The Poor Households have not shared in the benefits of Economic Growth in SA

The connection between state economic policy and the perpetuation of poverty and inequality is no accident, but a direct and foreseeable consequence of particular policy choices that have privileged the more ‘advanced’ components of the economy at the expense of the mass of the poor.

The poverty gap has grown faster than the economy indicating that poor households have not shared in the benefits of economic growth. In 1996 the total poverty gap [the required annual income transfer to bring all households out of poverty] was equivalent to 6.7% of gross domestic product (GDP); by 2001 it had risen to 8.3%.

This rise in inequality is captured in South Africa’s Gini coefficient for income, which rose from 0.69 in 1996 to 0.77 in 2001, with the greatest degree of inequality being found within the black (African) population group: ‘the overall driver of income inequality in post-Apartheid South Africa continues to be the rising inequality amongst African households’ (HSRC 2004).

Poverty is closely correlated with race and gender and is concentrated in rural areas. Limpopo and the Eastern Cape provinces have the highest proportion of poor people, with 77% and 72% of their populations living below the poverty income line, respectively, in 2001. The Western Cape has the lowest proportion in poverty, at 32% of the population, followed by Gauteng, at 42% (HSRC 2004). Bhorat and Kanbur (2006: 4) point out, however, that while there are higher rates of poverty in rural than in urban areas, the proportion of the total poor who reside in rural areas is declining, from 62% in 1996 to 56% in 2001: “This suggests a rapid process of urban migration that could in the future reshape the spatial nature of poverty in South Africa’.

Female-headed households also tend to be disproportionately poor, which Woolard and Leibbrandt (1999) attribute to a combination of factors: ‘female-headed households are more likely to be in the rural areas where poverty is concentrated, female-headed households tend to have fewer adults of working age, female unemployment rates are higher and the wage gap between male and female earnings persists’. Aliber (2001: 29) reports that, in 1999, 42% of all African households (i.e. 2.7 million) were female-headed, and that roughly 28% of these households were ‘chronically poor’.

While South Africa is often praised for its economic turnaround in the years since apartheid, and positive macroeconomic performance – as indicated by growth in GDP5, modest inflation, a falling proportion of GDP in taxation, falling budget deficit etc. – poverty, inequality and unemployment remain stubbornly impervious to policy prescriptions.

The connection between state economic policy and the perpetuation of poverty and inequality is no accident, but a direct and foreseeable consequence of particular policy choices that have privileged the more ‘advanced’ components of the economy at the expense of the mass of the poor. Terreblanche (2003: 422) describes this duality as ‘enclave capitalism’, a relatively new politico economic order that differs from the colonial and apartheid era in that it is no longer based on systematic exploitation of the black population, but rather on ‘systematic exclusion and systematic neglect’.

 

 
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 source:
 Terreblanche, S. 2003. A History of Inequality in South Africa 1652-2002. Scottsville: University of Natal Press.2)HSRC (Human Sciences Research Council), 2003. Land redistribution for agricultural Development: Case studies in three provinces. Unpublished report. Integrated Rural and Regional Development division, HSRC, Pretoria. October 2003.3)Aliber, M. and Mokoena, R. 2003. ‘The Land Question in contemporary South Africa’ in John Daniel, Adam Habib and Roger Southall (eds) State of the Nation. South Africa 2003 – 2004. Cape Town: HSRC Press.4)Woolard, I. and Leibbrandt, M. 1999. Measuring Poverty in South Africa. Development Policy Research Unit University of Cape Town. DPRU Working Papers No 99/33.5)http://r4d.dfid.gov.uk/PDF/Outputs/ESRC_DFID/60332_Lahiff_Redistributive.pdf

“South Africans should brace themselves for tougher economic times”

An economist warns that South Africans should brace themselves for tougher economic times as the government waivers on the implementation of its National Development Plan (NDP).

An economist warns that South Africans should brace themselves for tougher economic times as the government waivers on the implementation of its National Development Plan. Cees Bruggemans of Bruggemans & Associates, Consulting Economists said in a note on Tuesday, that to suggest 0.9% growth ‘appears unrealistic, though perhaps still politically useful as we approach local elections’.”Recession is such an ugly word, yet it rules the roost practically everywhere now,” the economist said. The economist said that confidence is needed to support risk-taking, fixed investment and job creation in the country.

“Under these challenging circumstances to steadily raise interest rates and impose R18 billion of tax increases while constraining government spending – cutting the budget deficit from 4% last year to 3.2% of GDP this year – is to hammer yet more nails into the collective coffin.” So what could hold us up? Bruggemans said that confidence would fire private businesses to do more.

He called for sustainable breakout policies, as intended by the National Development Plan, but so far cynically abandoned ‘while hailed with wild abandon’. “If it is still to be a while, expect further sinking a la Brazil,” the economist said.

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source:http://businesstech.co.za/news/business/117638/on-south-africas-economy-worse-is-coming-says-economist/accessed 23/03/2016