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South Africa: Post-Apartheid Poverty Inequality
AfricaFocus Bulletin
Oct 7, 2010 (101007)
(Reposted from sources cited below)
Editor's Note
The question of how much change in social and economic conditions
has followed the fall of apartheid in South Africa has provoked
not also much debate but also significant research. A useful new
report by Murray Leibbrant and others at the Southern Africa Labour
and Development Research Unit in Cape Town provides both a summary
of previous research and new analysis of household-level data
between 1993 and 2008.
The unsurprising bottom line: inequality between races has
decreased but is still large; within-race inequality has increased,
and so has overall inequality; income poverty has diminished
somewhat, particularly among the poorest, while services have
increased but still fall far short of meeting the needs. And the
decrease in income poverty is due primarily to child support grants
and old age pensions, not to the labor market which continues to
promote inequality.
This AfricaFocus Bulletin contains brief, relatively non-technical
excerpts from the report. The full report, includes tables,
footnotes, data annexes, and references, is available at
http://www.oecd.org/els/social/inequality
Thanks to Patrick Bond's recent article in the AfricaFiles At Issue
Ezine for calling my attention to this study. Bond's article is an
up-to-date evaluation of the South African economic and political
scene and prospects for the left, after the World Cup and the
recent public sector strikes. See
http://www.africafiles.org/atissueezine.asp#art2
For previous AfricaFocus Bulletins on economic issues, see
http://www.africafocus.org/econexp.php
++++++++++++++++++++++end editor's note++++++++++++++++++++
Trends in South African Income Distribution and Poverty since the
Fall of Apartheid
Murray Leibbrandt, Ingrid Woolard, Arden Finn and Jonathan Argent
Southern Africa Labour and Development Research Unit, School of
Economics, University of Cape Town
OECD Directorate for Employment, Labour and Social Affairs
http://www.oecd.org/els
OECD Social, Employment and Migration Working Papers, No. 101, OECD
Publishing. doi: 10.1787/5kmms0t7p1ms-en
http://www.oecd.org/els/workingpapers
[Brief excerpts only. The full paper is available at
http://www.oecd.org/els/social/inequality]
Abstract
1. This report presents a detailed analysis of changes in both
poverty and inequality since the fall of Apartheid, and the
potential drivers of such developments. Use is made of national
survey data from 1993, 2000 and 2008. These data show that South
Africa's high aggregate level of income inequality increased
between 1993 and 2008. The same is true of inequality within each
of South Africa's four major racial groups. Income poverty has
fallen slightly in the aggregate but it persists at acute levels
for the African and Coloured racial groups. Poverty in urban areas
has increased. There have been continual improvements in
non-monetary well-being (for example, access to piped water,
electricity and formal housing) over the entire post-Apartheid
period up to 2008.
2. From a policy point of view it is important to flag the fact
that intra-African inequality and poverty trends increasingly
dominate aggregate inequality and poverty in South Africa.
Race-based redistribution may become less effective over time
relative to policies addressing increasing inequality within each
racial group and especially within the African group. Rising
inequality within the labour market - due both to rising
unemployment and rising earnings inequality - lies behind rising
levels of aggregate inequality. These labour market trends have
prevented the labour market from playing a positive role in poverty
alleviation. Social assistance grants (mainly the child support
grant, the disability grant and the old-age pension) alter the
levels of inequality only marginally but have been crucial in
reducing poverty among the poorest households. There are still a
large number of families that are ineligible for grants because of
the lack of appropriate documents. This suggests that there is an
important role for the Department of Home Affairs in easing the
process of vital registration.
Introduction
5. In addition to high poverty levels, South Africa's inequality
levels are among the highest in the world. Furthermore, levels of
poverty and inequality continue to bear a persistent racial
undertone. Two indicators of the post-Apartheid political economy
have attracted special attention in this regard. The first
indicator responds to the question whether the evolving character
of the post-Apartheid economy and the policy efforts of the
post-Apartheid government have been able to start to lower these
very high aggregate levels of poverty and inequality. A related
question is whether the racial footprint underlying poverty and
inequality is starting to grey and will be replaced by new social
strata and more subtle socio-economic dynamics.
6. Using the latest comparable household micro data, this report
attempts to address these issues by reviewing the development of
poverty and inequality levels in South Africa since the country's
transition to democracy some 15 years ago. It also explores a range
of social policies and their efficacy in influencing these
outcomes.
7. Chapter 1 provides a background for the discussion by reviewing
existing empirical work on South African inequality and poverty.
Trends since 1970 are reviewed and described in the long-run, with
a special focus on aggregate figures and racial shares. The very
name "Apartheid" indicates the importance of race-based geography
and race-based policy. While formal policies of spatial separation
by race are long gone, a lingering legacy remains in the
rural-urban marker of inequality and poverty. ... The most
important conclusion of this chapter is that intra-African
inequality and poverty trends have increasingly dominated the
aggregate measures. While between-race inequality remains high and
is falling only slowly, it is the increase in intra-race inequality
which is preventing the aggregate measures from declining.
Therefore, policy initiatives which address the increase in
intra-racial inequality are recommended, rather than those focused
solely on redistribution between inter-racial population groups.
8. But between-race inequality too remains a central issue.
Although real incomes have been rising for all groups over the long
run, many Africans in the country still live in poverty. At any
poverty line, Africans are very much poorer than Coloureds, who are
very much poorer than Indians/Asians, who are poorer than whites.
Inequality by rural/urban ("geotype") on the other hand is
changing. While rural poverty rates remain substantially higher
than those in urban areas, urban poverty rates are rising and rural
rates seem to be falling. Finally, access to services is shown to
have improved, deeming service delivery together with asset growth
as being pro-poor.
9. Chapter 2 provides new empirical analyses of poverty and
inequality from three comparable national household survey data
sets from 1993, 2000 and 2008. ... It is found that the high level
of overall income inequality has further accentuated between 1993
and 2008, and that income has become increasingly concentrated in
the top decile. Thus, the country's Gini coefficient increased by
four percentage points, from 0.66 to 0.70, between 1993 and 2008.
The Gini coefficient for the African population has risen most
sharply.
10. Chapter 2 finds that poverty levels have decreased only
slightly over the period under review. ... Government social
assistance grants are found to be increasingly important in the
composition of household income of low-income households. While
their impact on poverty incidence remains negligible overall, they
succeed in reducing the poverty gap, especially among the poorest
households. That said, households without children have become
relatively poorer ... The fact that better-educated young people
remain poor suggests that the labour market has not been playing a
successful role in alleviating poverty and that the education
system is not delivering the skills needed in the labour market.
Thus, it is concluded that it is not the labour market but rather
social assistance grants which have driven the relative improvement
in poverty levels over time.
...
12. Chapter 3 deals predominantly with social assistance grants,
and shows that consolidated expenditure on welfare and social
assistance has increased substantially in the post-Apartheid
period. Two-thirds of income to the bottom quintile now comes from
social assistance, mainly child support grants. The study finds
that a high number of paternal orphans receive such grants,
compared to a low number of maternal orphans. In addition, it is
found that orphans are less likely to be receiving the Child
Support Grant than children with both parents. Most significantly,
there appear to be many eligible children in need who are not
receiving the grant. The most common reason for not applying when
eligible for the grant is found to be a lack of correct
documentation. More than 80 percent of the elderly receive the
country's Old Age Pension. More than two-thirds of the recipients
are women. ... Reviewing secondary sources, it is concluded that
the social grants have a positive effect on school attendance
rates, health status and nutritional outcomes.
...
Chapter 1: An Introduction to the Trends in South African Income
Distribution and Poverty since the Fall of Apartheid
14. This chapter provides the background for the rest of the report
by reviewing the existing empirical work on South African
inequality and poverty since the advent of the post-Apartheid era
in 1994. This review highlights points of agreement and dispute
within this empirical literature.
15. South Africa has an infamous history of high inequality with an
overbearing racial stamp. The issue of inequality has continued to
dominate the post-Apartheid landscape. There are two indicators of
the post-Apartheid political economy that have attracted special
attention in this regard. The first is whether the evolving
post-Apartheid economy and especially the policy efforts of the
post-Apartheid government have been able to lower inherited
inequality. The second is the related question of whether the blunt
racial footprint would start to fade under more subtle
post-Apartheid socio-economic dynamics. Historically the profiling
and measurement of poverty have formed sub-themes of this
inequality discussion because of the overt relegation of the black
majority to the bottom of the income and wealth distributions in
the country under Apartheid. Showing this to be the case and
illuminating the poverty inducing features of Apartheid policies
were the central tasks of much Apartheid era social science.
...
18. An important empirical tradition in tracking longer-run South
African inequality and poverty changes has made use of records of
personal income collected in the national censuses of 1970, 1991,
1996 and 2001 (McGrath, 1983; Whiteford McGrath, 1994; Whiteford
van Seventer, 2000; Leibbrandt et al., 2006; Simkins, 2005). Two
important points emerge from this census-based work. First,
starting in 1970 through to 2001 inequality as measured by the Gini
coefficient was very high by international standards ... Whiteford
van Seventer (2000) show that national Gini coefficients for the
period 1975 to 1996 remained close to 0.68. Leibbrandt et al.
(2006) then show that this national inequality remained at least
this high in the period 1996-2001. Second, the Gini coefficients by
race show widening inequality within each group for each census
from 1975 to 2001. ...
19. This picture of rising aggregate inequality and also rising
inequality within each race group begs the question of the relative
importance of the within-race versus the between race components of
inequality. ... All of the census-based empirical work makes a
consistent case that between-group inequality declined over the
period 1975 to 1996. Clearly, the forces driving a widening
inequality within each racial group over the last forty years have
been strong enough to increase the overlap between the within-race
distributions.
...
24. The poverty rankings by race are completely robust. At any
poverty line, Africans are very much poorer than Coloureds, who are
very much poorer than Indians/Asians, who are poorer than whites.
In addition, measured poverty increased for Africans, coloureds and
Indians/Asians between 1996 and 2001. However, here the choice of
poverty line seems to make a difference. There were only small
increases in poverty for Africans and coloureds when measured at
the low poverty line (R91) but fairly large increases in poverty
for these two groups and the Indian/Asian group when the higher
poverty line (R250) is used.
...
29. The inequality picture can be quickly dealt with as all of this
work (Simkins, 2005; Fedderke et al., 2003; Hoogeveen Özler,
2006; van der Berg et al., 2006; van der Berg et al., 2008)
supports the picture coming out of the census data; namely that
both aggregate inequality and inequality within each race group has
continued to increase through the 1990s and into the 2000s. Van der
Berg and Louw (2004) summarise this corpus as follows: Rising black
per capita incomes over the past three decades have narrowed the
interracial income gap, although increasing inequality within the
black population seems to have prevented a significant decline in
aggregate inequality .... (p. 568-9).
...
35. In sum, there is something of a consensus around the direction
of post-Apartheid inequality and poverty trends even if there are
disagreements about the precise levels at any point in time.
Aggregate inequality has remained stubbornly high and perhaps even
increased. This is being driven by increasing intra-race
inequality.
...
The importance of the state old age pension has been recognized
from the outset of the post-Apartheid period and the demonstrable
impact of the child support grant in the last six years is notable.
This takes the aggregate empirical picture a little closer to the
real application of post-Apartheid policy in South Africa.
...
43. There is a sense in which the inequality and poverty review in
this chapter up to this point has been unfair to the mechanisms and
achievements of post-Apartheid policy. We have focussed on money
metric poverty and inequality and largely ignored a literature
(Leibbrandt et al., 2006; Bhorat et al., 2006; and Woolard
Woolard, 2007) showing substantial improvements in access to
services such as housing, water and electricity over the post
Apartheid period. For example, Leibbrandt et al 2006 use census
data from the 1996 and 2001 to show that access to type of
dwelling, water, energy for lighting, energy for cooking,
sanitation and refuse removal all improved significantly over this
period. The proportion of households occupying traditional
dwellings has decreased while the proportion of households
occupying formal dwellings has risen slightly (approximately
two-thirds of households occupy formal dwellings). Access to all
basic services has improved, especially with regard to access to
electricity for lighting and access to telephones.
...
Chapter 2: An Empirical Description of Inequality and Poverty over
the Post-Apartheid Period
...
84. Overall, the labour market is shown to play a dominant role in
driving inequality. State transfers have increased their importance
as an income source but in a neutral way rather than as a driver of
inequality or decreased inequality. ...
grant income is shifting a substantial number of poor households up
towards the poverty line and therefore has to be equalizing the
distribution of income.
85. Analysis of absolute poverty involves drawing a poverty line
and concerning ourselves only with the welfare of those that fall
below the line. Obviously this understanding of poverty renders
analyses sensitive to the choice of poverty line, and the welfare
measure. ...
2.5 Conclusion
104. We end off this chapter by looking across the pieces of
evidence about inequality and poverty in order to ascertain whether
they suggest obvious drivers of inequality and poverty and of
poverty alleviation. Measured inequality increased consistently
between 1993 and 2008. In this regard, our empirical work on
inequality confirms and updates the findings of others that we
reviewed in Chapter 1. With regard to poverty, we showed that
aggregate poverty improved marginally between 1993 and 2008. This
trend accords with the analysis of others, although other data sets
suggest a more marked improvement in poverty. Our non-money-metric
picture of access to services (public assets) and to private assets
is in line with other research which suggests large and continuing
improvements in these dimensions of well-being since 1993. Poverty,
when measured in terms of these dimensions has improved strongly.
105. Within the aggregate inequality picture, our analysis of the
changing racial dynamics of inequality showed that the between
racial group contribution to inequality fell markedly in the period
between the democratic transition and 2000 while the changes
between 2000 and 2008 were more muted. ...
110. If the labour market is not driving the improvements in
poverty then what is? Our descriptive pictures flag the fact that
individuals with very low levels of education and with no workers
in the household have the highest poverty incidence but they have
not become poorer over time. Rather those with no children have
become poorer. This seems to be flagging the importance of social
assistance. Add to this our findings that the incidence and share
of poverty of those aged 60 and older has fallen markedly since
1993. As this group is not economically active, this can only be
due to the support that they receive through the state old age
pension. ...
Chapter 3: The Impact of Social Assistance Grants in Reducing
Poverty and Inequality
112. While we briefly describe unemployment insurance, the focus of
this chapter is on social assistance grants as these play a
particularly important role in reducing poverty and inequality in
South Africa. ...
138. Our discussion in Chapter 2 of money metric poverty and our
income source decompositions highlighted the importance of social
assistance grants as a source of income for many households in
South Africa. The extensive network of social grants is central to
anti-poverty policy in South Africa. Some aspects of this system
were inherited from the pre-democratic era; however, the
post-Apartheid state has been very active in reforming and adding
to this system.
...
By April 2009, 13.4 million people were benefiting from social
grants. Of these, 2.3 million were receiving old age pensions, 1.4
million were receiving disability grants and 9.1 million children
were benefiting from Child Support Grants.
...
155. Of greater concern, there appear to be 2.5 million children in
need who are not receiving the grant. Of these, 1.9 million have
never applied for a grant. The reasons given for not having applied
are listed in Figure 3.6 below. The most common reason for not
applying when eligible was stated as a lack of correct
documentation. ...
158. The State Old Age Pension was originally introduced in South
Africa in 1928 to address poverty among elderly white people, but
was gradually extended to other population groups. During the
Apartheid years both the size of the grant and some of the
conditions discriminated on the basis of race. Figure 3.9 shows how
the value of the State Old Age Pension has changed over time. In
1970, the size of the State Old Age Pension for a white person was
more than seven times the value of the pension for an African. This
gap narrowed rapidly to a ratio of just over three in 1980, partly
through a reduction in the real value of a white pension, but also
through real increases in the size of the pension to Africans. The
1992 Social Assistance Act finally did away with all racially
discriminatory provisions.
...
159. The State Old Age Pension is available to women at the age of
60 years and to men at the age of 61 years. (Until 2007, men only
qualified for the Old Age Pension at age 65 but this gender
discrimination has been gradually phased out. From April 2010, the
ages will be equalised at age 60).
...
Chapter 4: Conclusion
184. Chapter 1 began by gathering the evidence to show that the
long-run development trajectory in South Africa has been one that
has generated a very high-inequality society with a strong racial
component to this inequality. The bottom half of the income
distribution was reserved for black South Africans and, at any of
a wide range of poverty lines, poverty was dominated by black South
Africans. Historically this was the result of active racial
privileging and discrimination in state policy. Even without the
direct racial interventions in the labour market such as the
reservation of jobs that took place under Apartheid, the racial
biases in determining where people were allowed to live and in the
education, health and social services policy matrix would have
created a workforce with racially skewed human capital and spatial
characteristics. Such spatial and human capital legacies leave a
very long-run footprint and these processes are hard to reverse.
They should not have been expected to disappear at the dawning of
democratic government in South Africa. In Chapter 2, we drew on the
large pool of post-1993 survey data up to the just recently
released data from 2008 to show that these factors have continued
to exert an influence on South Africa's development path. It is not
just the case that the 15 years since the democratic transition is
not enough time for these factors to work their ways out of South
African society: it is a much more dynamic and daunting process
than this.
185. While we observe a decline in the importance of between-race
inequality, within-race inequality has risen sharply and this has
been strong enough to stop South Africa's aggregate inequality from
falling. It should be noted that while the between-race component
of inequality has fallen, it remains remarkably high by
international norms and its decline has slowed since the mid 1990s.
Moreover, the bottom deciles of the income distribution and the
poverty profile are still dominated by Africans and racial income
shares are far from proportionate with population shares.
Nonetheless, South Africa's changing population shares imply that
a policy focus on race-based redistribution will become
increasingly limited in the future as the foundation for further
broad-based social development.
186. South Africa has chosen to allocate significant resources to
direct redistributive policies with the dual objectives of
providing short-term income support to the poor and breaking the
intergenerational transmission of poverty by encouraging households
to invest in better health, education and nutrition for their
children. Chapter 3 sketched out some of the key elements of South
Africa's social safety net system, namely the existence of
short-term unemployment insurance for those with formal labour
market experience; a public works programme that seeks to provide
income support and skills development to an increasing proportion
of the long-term unemployed who are outside of the contributory
unemployment insurance system; and an extensive arrangement of
non-contributory social assistance grants that directly benefit
more than one-quarter of South Africans. It needs to be emphasized
however that the grants are specifically targeted at the elderly,
the disabled and children. In our analysis of the Child Support
Grant we highlighted the importance of improving the vital
registration system in order to get children into payment sooner.
187. Most of the unemployed are unable to access unemployment
benefits but are not provided for in the social assistance system
which remains premised on the notion that unemployment is a
temporary condition. Consequently there are many that argue that
the social grant system should be extended to focus directly on the
unemployed. While strong economic growth supported the growth in
the grants in the first fifteen years of democracy, we would argue
that it is imprudent to argue for permanent income support for the
unemployed. Many of the unemployed are young school leavers and
while they clearly need some sort of social safety net or temporary
social insurance, the longer term goal has to be directed at
assimilation into the labour market. In section 3.4 of this
chapter, we presented a brief review of the body of literature
which shows that the existing grant system seems to be promoting
desirable education and health behaviours. This is true even though
these grants are unconditional. Yet, the ultimate return to these
positive human capital outcomes is an ability to become a
productive citizen in the country. Again this turns on a more
virtuous interaction with the labour market than we currently
witness.
*******************************************************
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