DANIEL MCLAREN: Investment in early childhood development could cut inequality and ignite growth

Inequality begins in utero. In SA, 70% of children are born into poverty — households with monthly income per person below R1,558. By age five one in four children is stunted, suffering impaired cognitive and physical development because of malnutrition. Only three out of 10 children living in poverty are enrolled in an early learning programme, and only two are subsidised by the state. More than half of children enrolled in early learning programmes fail to reach the basic physical and learning milestones necessary to “Thrive by Five”.   

With the odds stacked heavily against so many children it should be no surprise that by age 10 eight in 10 schoolchildren cannot read for meaning in any language. Sadly, by 18 40% of children have dropped out of school, leaving them vulnerable to exploitation, crime and a lifetime of unskilled and insecure employment. 

Correcting government’s historic neglect of early childhood development is necessary to end this vicious cycle — and could be among the most cost-effective routes to growth and job creation. 

Early childhood development (ECD) is far more than day care for young children. It refers to the entire period from conception to five years of age when children experience considerable physical, emotional and cognitive development. To thrive, five essential components of ECD must be in place: maternal and child health, social protection, nutrition, early learning stimulation and support for caregivers. 

Since 1994 significant gains have been made in maternal and child health and income support for children. Now, 90% of women receive antenatal care and child mortality has almost halved since 1994. The child support grant of R505 per month, while far below the food poverty line of R760 per month, reaches 13.5-million children and is considered one of the most effective interventions for reducing extreme child poverty. 

These gains were enabled by large public funding increases to healthcare and social protection over the past two decades. Government now spends R113bn on primary healthcare and R82bn on the child support grant each year, together amounting to 10% of government expenditure. However, policies addressing nutrition, childcare and early learning, and support for caregivers, have been grossly underfunded.

Too late

Public funding for early learning programmes (ELPs, ranging from part-time playgroups to full-time ECD centres) amounts to only R4bn, or 0.2% of government expenditure. This pales in comparison to expenditure of R310bn on state schools or R136bn on postschool education and training.

While these investments in basic and higher education are essential, the widely accepted Heckman curve demonstrates that “the highest rate of economic returns comes from the earliest investments in children … society invests too much money in later development, when it is often too late to provide great value”.  

Government provides a per child subsidy to registered ELPs subject to a means test. This should stimulate the supply and demand for ELPs in low-income communities by guaranteeing a minimum income for providers regardless of fee income.

However, its present value of R17 per child per day substantially limits its potential to improve the availability and accessibility of programmes. Running an ELP on subsidy income alone is unviable, and 69% of ELPs rely on parent fees as their main source of income. 

Consequently, only 1.1-million of the 4.9-million children living in poverty in SA attend an early learning programme, and only about 650,000 benefit from subsidised access.

The subsidy’s poor reach is largely because it is only provided to registered ECD programmes. A lack of support for training, infrastructure and registration means that of the estimated 42,000 ELPs in SA only about 17,000 are registered. 

Women’s work

Moreover, the low value makes it impossible to offer decent wages and job security to the 200,000 mainly black, female workers in the ECD sector. Shockingly, recent data shows that 90% of these workers earn below the minimum wage. 

The failure to adequately support childcare and early learning is symptomatic of a broader failure to recognise and invest in women’s work in the care economy. Limited access to ECD programmes also holds countless caregivers back from seeking out education, training or employment opportunities. 

The low subsidy value also fails to address the need for adequate nutrition, learning and play materials and safe and stimulating infrastructure.

Countless studies demonstrate that adequate quality is a prerequisite for ECD interventions to have benefits for children. This means programmes must be managed and provided by skilled staff, ensure a supportive environment and stimulating pedagogy, take place in safe and hygienic settings, provide nutritious food, and incorporate a range of play and reading materials.

Modelling by Ilifa Labantwana suggests that the cost of providing a basic, quality ELP is at least R32 per child per day. Sadly, the ECD subsidy has been moving in the opposite direction, having frozen at R17 since 2019, reducing its real value by 20%. Indeed, the ECD subsidy has never been linked to inflation or the actual cost of providing an ELP.

Our modelling suggests that the cost of supporting children to thrive is tiny compared with the consequences of not doing so. 

Close gap

Initially, an average boost to the ECD subsidy of R700m per annum would allow the subsidy to increase to R20 per child per day, and expand its reach to a further 300,000 children over three years. 

By 2026/27 average annual increases of R2.9bn to ECD funding would secure universal access to quality early learning opportunities by 2042/43. This would dramatically close the school-readiness gap, improve the skills and working conditions of 200,000 mainly black, female workers, create over 300,000 new jobs, relieve childcare burdens for 2-million women, and provide a much-needed stimulus to township and rural economies. 

Critically, investments in ECD would in time yield significant savings in budget areas such as social services, remedial education and grade repetition, health and crime. Ultimately, greater levels of investment in ECD are necessary to raise SA’s long-term growth rate, by improving the returns from basic education and enhancing the health, skills and productivity of our working age population.

As the National Treasury calls for further budget cuts in the public sector, the National Development Plan’s goals of reducing poverty, inequality and unemployment seem further off than ever. We urge policymakers to consider the impact of budget allocations on our ability to protect our human capital and achieve genuinely inclusive economic growth. This is the real key to fiscal sustainability. 

• McLaren is public finance economist at ECD programme Ilifa Labantwana.