Defend Truth


The government must move its promises from podium rhetoric to visible programmes to tackle growing poverty


Bongani K Mahlangu is a National Executive Member of the South African Youth Council (SAYC).

Those who sit on the negative end of the inequality divide are unable to generate income surplus to lock away into a financial buffer for ‘rainy days’. These households live from hand to mouth. Not one cent of a month’s income reaches the payday of the following month.

South Africa’s poor and blue-collar workers continue to see a rapid decline in their purchasing and bargaining power, and an increase in household debt, as a direct consequence of declining national economic fortunes. This section of society, predominately African in demographic and a majority in number, are spectators in a country with weak fiscal buffers, as confessed by Treasury in the Medium Term Expenditure Framework Technical Guidelines 2021. The household income of this group is suffering rapid erosion due to debt, inflation, unemployment and no savings.

South Africa ended 2019 in a technical recession — defined as two consecutive quarters of decline in a country’s productivity, measured as gross domestic product. In the following year, 2020, came the virus Covid-19 to our shores with the subsequent (economic) lockdown that was loud on saving lives, but low on protecting livelihoods.

Lockdown meant a persistent loss of jobs, as captured by Statistics South Africa in its Quarterly Labour Force Survey (QLFS). Not only did unemployment increase, but underemployment followed suit, characterised mainly by wage cuts and reduced working hours. This was happening while household expenses remained the same at least, or increased at worst, forcing many households to seek a supplement to their incomes by means of credit.

South Africa has an average household debt-to-income percentage of 77.1%. That means that out of every one rand made by an average household, seventy-seven cents is consumed by debt. This is a very high proportion of debt to income, thanks largely to reckless lending from financial institutions, the issuing of expensive unsecured loans, and loans that don’t require collateral such as credit cards, personal loans and overdrafts.

The lure of unsecured loans to supplement income becomes highly attractive in order to keep a household afloat during these tough times, albeit at a heavy cost. Among the poor and working class, there is also informal debt owed to friends, family and neighbourhood loan sharks.

The headline consumer price index — headline inflation that measures the total movement of prices in the economy including commodities such as prices of energy and food, often deemed volatile due to their rapid price fluctuations — currently sits at 5.2%, as last measured by Stats SA. This is a 30-month high. This is while household income is not increasing because many working-class households have not received annual increments.

Specifically, this includes government employees whose income has decreased in real terms since the global economic recession, leading to downward social mobility and leading them closer to poverty. This results in increased borrowing to keep up with household expenses.

Unemployment and underemployment are two important and primary variables to consider when analysing labour market deficiencies as advised by the International Labour Organisation (ILO). These twin variables strangle the bargaining power of the unskilled and low-skilled members of the labour force. These types of workers are involuntarily forced to take what they can get from their employers due to the ease of replacing them should they demand wage hikes.

Thanks to high unemployment, there is always someone willing and able to accept a lower wage for equal or more work, setting the stage for underemployment. The less employment there is available, the more this situation persists.

The South African household savings ratio (the income saved by households during a certain period), gross domestic savings (% of GDP), and its savings culture have received much publicity on formal as well as informal platforms, in academic and non-academic publications and dinner-table discussions. Those who sit on the negative end of the inequality divide are unable to generate income surplus to lock away into savings that would allow them to create financial buffers for “rainy days”.

These households live from hand to mouth. In fact, they live on critical deficits which increase the opportunity cost of not working with each price change reflected on a grocery receipt and declining basket items. Not even one cent of a month’s income reaches the payday of the following month. Income evaporates mid-month for the lucky, and then after credit has been used to see the household to the end of the month.

The sixth administration has promised a speedy Covid-19 inoculation process to ensure the country reaches population immunity. The sixth administration has promised rapid industrialisation even though R250-billion has been cut from the government’s baseline due to its austerity pro-growth fiscal consolidation strategy.

The sixth administration promised, cumulatively, to create hundreds of thousands of jobs — later rephrased from “jobs” to “job opportunities” with some linguistic gymnastics. The sixth administration has recently tried to raise the volume when referring to saving livelihoods. And now the sixth administration has meticulously centred all economic woes on the virus, a virus that led us to the lockdown that has been a catalyst for our already declining economic fortunes.

South Africa is a labour-intensive country with a fragile labour market, characterised by high-income inequality and skills shortages, which affects those at the bottom of the pile most severely. The economic challenges facing the country place the household income of this struggling group under heavy strain.

The longer the government delays its promises of economic recovery, the longer these households will struggle towards an unknown end. The plans and promises of the sixth administration must move from podium rhetoric to actual visible and tangible programmes, which in poor households will see more items in their baskets and more food in their cupboards and fridges. DM


"Information pertaining to Covid-19, vaccines, how to control the spread of the virus and potential treatments is ever-changing. Under the South African Disaster Management Act Regulation 11(5)(c) it is prohibited to publish information through any medium with the intention to deceive people on government measures to address COVID-19. We are therefore disabling the comment section on this article in order to protect both the commenting member and ourselves from potential liability. Should you have additional information that you think we should know, please email [email protected]"

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  • An interesting article consisting mostly of rather obvious observations, but very thin on suggestions or recommendations. Over the last few days, the rioting and looting have illustrated just how badly we need major labour-intensive employment. Unfortunately, these events are only symptoms and will merely exacerbate the illness. Unemployment is merely an oversupply of labour. We should be striving to reduce the over-supply, which will automatically increase the price of labour, (wages) standard of living will improve, leading to increased aggregate demand, creating an incentive for more investment. How do we do that? By simply following the methods employed in all successful developing economies.
    1. Less government regulation, rather than more.
    2. Government expenditure focused on good infrastructure, not consumption.
    3. Remove legislation that discourages labour-intensive investment and encourages capital-intensive investment.
    4. Ensure that all tax rates are competitive – We are competing for investor’s money to employ our people.
    5. Political & legal certainty – (EWC and NHI are meant to address inequality and economic disparity, but to potential investors/employers these may be perceived as unnecessary risks with other jurisdictions being regarded as safer investment destinations.)

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