This paper uses project and household data to examine the ability of 100 or so public works projects in Western Cape Province, South Africa, to target benefits—both direct and indirect—to those living below the poverty line. We find that public works projects generally outperform hypothetical untargeted cash transfers in this regard under a wide range of assumptions about underlying parameters.Public works. ,Subsidies. ,

Adato, Michelle

Haddad, Lawrence James

English

Research Papers in Economics

 
Discussion Paper 108 
How Efficiently Do Public Works Programs Transfer 
Benefits to the Poor? Evidence from South Africa 
Lawrence Haddad and Michelle Adato 
 
ost best-practice national strategies to 
reduce poverty include workfare programs. 
Typical p rograms are public works 
schemes that pay below-market wages. Such 
initiatives attempt to create physical assets labor-
intensively so that as much employment is generated 
as possible. To increase the poverty-reducing 
impact, an attempt is made to generate assets that 
benefit the poor in the medium to long run. 
  This type of antipoverty intervention has met with 
skepticism, as some wonder whether the programs 
can be sufficiently well targeted to generate 
additional employment rather than substitute for 
market-led employment, whether the programs’ 
administrative requirements consume too many of 
the resources, and whether high-quality assets can be 
generated in a sufficiently labor-intensive fashion to 
generate sufficient income for the poor. 
 
Purpose of This Report 
This paper analyzes project-level data collected by 
the authors research team in South Africa’s Western 
Cape Province to try to answer some of these 
questions. The projects represent the universe of 
projects in 1995–1997 with a set of objectives that 
mirror those of the country’s National Public Works 
Programme (NPWP). These objectives include 
short-term job creation; the creation of assets or 
environmental improvement via labor-intensive 
means; sustainable job creation through skills train-
ing, and  local institutional ca-
pacity building and community 
empowerment through partici-
pation in infrastructure projects. 
 
Methodology 
Specifically, the authors merge 
information on 101 public works projects under-
taken in the province during the 1995–1997 period 
with household survey data from the districts where 
the projects were based. The authors then estimate 
the rands of public expenditure necessary to transfer 
one rand of resources to the poor and compare this 
ratio to that generated by a hypothetical untargeted 
transfer under a range of assumptions about 
parameter values. The model the authors use is 
based on—but fleshes out as well—Ravallion’s 
framework for appraising workfare programs 
(Appraising Workfare. 1999. World Bank Research 
Observer 14 [1]: 31-48). 
 
Limitations of the Study 
Of course, all of the authors’ suppositions and 
assumptions are open to challenge. For example, the 
authors focused on the poverty-reduction aspects of 
the programs, despite the fact that many had other 
stated goals as well. In particular, the comparisons 
with hypothetical untargeted transfers do not 
consider the sizable nontransfer benefits that are 
generated for the nonpoor by the assets the projects 
generate, nor did they capture the skills development 
and community empowerment effects that do affect 
the poor. Nevertheless, the database used in this 
study is much richer than any other such database. 
By merging quantitative project-level data with 
extant district-level data, dialogue on the antipoverty 
effectiveness of public e xpenditures will be 
enriched.  
 
Results and Discussion 
Based on the authors’ assumptions, the results were 
that the vast majority—between 83 and 92 percent—
of public works pro-
grams outperformed hy-
pothetical untargeted 
transfer schemes by a 
considerable d istance 
over a wide range of 
parameter scenarios. Not 
surprisingly, performance of the projects improves 
when a higher value is placed on a transfer from 
taxpayers to workers and when an administrative 
overhead is applied to the benchmark untargeted 
transfer. 
M
 
Discussion Paper BRIEFS 
Food Consumption and Nutrition Division of the International Food Policy Research Institute 
Based on the data and the authors’ 
assumptions, public works programs 
significantly outperformed untargeted 
transfers in terms of poverty impacts.  
  A number of lessons can be drawn from the 
analysis. First, the performance of public works 
projects as public-sector antipoverty initiatives vis-à-
vis untargeted transfers depends on the interplay of 
many factors. Projects are more likely to perform 
well if they (1) offer wages that are lower than 
comparable market wages, (2) locate in areas that 
have a high unemployment rate among the poor, 
(3) have a labor intensity high enough to generate a 
sizeable transfer income, (4) create assets that 
generate  nontransfer benefits valued by the poor, 
(5) locate in areas that are poor, but not so poor that 
an untargeted transfer is inevitable, and (6) leverage 
additional nongovernmental funding. 
  However, the trade-offs between these factors are 
important to note. For example, if labor intensity is 
too high, not enough of the project budget will go to 
an asset that can generate nontransfer benefits. 
Similarly, if a project is located in an area in which 
nearly everyone is poor, an untargeted transfer might 
be more appropriate as a transfer program. At the 
provincial level, the location of programs in rela-
tively poor and unemployed areas is particularly 
crucial to their performance, as it reduces leakage of 
the transfer benefits to the nonpoor, increases the 
capture of nontransfer benefits by the poor, and in-
creases the social value of transfers of income from 
taxpayer to worker. Unfortunately, there appears to 
be little relationship between the district-level share 
of public works activity and the district-level share 
of poverty, unemployment, and infrastructure need. 
This disparity exists despite the wide availability of 
repeated surveys of living standards in South Africa, 
and reflects the philosophy that the location of these 
projects should be led by communities. More devel-
oped communities are better connected and thus 
better able to apply for public works resources—
hence, the trade-off with targeting objectives. 
  Interestingly, the performance of the programs 
does not appear to depend on the type of asset that is 
constructed. If program characteristics are found to 
be important for their antipoverty performance, this 
has implications for the mechanisms that govern-
ment uses to choose among proposals. For example, 
if projects led by community-based organizations 
were found to be more effective in transferring 
benefits to the poor, this could lead to an increased 
share of projects being awarded to community-led 
proposals. 
  Another lesson is that there is much value in 
collecting a key set of indicators for project 
monitoring and evaluation purposes, including total 
costs, labor costs, duration, wage rates, number of 
days of employment, the number of project workers 
that leave for nonproject employment, and the area 
wage rate for comparable work. Such data collection 
protocols need to be developed by workfare pro-
grams. Also at the program level, poverty, employ-
ment, and infrastructure maps need to be generated 
and used when alternatives for project location 
present themselves. 
 
Keywords: public works, South Africa 
 
 
 
 
The full text of this document and other FCND Discussion Papers are available on our Website 
(www.ifpri.org/divs/fcnd/dp.htm) or via B.McClafferty@cgiar.org 
 
 
 
FCND BRIEFS 
 
International 
Food 
Policy 
Research 
Institute 
 
 
2033 K Street, N.W. 
Washington, D.C. 20006 U.S.A. 
 
Based on the data and the authors’ assumptions, public 
works programs significantly outperformed untargeted 
transfers in terms of poverty impacts.—DP108 

How effectively do public works programs transfer benefits to the poor?

http://www.ifpri.org/sites/default/files/publications/fcnbr108.pdf

How effectively do public works programs transfer benefits to the poor?

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