Learn to live with it
The rich get richer at a faster rate than the poor
WHEN THE ANC came to power in 1994 its focus fell firmly on the extremes of inequality and poverty in the country. Around 13 years after the advent of democracy – and in the midst of the longest post-war economic boom in South Africa’s history – the question is whether progress is being made in dealing with those crucial issues.
The problem in answering questions concerning poverty and inequality is that there aren’t any up-to-date official figures; and those figures that do exist are suspect. The latest official data from Statistics SA stops at 2000 and is based on the Income & Expenditure Surveys (IES) of 1995 and 2000. The comparison between the two surveys shows that poverty was worse in 2000 than in 1995.
Some academics have questioned the use of the IES data, as it’s far out of line with household income and expenditure information obtained from the SA Reserve Bank’s national accounts.
Meanwhile, Statistics SA has strengthened the IES but has yet to release its latest findings. However, Statistics SA has put out a discussion document with a suggested poverty line for SA set at R322/person/month at 2000 prices. That comes to around R430 at 2006 prices. Based on the 2000 IES, that means about 53% of South Africans lived in poverty in 2000.
Critics say that Statistics SA has set its poverty line too high and that at that level you can’t tell what’s happening to the poorest of the poor. However, Statistics SA also suggests that there should be two thresholds below and above the poverty line as indicators of extreme poverty and of a broader level of household income adequacy. For the threshold for extreme poverty it suggests using the US$2/day measure – which, at 2000 prices, is R162/per capita/month.
It’s important to note that the cut-off point to be used is crucial. When the cut-off point is too high, it may seem as if fewer people are living in poverty when in fact more are living in extreme poverty and more have become relatively well off.
Though the Statistics SA paper doesn’t say what recent trends in poverty have been, there seems to be broad consensus among economists that poverty worsened in the first five years of democracy before improving meaningfully. Massive Government spending on social grants is one of the main reasons for that improvement.
University of Stellenbosch academic Servaas van der Berg and his colleagues Ronelle Burger, Rulof Burger, Megan Louw and Derek Yu have done much work estimating poverty trends using sources other than Statistics SA’s IES. Van der Berg makes use of the SA Advertising Research Foundation’s AMPS data, which incorporates a range of surveys of SA’s adult population.
Statistics SA has set a poverty line for SA
Working on a poverty line of an income of R3 000/year, the researchers find a moderate rise in poverty between 1995 and 2000. “By 2004 the incidence of poverty in SA had fallen substantially, with a reduction of eight percentage points – equivalent to 3m people – in the number falling below the poverty line,” their paper says.
Adjusting the AMPS data for national accounts figures yields the same broad trends, although absolute numbers of people in poverty differ.
The researchers then turn to the question of inequality, which has worsened since the advent of democracy. However, it’s important to note that inequality within the same race group has risen more than that between different races.
“Within-race inequality has now finally overtaken the extreme levels of between-race inequality engineered by apartheid policy as the main driver of income inequality in SA,” the researchers say. Using AMPS data, they arrive at a Gini coefficient of 0,70 in 2004 from 0,678 in 1993. The closer the Gini coefficient is to one, the worse the inequality.
Inequality has been the focus of much attention recently, with trade union Solidarity releasing the findings of a study that looked at the wage gap and found the average CEO earned between 35 and 53 times more than the average worker. Last year, the Department of Labour linked the yawning income disparities with the rise in pay disputes between workers and employers. SA has targets for economic growth and poverty. Should it also have a target for inequality? Van der Berg thinks not, because the main reason for inequality is the high earnings paid to highly skilled people at the top end. There’s a shortage of skilled people, which drives up earnings. “There’s no instrument to address this problem,” he says. It seems we’ll just have to learn to live with a highly unequal society.
No target for
inequality. Servaas van