Inequality a threat to social stability

Ten years after democracy, pervasive poverty and inequality characterise South Africa, according to a recent study. The report, 'Poverty and Inequality in South Africa 2004-2014', focused on current trends and future policy options in narrowing the economic divide. Compiled by various academics as part of a study by the Ecumenical Foundation of Southern Africa (EFSA), it argues that social stability is at risk because of growing inequality. "The single most important issue facing South Africa 10 years after the transition to democracy is breaking the grip of poverty on a substantial portion of its citizens. There is a consensus amongst most economic and political analysts that approximately 40 percent of South Africans are living in poverty - with the poorest 15 percent in a desperate struggle to survive," the study noted. "This means that approximately 18 million out of 45 million people have not experienced the benefits of our newly found freedom. This poses a moral challenge to all South Africans - to work together towards the economic and social integration of the poorer section of our fellow citizens." The researchers added that "in public discourse the two [issues] - poverty and inequality - are normally linked and treated as an expression of the same problem. In reality, they are very different". These differences have important public policy consequences: inequality is reflected by the Gini coefficient, which measures the distribution of a country's national income. "In a perfectly equal society 10 percent of the population will receive 10 percent of the income; 20 percent of the population will receive 20 percent of income, and so on. For such a society the Gini coefficient will be zero," the study explained. The Gini coefficient varies between 0 and 1 - the closer to 1, the more unequal a society; the closer to 0, the more equal a society. The Gini score for South Africa is about 0,6. "With Brazil, South Africa has one of the most unequal income distributions in the world. This overall figure, however, hides a particular aspect: the Gini is higher amongst African [black] households than amongst non-African households. This is the result of some African households improving their position - a process that started in the 1990s, but accelerated after 1994", when the country became a democracy. It "is important to note that a society with low levels of poverty may still be unequal; low poverty and inequality may co-exist. That is one of the reasons inequality cannot simply be equated with poverty. They are different phenomena," the report said. In terms of poverty, South Africa could be referred to as a "45/55" society. By using the minimum living level (MLL) of a monthly income of R1,489 per household of 4.7 people - rather than the more common US $1-a-day poverty measure, due to the fluctuating currency exchange rates and recent dollar weakness - "about 45 percent of the population live in poverty and 55 percent do not". The researchers explained that while this ratio was high, "unlike the Gini coefficient, it is not one of the highest in the world". Comparisons of poverty levels are risky, but "several countries have higher percentages of the population living in poverty than South Africa", according to the World Bank Global Poverty Monitor. Although poverty has to some extent been "rolled back" - the proportion of people living in poverty has declined since 1970, for example - there has been rising inequality in income distribution. This has created the notion of "two economies" in one country, a concern raised several times by President Thabo Mbeki. The first economy is prosperous, skilled and largely white, while the second is poor, unskilled and largely black. An estimated 1.6 million "sustainable jobs" were created between 1995 and 2002. The state aims to create 1 million temporary and intermittent jobs through its Expanded Public Works Programme over the next five years, at a total cost of R15.5 billion. However, "over the same period that 1.6 million jobs were created, more than 5 million people entered the labour market. That resulted in an increase in the number of unemployed of more than 3 million - meaning South Africa has an unemployment rate ... of about 40 percent", which underlined the need to make economic growth the "top priority". The report noted that "not all poor [people] will be absorbed into the formal or even the informal economy", and stressed the need for a social safety net to alleviate the worst poverty, saying, "it is, in fact, being implemented systematically with the children's grant and increased old-age pensions, school feeding programmes and extended health services". EFSA executive director Dr Renier Koegelenberg told IRIN that a policy shift to "developmental interventions, rather than welfare interventions", was needed. "A substantial portion of the population falls between the lines of the public programmes at the moment. We are negotiating with the state ... to find a new deal for integrating people excluded from the normal economy. Unless we have a long-term policy to address these people not being picked up in the in normal, formal economy, we cannot increase social stability," Koegelenberg concluded.