz curve for market income <!-- Start of picture text --> Panel A Panel B<br>100% Lorenz for Market Income 100% Lorenz for Market Income<br>Direct Transfers<br>90% Old -age pension 90% Direct Transfers<br>child foster care<br>Child support grant<br>80% 80%<br>grant-in-aid<br>Disability grant<br>70% Population Shares 70% other grants<br>Population Shares<br>60% 60%<br>50% 50%<br>40% 40%<br>30% 30%<br>20% 20%<br>10% 10%<br>0% 0%<br>0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10<br>Source: Own calculations based on IES 2010/11.<br><!-- End of picture text --> The above results partly reflect the fact that the share of households with elderly and school-aged children is higher at the bottom of the distribution. The bulk of its cash transfers go to the bottom of the income distribution: 69 percent of all cash transfers go the bottom 40 percent. The IES shows that about 66 percent of the bottom decile households have children under 18 years of age, compared to 37 percent in the top decile (Appendix 2). Some 28 percent of households in the bottom decile have a pension aged adult in it compared to 22 percent in the top decile. Moreover, by targeting transfers to families with children and the elderly, the transfer system is very effective at targeting the poor because some 40 percent of those who are classified as living below the national lower bound poverty line of R 433 (US$ 59.31) per month in 2010/11 prices were under the age of 15, while 23 21