Special report on widening poverty gap

South Africa has made significant gains since the advent of democracy in April 1994. However, the country still faces serious problems. The most significant one - apart from the impact of HIV/AIDS - is the lack of economic and social rights for a large sector of the population. Research undertaken by a project team in the office of President Thabo Mbeki, assisted by the Department of Social Development, has attempted to capture the essence of the problem. Their report, titled "Towards A Ten Year Review", seeks to quantify the performance of the state in its constitutional obligations to its citizens, and its progress in redressing apartheids injustices. While the government's performance in provision of health, education and other basic services has been commendable, the report notes that "two economies persist in one country". "The first is an advanced, sophisticated economy, based on skilled labour, which is becoming more globally competitive. The second is a mainly informal, marginalized, unskilled economy, populated by the employed and those unemployable in the formal sector," the report said. During a recent talk at the annual conference of the Black Management Forum, Mbeki reportedly likened the "two economies" in the country to a double-storey house "without a connecting staircase". "Despite the impressive gains made in the first economy, the benefits of growth have yet to reach the second economy, and with the enormity of the challenges arising from the social transition, the second economy risks falling further behind if there is no decisive government intervention," the report warns. The 10 year review argues that "the central economic challenge for the next decade, to help address the negative impact of the social transition - with far-reaching social and political implications - is to ensure much higher rates of growth and employment creation". Between 1995 and 2002 the number of people classified as unemployed, according to the narrow definition of those actively seeking work, had risen from just over 1.9 million to over 4.2 million - an increase of over 2.3 million. The department of labour says the national official unemployment average is 30.5 percent or 4.8 million people. However, the department uses a strict defenition for unemployed, which independent researchers have disputed, and some have pegged the general unemployment figure as high as 40 percent. SOCIAL GRANTS The extension of social grants has been trumpeted by the government as a major achievement, following the systematic scrapping of apartheid era legislation aimed to place whites above other citizens in terms of accessing state assistance.

Impoverished areas around the district of Sebokeng, south of Johannesburg, have existed on the doorstep of a major economic hub, without any trickle down of the benefits of South Africa's macro-economic stability. Full Report

According to Statistics South Africa, in 1995 about 28 percent of households and 48 percent of the population were living below the poverty line. In 1999 just under 33 percent of households were living below the poverty line - most of them were defined as African (black indigenous South Africans). This is an indication of the impact that the exclusion from the broader economy, through apartheid job reservation legislation, and the prejudicial nature of state assistance, has had on black communities, analysts say. Since 1994 the state's expenditure on social grants has increased from R10 billion (about US $1.4 billion) in 1994 to R34.8 billion (about US $5 billion) in 2003. Similarly, there has been a concurrent increase in beneficiaries as the state attempts to address the legacy of apartheid. In 1994 some 2.6 million people benefited from direct social grants, while in 2003 that figure had ballooned to 6.8 million. The 10 year review notes that "overall, social grants have the potential of reducing the number of individuals in poverty from 42 percent to 24 percent. Although great progress has been made in registering recipients, the full impact of these grants will only be realised when all eligibles are registered". The government has admitted that many South Africans eligible for social grants are unable to access them as they lack the necessary identity documents, proving their citizenship, to do so. As with social grants, public works programmes are a key intervention which allows the state to address, in part, the poverty of individuals and asset poverty (houses, infrastructure) of communities. "Expenditure on public works programmes has increased almost tenfold since 1998 ... employing a total of 124,808 people since 1998. However, most of these jobs were temporary," the review notes. Some 3,407 permanent jobs were created by public works projects between 1999 and 2002 and a further 141 permanent jobs were created by the first half of the 2002/03 financial year. "Research indicates that public works programmes vary in their efficiency of transferring income to the poor with the average expenditure per worker varying between R27,242 [US $3,928] in Limpopo [province] to R6,515 [US $939] in the Eastern Cape [province]," the review said. It added, however, that "while increasing provision of assets to the community, [public works programmes] are not as efficient as income grants in alleviating income poverty". EDUCATION, AN ESCAPE FROM POVERTY? Literacy rates have increased from 83 percent in 1996 to 89 percent in 2001 for the general population, while literacy rates for the 15 to 24-year-old age group have risen from 83 percent to 96 percent over the same period. "Which is exceptionally high for any nation," the 10 year review notes. The report added that "while significant progress has been made, there is evidence that discrimination in employment still exists. Unemployment and other social ills are still disproportionately higher for blacks and women, and there is still a gender-based premium in earnings". Many black South Africans are now better educated, but this has not necessarily translated into better jobs. While studies have shown that the better educated an individual, the better off they are, in South Africa it is not only those without skills and education who struggle to find employment. Research by the Centre for the Study of African Economies (CSAE), based at the University of Oxford in the UK, notes that in South Africa race and unemployment are linked. Evidence from Ghana, Uganda and South Africa was collected for the report which questioned whether investing in education reduced poverty. The report notes that in "Uganda and Ghana, education plays an important role in access to certain types of employment, whereas in South Africa, the issue is access to employment [overall]". "In South Africa, racial differences in unemployment incidence cannot simply be dismissed as a problem of the poorer productive characteristics of the African, coloured and Indian groups relative to whites," the CSAE said. "While a substantial part of the race gap in the incidence of unemployment in the mid-1990s was explained by inter-group differences in observed characteristics, there remained a residual that could not be explained in this way. The residual may be due to employer discrimination or to racial differences in unmeasured determinants such as the quality of education," it added.

Job creation will be a key issue during the 2004 elections.

Another report from the CSAE, titled "Race and the Incidence of Unemployment in South Africa" takes the point further. It says "an empirical model fitted to predict individuals' probability of unemployment shows an important role for race, education, age, gender, home-ownership, location, and numerous other variables, all of which have plausible explanations". But it is "the large race gap in unemployment" which "might represent labour market discrimination against blacks". A recent survey by the Human Sciences Research Council of South Africa (HSRC) found that while university graduates have a distinct advantage in the country's competitive labour market, some historical hurdles remain. "Africans, women and those who studied at historically black universities still have the greatest difficulty finding employment," the HSRC found. It conducted a survey of 2,672 university graduates who obtained their first degree between 1990 and 1998. The study revealed differences along racial lines. "About 70 percent of white graduates found employment immediately, compared with 43 percent of Africans, 42.2 percent of coloureds and 47.6 percent of Asians. A higher proportion of graduates from historically black universities (65.4 percent) experienced periods of unemployment compared to graduates from historically white universities (34.65 percent)," the report said. KEY CHALLENGES FOR THE FUTURE A comparison of public opinion polls provides important direction as to the concerns uppermost in the minds of South Africans, of all race groups. In 1994, 67 percent of those polled believed job creation to be the "most important problem" facing the country. While in 2002 the number of people who believed job creation was the "most important problem" had risen to 84 percent. Likewise, in 1994 just 9 percent of respondents were concerned about poverty, by 2002 that had increased to 28 percent of respondents. The government's performance in providing safety and security, education and health care seems to have been given a nod of approval. In 1994, 34 percent of respondents were concerned about education, but by 2002 that had dropped to 15 percent. South Africa will celebrate 10 years of democracy in April 2004, during which time the electorate will go to the polls once more for presidential and legislative elections. The lack of social and economic equality for a large section of the population is set to be a key election issue. Institute for Democracy in South Africa (IDASA) executive director Paul Graham told IRIN that "in general the figures are pointing to a continued high level of inequality between the wealthy and the poor". "The data does suggest that there's de-racialisation among the wealthy. But poverty levels certainly have not improved and when we do our research, which asks people what they think the main public issues are, jobs comes up as the key issue," he said. IDASA research indicated that "about 80 percent of people in the country see [economic inequality] as the key issue that government should be doing something about". With regard to peoples' perception of government performance around key issues, "the general view is that this is the area where government has done the worst, I think about 9 percent believe government has done a good job in terms of job creation," Graham noted. "People who were poor 10 years ago have not been able to escape the poverty trap. Government's rejoinder is that the social security net and availability of services to the poor has improved, and there's some evidence in that regard, [the roll out of] houses, potable water and so on. But the problem for people is that they don't feel they are able to get themselves out of the poverty trap, they need work," Graham added. The debate in South Africa was moving away from the undisputed facts around poverty and more toward finding solutions. "I think over the elections there's going to be a substantial debate over macro solutions to these micro problems, how one actually changes the structural problems of South Africa. I do get the impression of increasing interest in Brazil and the policy formation of the new president of Brazil in an attempt to see whether there are ways in which the state can be more proactive. Instead of merely creating an investment climate - which is largely policy at the moment, fiscal discipline, liberalisation of the policy arena etc," Graham noted. Research has shown that with an average growth rate of 2.8 percent, net employment grows at a rate of 2.1 percent. South Africa's economy grew by 3 percent in 2002 up from 2.5 percent the year before, said a UN Economic Report on Africa 2003. But the issue remains how to raise growth to higher levels. "And more specifically, the rate of investment from the current 16 percent to 17 percent of GDP," the 10 year review noted. Graham said the "only way to change [unemployment trends] is if the growth rate is running between 5 percent and 6 percent. Which we have not had over the last few years. Also [while there has been economic growth] we have had jobless growth, in fact there's been some shedding of jobs". To address poverty it was necessary to "address the asset base of the poor, political power of the poor and income security of the poor". "The political power issues have been partially addressed. The asset base areas such as land, education, tenure of housing, are being addressed, but those are slow processes. [With regard to] income security, government has been good about providing a social security net, which is not yet being accessed by everybody, and the other area is jobs, jobs, jobs - and that is not happening," he concluded.
SOUTH AFRICA: Bringing services to the poor