Opinionista Trudi Makhaya 6 April 2014

Rallying around inclusive growth

The hope of a middle-class majority in my lifetime might be within reach. Four million people escaped poverty in the period from 2006 to 2011. This is according to a recent paper from Stats SA, which brings together figures from various household surveys.

The percentage of the population living below a poverty line of R620 a month per person stood at 46% in 2011, down from 57% in 2006. Measures of the depth of poverty also show that on average, poor households are not too far down from the poverty line, making it easier for them to cross it.

Poverty lines always seem very low, but they give a rough indication of how society is doing in overcoming deprivation. However, being slightly above the poverty line still entails a life of hardship, sacrifice and vulnerability. A significant event with negative economic consequences, such as ill health or the sudden unemployment of a breadwinner, can send these households back into poverty. Nonetheless, the figures are going in the right direction.

The reduction in the number of poor people is, according to the report, a function of economic growth, real wage increases, expansion of the social safety net, credit extension and lower inflation. It is important to reflect on these drivers of change because they should frame the way in which we evaluate this apparent success in poverty reduction. Very few will quibble with the virtues of economic growth and lower cost pressures on households.

However, other drivers of poverty reduction have to be met with caution. In spite of tighter credit regulation, the period under examination saw an increase in credit extension, including through micro-finance and unsecured products. The reliance of households on credit is particularly problematic if it is financing short-term consumption and not future-oriented expenditure such as on health and education. Poverty has also been alleviated through wage increases above inflation, but this cannot be realised indefinitely without related improvements in productivity.

Conservative critiques of welfare expenditure argue that it fosters negative attitudes towards work and personal responsibility. In a country with our developmental deficits, where close to half the population is still living in poverty, it is mischievous to attribute such systemic poverty to individual pathologies. Nonetheless, it is important to consider the sustainability of the social safety net. Estimates by the National Treasury suggest that social grants will decline as a percentage of GDP in the coming years. That the sustainability of the grants system is being closely monitored by government is encouraging, though it’s not clear if there are hard limits that would prompt a policy reversal if they were to be breached.

What would the lives of the poor as consumers, producers and employees look like in an economy on an inclusive growth path? As employees, there would be well located, easy to find entry level jobs that also provide opportunities for the on-the-job training. As consumers, the prices of staple foods, key services and household items would be competitive. As producers, the marginalisation of small business by big business and restrictive government policies would cease.

The incoming administration will have to meet the challenge of inclusive growth in a tough global environment and amidst increasing expectations from our communities. To deal with poverty decisively, the economy needs to break out of the low growth rates of the past few years. This means seeking growth from new sources, rather than stumbling along with an economy creaking under cartels and restrictive government policies. The other side of the equation is to channel state resources to make high-impact investments in people and infrastructure. There is no doubt that the efficiency of government spending needs to be enhanced to maximise the impact of the limited resources it has at its disposal. The extent of the will and the capacity to do so will determine the fate of the 23 million people who still live in poverty, including the 10 million that face the indignities of extreme poverty.

It is now a well-accepted fact that women are crucial in the fight against poverty. Empowering women has significant positive externalities as their success translates into better outcomes for their children and their communities. The report from Stats SA finds a higher rate of poverty amongst women as individuals and women-headed households, and also deeper levels of poverty. Thus society’s violence against women also finds expression in the economic sphere. This perpetuates a vicious cycle as economically deprived women are also most vulnerable to physical violence and abuse.

With the economic empowerment debate dominated by race, it is important to bring women’s issues back into dialogues about broad-based transformation. Assuming that we will still have a women’s ministry after the elections, it has to do far more to advocate for the removal of the barriers to women’s participation at all levels of the economy. The country has yet to have a woman minister in the core economics cluster ministries such as trade and industry and the national treasury. Of course, this would not be a magic solution, as what is needed is a critical mass of voices making the case for women’s empowerment, including men’s voices. DM

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