EDITORIAL: Grow the economy to cut poverty
SA has made good progress in combating poverty in the first two decades of democracy
SA has made good progress in combating poverty in the first two decades of democracy. It is worrying that this progress has now begun to slip away.
The Statistics SA report on poverty trends published last week was a grim reminder of who the real victims of low growth and economic stagnation were. In 2006, 66.6% of South Africans lived below the poverty line. By 2011, this proportion had shrunk to 53.2%. But by the time the 2015 survey was conducted, poverty had risen again, with 55.5% people below the line.
Overlay these statistics with race and gender and the picture is darker. Now, 64% of black Africans live below the line, as do 43% of coloured people. The fortunes of Indians over this time continued to improve — only 5.9% are poor — and poverty among whites remained in the region of 1%.
Women face greater hardship than men, with half of all female-headed households poor compared with 33%.
The upper-bound poverty line, which is defined as the amount in rand needed for an individual to purchase the necessary food and other items over a month, sits at R1,138 in today’s money. It is a pitiful amount of money, yet more than half of South Africans live on less.
The gains since 1994 have much to do with SA’s redistributive national budget and, in particular, the expansion of the social grant system. In 1998, 2.4-million people were grant beneficiaries. By 2002, this had doubled and by 2017, it had grown to 17-million. The budget also made great strides in combating multidimensional poverty by improving the living conditions of the poor through providing facilities such as free housing, free education and free basic services. The progress is demonstrable, with 90% of households now with access to electricity compared with 58% in 1996; and 83.5% of households with access to piped water, compared with 60.5%, 20 years earlier.
But redistribution is not enough. Households need access to wage earnings if they are to rise above the poverty line and stay there. For the past two years, GDP growth has not kept pace with population growth. It means South Africans, measured by GDP per capita, are getting poorer.
Over the past six months, the unemployment rate has found a 14-year high at 27.7% even as more people drop out of actively seeking work. In the second quarter of 2017, the net job loss was 113,000, driven by a bloodbath in the construction sector. More damage is on the way, with the mining industry warning in recent days that it is seeking to cut 21,000 jobs.
For the past two years, GDP growth has not kept pace with population growth. It means South Africans, measured by GDP per capita, are getting poorer.
This is partly because of factors beyond our control. Low commodity prices are part of the reason behind stagnating growth. But as so many have pointed out before, many of our difficulties are self-inflicted. Policy uncertainty, especially in mining, and uncertainty about the long-term future of SA in the context of rising government debt and rampant corruption have undermined investment. Corporate SA now sits on a cash pile of R1.3-trillion, which it has chosen not to invest. South African companies are looking abroad for opportunities.
There could not be a worse time for the ANC to pump up the volume with populist slogans. In the past, investors could ignore radical calls for change or attacks on the independence of the Reserve Bank as political noise necessary for democratic debate but not likely to find a place in official policy. This has all changed with the popularisation of radical economic transformation by President Jacob Zuma, his political cronies and presidential hopeful Nkosazana Dlamini-Zuma. Investors no longer know how seriously to take this kind of talk and have decided to wait and see.
The consequence for the economy is stalled growth and low confidence. For people, especially those at the bottom of society, the consequence is greater hardship.