Cash transfers successfully alleviate poverty in many developing countries. South Africa is a
case in point, implementing one of the largest unconditional cash transfer programmes
internationally, and with substantial benefits to household well-being along multiple
dimensions. Yet, grants discourage formal labour market attachment, creating dependencies
on the fiscus. This study uses a fuzzy regression discontinuity design to establish that statefunded
Old Age Pensions encourage non-market economic activity (in the form of small-scale
farming), and improve the self-reported food security of rural households that farm, vis-à-vis
those that do not. However, only non-farming households increase market food expenditure
and consume more diverse diets from market-sourced foods: diet quality improves with
greater spending, while food sufficiency remains unaffected. Farmers, on the other hand, do
not change food spending patterns, but self-rated food sufficiency improves due to greater
levels and diversity in home production. The role of small-scale farming is of broader interest
in rural development, given the context of the 1913 and 1936 Land Acts that constrained this
form of livelihood in former apartheid homelands. This paper’s contribution is two-fold: grants
are an effective channel to actively promote rural development through small-scale farming,
and they improve food security by non-market mechanisms.