Assessing the impact of social grants on household welfare using morning after simulation and PSM approach

Despite having relatively well-developed social security system, poverty levels in rural parts of South Africa remains very high. This study employs a cross-sectional households’ survey data conducted in Hlokozi village (located in one of the poorest provinces in South Africa – Kwazulu Natal Province) and propensity score matching technique (which accounts for non-random selection of households) to investigate the impact of social grants on rural household welfare. The results reveal that social grants have a significant and positive impact on rural household welfare. Specifically, the nearest neighbour matching estimates suggest that the causal effect for social grants on household welfare is the region of about R 5830. Consistent with the nearest neighbouring method, the results obtained using Kernel matching method shows that social grants are significant in improving rural household welfare. Our finding seem to lend credence to the conclusion of previous studies that social grants (conditional or unconditional) help in the way of lifting households out of poverty and improve their welfare. Thus rural areas (traditional rural areas) should continue to be a chief focus of poverty alleviation efforts in South Africa.