Opinionista Xolisa Phillip 14 October 2019

Treasury’s economic paper fudges the key issues

In a state as racialised as South Africa, it is a must to look at the correlation between race and gender in poverty and inequality. In the absence of this, National Treasury’s economic paper risks being reduced to an academic exercise that does not address the underlying factors in the country’s economic status quo.

The government’s quest to make inroads into South Africa’s poverty and inequality problems is steeped in contradictions that are marked by giant leaps of progress followed by extended periods of regression.

There is broad consensus that poverty rates went down post-1994. But these inroads have been undermined by deep and persisting structural impediments that reinforce this status quo.

In March 2018, the World Bank, in collaboration with the Department of Planning, Monitoring and Evaluation, released a review report on the country titled “Overcoming Poverty and Inequality in South Africa: An Assessment of Drivers, Constraints and Opportunities”.

The review is both illuminating and an indictment on the post-1994 political consensus. It is relevant against the backdrop of the current discussions around the National Treasury’s economic paper with reference to job creation and growth.

Furthermore, revisiting the review report is useful because it provides a diagnostic about why the National Development Plan’s (NDP’s) job-creation targets for 2030 are way off. It does this by pointing to the underlying environmental inhibitors in making this a reality and identifying the systemic contributors to present socio-economic challenges.

Treasury’s economic paper uses the NDP as its points of reference and departure.

In South Africa, poverty runs deep and it is generational. It is expensive, exhausting and exclusionary. It affects income generation, wealth accumulation, access to opportunities, upward mobility and the ability to land a stable job with good income.

It has an adverse effect on better schooling options, optimal living arrangements, transportation and every other facet of life that would enable a dignified existence. Poverty is, indeed, a trap that correlates with income inequality.

Income equality shows up at the till for most South Africans.

That is the arena where the truly wealthy enjoy the fruits of democracy and those who are less fortunate do not. Since 1994, inequality has been on an upward trajectory. This is captured in South Africa’s household consumption figures, which bear testament to the country’s categorisation as the most unequal society in the world.

Put differently, South Africa is an unforgiving maze of structural barriers for the poor. However, this is not the case for the well-heeled, who have best-in-class options that are comparable to those found in developing countries.

The elephant in the room is that “…[race] still affects the ability to find a job, as well as the wages received once employed.

Although an increased number of women participate in South Africa’s economy, …[women] find it harder to find a job, and earn less than men when they do.

“…[A] typical poor household is rural and headed by a single, economically inactive… black South African [woman],” according to the review.

The inverse of this is that white South African men have a good story to tell about their material fortunes pre- and post-democracy.

They occupy the top spots in every quintile in measures of income generation, generational wealth, assets, wealth accumulation, access to opportunities, upward mobility and the ability to land decent jobs with good incomes.

The crude racial hierarchy of apartheid in terms of income and wealth distribution persists.

It is no exaggeration to point to the enduring legacy of apartheid for the ingrained nature of the structural drivers of entrenched poverty in South Africa.

Consider that the Eastern Cape, Limpopo and KwaZulu-Natal have the highest proportion of poverty rates and inequality in South Africa. A major contributing factor is that these provinces were the host sites of most of the now-defunct homelands.

Gauteng, the Western Cape, the Free State fare better because these provinces were not burdened by a “high concentration” of homelands.

The review report looked at SA’s economic situation since 1994, and used the period between 2006 and 2015 as a reference point. The government’s fiscal interventions yielded good returns between 2001 and 2011. However, between 2011 and 2015 poverty rates spiked.

The World Bank points to a lack of economic growth coupled with high unemployment to explain that reversal in progress. Another factor is the economy not creating enough jobs at the required pace and scale that would make inroads on poverty.

In the review report, the World Bank posits that: “Although the NDP envisions the creation of 11 million jobs between 2011 and 2030, this is unlikely to occur.

To achieve the employment target of the NDP, the economy would need to create about 600,000 jobs a year, but the economy has barely been managing to create half of that.”

In addition, during the good years when the country was hitting its economic growth targets, this did not correlate with the inclusion of the majority of South Africans.

Transformation, inclusion and growth are core tenets of Treasury’s economic paper. Indeed, the structural definers of the South African economy – systemic, cultural and racial – have to be addressed for any meaningful progress to be made.

However, Treasury’s paper speaks of transformation, inclusion and growth in broad strokes. In order to institute long-lasting and effective interventions, race and gender have to be factored and spoken about candidly in policy discussions about the economy.

By way of example, consider that the services sector, which is a fast-growing contributor to GDP, remains largely white and exclusionary to black South Africans, more so black women, according to the World Bank’s review.

That makes it imperative to have a holistic and honest approach to policy formulation and discussions. In the absence of this, South Africa will inevitably find itself with the same problems it is attempting to resolve five years down the line. BM

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