The democratic government in South Africa has developed a system of social grants to
combat the high levels of poverty and inequality inherited from the apartheid regime. With the
help of modest economic growth and an associated increase in per capita household income, the
introduction and expansion of social grants has helped alleviate the inherited burden of poverty.
On the other hand income inequality has remained stubbornly high in post-apartheid South Africa
and the role of these grants in inequality reduction remains unclear. We use national household
survey data from 1993 and 2008 and the major income inequality decomposition techniques in
order to assess the impact of a change in these government transfers on inequality. This South
African case study allows for a side-by-side assessment of these income inequality decomposition
techniques. We find that the social assistance awarded to the elderly has contributed dramatically
to the decline in poverty but has not reduced income inequality. On the other hand social
protection programs directed at child minders of poor children had an equalizing effect. More
recent decomposition techniques allow us to net out the effect of changes in household
composition on inequality from these impacts. This is shown to notably lower the direct impact
of the social grants on inequality.