The income distribution in South Africa is one of the most skewed in the world. According to Whiteford and Van Seventer (1998: 17) the Gini co-efficient for South Africa in 1996 was 0,69. For countries at the same level of development as South Africa the Gini co-efficients fluctuated between 0,42 for Costa Rica and 0,61 for Brazil. The welfare significance of the national government's financing of provinces can be measured by the construction and analysis of a provincial welfare budget. The welfare budget will, inter alia, show whether the problem of a skewed income distribution amongst provinces is addressed. For purposes of such welfare analyses inter provincial equity boils down to the equalisation of personal incomes amongst provinces. This might also lead to inter racial group equity. The latter is not addressed in this article though. by addressing inter provincial equity, the assumption is made that income disparities amon