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South Africa: Poverty Debate

AfricaFocus Bulletin
Nov 29, 2004 (041129)
(Reposted from sources cited below)

Editor's Note

"At the moment, many, too many, of our people live in gruelling, demeaning, dehumanising poverty. We are sitting on a powder keg. ... We should discuss as a nation whether a basic income grant is not really a viable way forward. We should not be browbeaten by pontificating decrees from on high. We cannot, glibly, on full stomachs, speak about handouts to those who often go to bed hungry. It is cynical in the extreme to speak about handouts when people can become very rich at the stroke of a pen." - Archbishop Desmond Tutu

Archbishop Tutu's comment, in the annual Nelson Mandela lecture on November 23, reignited an ongoing debate in which most of the critics combine critical views of government policy with electoral loyalty to the majority African National Congress. Along with AIDS and Zimbabwe, poverty is one of three issues on which the government faces criticism from all quarters, including much of its own base. The sensitivity of the issue was shown when President Mbeki reacted sharply and dismissively to Archbishop Tutu's appeal in the same lecture not to "pull rank and demand an uncritical, sycophantic, obsequious conformity." [The full text of Tutu's lecture is available at http://www.safm.co.za/webfeatures/featureList.jsp?featureID=12 President Mbeki's comment is available on the ANC website at http://www.anc.org.za/ancdocs/anctoday/2004/at47.htm]

This AfricaFocus Bulletin contains several recent documents relevant to the debate on poverty in South Africa, and in particular to the Basic Income Grant proposal to which Archbishop Tutu refers. This proposal for a non-means-tested grant would build on the acknowledged impact of equalizing old-age grants in providing some widely-distributed counterbalance to the inherited inequalities of apartheid.

For a wealth of resources on the wider debate on poverty, inequality, and the impact of government policies, see in particular the website of the Southern African Regional Policy Network (SARPN; http://www.sarpn.org.za), particularly the page on the 10-year review (http://sarpn.org.za/documents/d0000589/index.php). An overall survey of the poverty debate, "The Politics of Poverty," by David Everatt, is available at http://www.sarpn.org.za/documents/d0000613/index.php. Other references are given in the documents below.

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Editor's Choice
Recommended Books on Poverty in South Africa (last updated January 2008)

Skhela Buhlungu et al., State of the Nation: South Africa 2007, 2007. (check prices at Powell's Books or Amazon)

Adam Habib and Brij Maharaj, Giving and Solidarity: Resource Flows for Poverty Alleviation in South Africa, June 2008. (check prices at Powell's Books or Amazon)

Ashwin Desai, We are the Poors: Community Struggles in Post-Apartheid South Africa, 2002. (check prices at Powell's Books or Amazon)

Sampie Terreblanche, History of Inequality in South Africa 1652-2002, 2003. (check prices at Powell's Books or Amazon)

Francie Lund, Changing Social Policy: The Child Support Grant in South Africa, June 2008. (check prices at Powell's Books or Amazon)

Jeremy Seekings and Nicoli Nattrass, Class, Race, and Inequality in South Africa, 2005. (check prices at Powell's Books or Amazon)

South Africa: Debate rages over proposed basic income grant

UN Integrated Regional Information Networks (IRIN) http://www.irinnews.org

[This report does not necessarily reflect the views of the United Nations]

Millions of South Africans still live in poverty

JOHANNESBURG, 23 Nov 2004 (IRIN) - Debate on the sustainability and suitability of a basic income grant (BIG) for all South Africans is raging, with government facing off against its traditional allies, labour unions, church and civil society groups.

The debate around BIG has been heating up as it became clear that economic growth alone could not address poverty in the country. "It's not going to happen in [the next] 10 years," Charles Meth of the School of Development Studies at the University of KwaZulu-Natal told IRIN on Tuesday.

A report titled 'Social Security Policy Reform in Post-Apartheid South Africa - A focus on the Basic Income Grant', published by the university's Centre for Civil Society, observed that the country was saddled with "huge socioeconomic inequality". [The report is available on the website of the Centre for Civil Society - http://www.ukzn.ac.za/ccs]

Reflecting the country's apartheid past, poverty was concentrated among blacks, particularly Africans. Sixty-one percent of Africans and 38 percent of mixed-race 'coloureds' were poor, compared with five percent of Indians and one percent of whites, according to the report.

Although the government has made poverty eradication its top priority, Meth noted that "they cannot solve the poverty problem - economic growth cannot happen fast enough. I would say about 4 million out of the 8 million unemployed are desperate, and they cannot be reached through strategies aimed at stimulating job growth".

The government has instituted a number of social grants - for pensioners, child support and disability, among others - that are all subject to a means test, given by the department of social development, before a beneficiary qualifies.

"However, 11.8 million of the poorest 23.8 million South Africans lived in households that received no social assistance in the same year [2002]... that the [government-appointed] Taylor Committee recommended the introduction of a basic income grant (BIG), i.e. a grant of R100 [US $16.70] per person per month for every South African citizen, regardless of age or income level," the report noted.

While the government remains undecided on the matter, there has been increasing pressure by civil society, church and labour groups, which have united under the umbrella of the BIG Coalition.

The report pointed out that "in contrast to conventional social assistance subject to means tests, the BIG is paid to everyone irrespective of income". However, this "does not mean the introduction of a BIG would make the rich become richer, because the BIG must be funded somehow, and the rich would contribute more (relative to their numbers, not necessarily their incomes) to its funding than the relatively poor".

This could happen in a number of ways, including a progressive income tax "or even a regressive indirect tax", the report noted.

On Friday last week Finance Minister Trevor Manuel told members of the National Council of Provinces that the implementation of a BIG would "bankrupt the country".

News agency I-Net Bridge reported that Manuel was responding to questions in the National Council of Provinces - the upper chamber of parliament - when he said the BIG would have to go to every individual "as a right", and would cost the fiscus R83 billion ($14 billion).

The government has also come under pressure from the official opposition, the Democratic Alliance, to institute a means-tested BIG, rather than the non-means-tested initiative currently advocated.

Manual, who has been praised for tight fiscal discipline, added that he had major problems with the idea of BIG, as the state would "probably have to raise VAT [value added tax] by at least another 14 percent to fund the R83 billion".

However, in a letter on Tuesday to the influential national daily newspaper, Business Day, BIG Coalition treasurer Rev Edwin Arrison said it was unclear on which costings the minister had based his statement.

"The coalition released research findings on the financing of a BIG, done by four highly respected economists. They strongly concurred that a BIG for everyone in SA is affordable and sustainable, and would cost the government between R24 billion [$4 billion] and R40 billion [$6.6 billion], depending on how some of the costs were recouped through the tax system," Arrison said.

He also questioned why government had set up the Taylor Committee to investigate a comprehensive social security system for South Africa, which recommended a BIG for everyone, "if its guidance is not taken seriously".

The BIG Coalition would continue lobbying for a non-means-tested grant, as "it is our view that a people's contract should start with a BIG," Arrison concluded.

The coalition believes that the BIG would provide "everyone with a minimum level of income, enabling the nation's poorest households to better meet their basic needs".

Meth noted that there were various ways of costing a BIG, and estimates varied widely. "What we are talking about is redistribution from those who have to those who have not," he said. "The only way to do that is through the tax system ... this is essentially a political problem, rather than an ideological one."

Also on Tuesday, Archbishop Emeritus Desmond Tutu questioned the impact of black economic empowerment (BEE) on poverty, saying it seemed to benefit a small "recycled" elite, and argued that it was perhaps time to consider a BIG as "a viable way forward", SAPA reported.

Tutu was speaking at the Nelson Mandela Foundation in Houghton, Johannesburg, when he said too many people were living in "gruelling, demeaning, dehumanising poverty", and warned that South Africans "are sitting on a powder keg - we really must work like mad to eradicate poverty."

Just days after Manuel's statements, Tutu urged people not to be "browbeaten by pontificating decrees from on high" and added that "we cannot glibly on full stomachs speak about handouts to those who often go to bed hungry". In reference to recent BEE deals involving ruling party and former government officials, Tutu said it was "cynical in the extreme to speak about handouts [to the poor] when people can become very rich at the stroke of a pen".

Proponents of a BIG argue that welfare states cater for various risks related to ageing, unemployment and health, but assume full employment of the populace - that is, social assistance is intended only in exceptional circumstances.

The report, however, noted that "due to globalisation and post-industrialisation, full employment is becoming more difficult - chronic unemployment and underemployment have increased".

The government has focused its poverty alleviation efforts on extending the child support grant to a greater number of recipients and an expanded public works programme, but South Africa's "unemployment rate is so high that public works programmes would not be able to create enough jobs, however 'massive' they [public works programmes] would be", said the report.

Anna McCord, an analyst with the Centre for Social Science Research at the University of Cape Town, told IRIN that the government's expanded public works programme and the proposed BIG were "absolutely not policy alternatives".

"The expanded public works programme aims to create 200,000 jobs a year, but they are temporary jobs. Unemployment levels are between 5 million and 8 million, so the impact of the public works programme will be far more limited than the impact of a BIG - they're incomparable in terms of their scale," McCord said.

She added that the proposed BIG would be universal and, as such, it would have "large-scale [impact] and be a significant step in addressing poverty".

"The pubic works programme is excellent ... as, when government spends money on infrastructure, a greater proportion will be spent on labour, but 200,000 temporary jobs is in no way comparable to the impact [on poverty] of a basic income grant," McCord concluded.


South Africans for a Basic Income Grant

3 July 2001 [Statement available at http://www.sacc-ct.org.za/BIGindex.html]

Poverty and inequality pose the greatest threat to the success of South Africa's young democracy. A bold initiative is urgently needed to confront this challenge.

We, the undersigned organisations, call for the introduction of a universal Basic Income Grant as a key intervention to combat poverty and to improve the lives of the majority of South Africans.

At least 22 million people in South Africa--well over half the population--live in poverty. On average, they survive on R144 per person per month. A Basic Income Grant would provide rapid and sustained relief to all South Africans by:

  • providing everyone with a minimum level of income,
  • enabling the nation's poorest households to better meet their basic needs,
  • stimulating equitable economic development,
  • promoting family and community stability, and
  • affirming and supporting the inherent dignity of all.

The Basic Income Grant should be founded on the following fundamental principles:

  • Universal Coverage: It should be available to everyone, from cradle to grave,and should not be subject to a means test.
  • Relationship to existing grants: It should expand the social security net. No individual should receive less in social and assistance grants than before the introduction of the Basic Income Grant.
  • Amount: The grant should be no less than R100 per person per month on introduction and should be inflation indexed.
  • Delivery Mechanisms: Payments should be facilitated through Public Institutions. Using community Post Banks would have the additional benefit of enhancing community access to much-needed banking services.
  • Financing: A substantial portion of the cost of the grant should be recovered progressively through the tax system. This would demonstrate solidarity by all South Africans in efforts to eliminate poverty. The remaining cost should be borne by the fiscus. A range of new measures should be introduced to increase revenue so that the additional cost can be accommodated without squeezing out other social expenditure.

In recent weeks, the following organisations have come together to endorse this basic platform and to commit ourselves to working with government to make the Basic Income Grant a reality. We call on all South Africans to join us in this campaign and invite them to add their endorsement to this platform.

Alliance for Children's Entitlement to Social Security (ACESS)
Black Sash
Child Health Policy Institute
Congress of South African Trade Unions
Development Resources Centre
Ecumenical Service for Socio-Economic Transformation
Gender Advocacy Programme
Community Law Centre, University of the Western Cape
South African Council of Churches
South African National NGO Coalition
Southern African Catholic Bishops' Conference
Treatment Action Campaign


Fact Sheet: Poverty in South Africa

Human Sciences Resource Council
http://www.hsrc.ac.za

Excerpts only
Full document (including tables and map) available at http://www.sarpn.org.za/documents/d0000990/index.php

26 July 2004

Introduction

New estimates of poverty show that the proportion of people living in poverty in South Africa has not changed significantly between 1996 and 2001. However, those households living in poverty have sunk deeper into poverty and the gap between rich and poor has widened. The Human Sciences Research Council (HSRC) in collaboration with Mr Andrew Whiteford, a South African economist, has generated these estimates.

Approximately 57% of individuals in South Africa were living below the poverty income line in 2001, unchanged from 1996. Limpopo and the Eastern Cape had the highest proportion of poor with 77% and 72% of their populations living below the poverty income line, respectively. The Western Cape had the lowest proportion in poverty (32%), followed by Gauteng (42%). See Table 1.

The HSRC has estimated poverty rates for each municipality. The majority of municipalities with the lowest poverty rates are found in the Western Cape. These include Stellenbosch (23%) and Saldanha Bay (25%). The major city with the lowest poverty rate is Cape Town (30%). Pretoria and Johannesburg have somewhat higher rates of 35% and 38%, respectively, while Durban has a rate of 44%. The poorest municipality is Ntabankulu in the Eastern Cape, where 85% of its residents live below the poverty line. The figure below shows that seven of the 10 poorest municipalities are located in the Eastern Cape while two are located in Limpopo and one in the Free State.

While the poverty rate measures the proportion of a region's population living below the poverty line it does not give any indication of how far below the poverty line poor households are. For this the HSRC has used a measure called the poverty gap that measures the required annual income transfer to all poor households to bring them out of poverty. The HSRC study has shown that the poverty gap has grown from R56-billion in 1996 to R81-billion in 2001 indicating that poor households have sunk deeper into poverty over this period.

Table 1. Poverty indicators by province

[see full PDF version of paper]

With its large, poor population KwaZulu-Natal has the biggest poverty gap (R18 billion). The Eastern Cape and Gauteng follow KwaZulu-Natal. The Gauteng's poverty gap has grown faster between 1996 and 2001 than all other provinces. This is probably a result of its population growth rapidly exceeding economic growth. Among municipalities, Durban has the largest poverty gap, followed by Johannesburg and East Rand.

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 was equivalent to 6.7% of gross domestic product (GDP); by 2001 it had risen to 8.3%.

The fact that poorer households have not shared in the proceeds of economic growth is reflected in the rise in inequality between rich and poor. To measure inequality the HSRC have used the Gini coefficient, which can vary from 0 in the case of a highly even distribution of income, to 1 in the case of a highly unequal distribution. South Africa's Gini coefficient rose from 0.69 in 1996 to 0.77 in 2001. While historically South Africa has had one of the most unequal distributions of income in the world this rise is likely to place it at the top of the world rankings.

In the past inequality in South Africa was largely defined along race lines. It has become increasingly defined by inequality within population groups as the gap between rich and poor within each group has increased substantially The Gini coefficient for the African population has risen from 0.62 in 1991 to 0.72 in 2001. This level of inequality is comparable with the most unequal societies in the world. The white population has a Gini coefficient of 0.60 that is extremely high for a group whose education and occupational profile matches that of societies in highly industrialised countries.

Table 2. Gini coefficient by population group

[see full PDF version of paper.]

Methodology

Aggregate Poverty Gap

The poverty gap measures the difference between each poor household's income and the poverty line. Thus, it measures the depth of poverty of each poor household. The aggregate poverty gap is calculated by summing the poverty gaps of each poor household. Therefore, it is equivalent to the total amount by which the incomes of poor households need to be raised each year to bring all households up to the poverty line and, hence, out of poverty.

The poverty line varies according to household size, the larger the household the larger the income required to keep its members out of poverty. The poverty lines used were based on the Bureau of Market Research's Minimum Living Level.

Table 3. Poverty income by household size (R per month)

[See full PDF version of paper. The 2001 poverty line for a household of 5 was 1,541 South African rand a month - less than US$200 using 2001 exchange rates.]

In order to calculate the aggregate poverty gap a cross tabulation of household income by household size, municipality and race was drawn from the 2001 census. This data, viewed together with the poverty income data shown in Table 1, enables the number of households living in poverty and the poverty gap of each poor household to be determined. The poverty gap of each poor household was summed to arrive at the aggregate poverty gap for each municipality.

Gini Coefficient

The Gini coefficient is a summary statistic of income inequality that varies from 0 (in the case of perfect equality where all households earn equal income) to 1 (in the case where one household earns all the income and other households earn nothing).


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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