Poverty and inequality

Poverty has many dimensions that shape people’s lives. Poverty in South Africa is most evident in the lack of opportunities for economically active citizens to earn a wage. Income poverty affects individuals and households in ways that are often degrading and lead to precarious lifestyles. However the linkages between income poverty and deprivations in health care, education and social infrastructure are direct, with devastating consequences for individuals and society. Deprivations in health and education are also linked to a lack of access to other assets such as housing, land, social infrastructure (such as clinics, schools, libraries and cultural resources) and services such as credit facilities. Without access to quality health and education and income-earning opportunities, the lives of the vast majority of the poor wage a daily struggle to simply survive.

Poverty

South Africa does not have a single official poverty line. Government uses US$2 a day or R524 a month per person (in 2008 prices, updated to 2010) as a rough guide. Using this indicator, the proportion of people living below the poverty line was about 53 percent in 1995; the figure subsequently varied, reaching 58 percent in 2001 and declining to 48 percent in 2008. By international standards, this is a very high level of poverty. Poverty among women-headed households is higher than the average and women continue to earn less than men, even though differences in years of education have largely been narrowed. About 61 percent of women live in poverty, and 31 percent live in destitution, compared with 39 percent and 18 percent of men respectively. The decline in poverty since 1995 has been relatively small given rising per capita income, a growing economy and significant social policy interventions (Bhorat & Van der Westhuizen 2011a).

Income inequality

There is good reason to be concerned about rising income inequality. Research by Wilkinson and Pickett (2009) shows that unequal societies tend to do worse on a range of socioeconomic indicators, including life expectancy, mental illness, obesity, educational performance, teenage births, homicides, imprisonment rates, levels of trust and social mobility. Other research shows strong relationships between levels of inequality and violence and crime, as well as the propensity for conflict and civil war (Collier 1998; Sen 2000).

Inequality in South Africa is reflected in the following ways: 

  •  In 1995, the poorest 20 percent of people earned an average of R1 010 a year (in 2008 prices) and the richest 20 percent earned an average of R44 336 a year. In 2008, the poorest 20 percent of people earned R1 486 a year and the richest 20 percent earned an average of R64 565 a year. 
  • In 1995, the poorest 20 percent of the population earned just 2.3 percent of national income, while the richest 20 percent earned 72 percent. By 2008, these figures had barely changed, with the poorest earning 2.2 percent of income and the richest earning 70 percent. 
  • In 1995, median per capita expenditure among Africans was R333 a month compared to whites at R3 443 a month. In 2008, median expenditure per capita for Africans was R454 a month, and for whites R5 668 a month. 
  •  According to the Income and Expenditure Survey, the Gini coefficient, which measures the gap between richest and poorest, increased marginally from about 0.64 to 0.68 between 1995 and 2005. According to the AMPS data, the Gini coefficient has been broadly constant during this period at about 0.67. South Africa remains one of the world’s most unequal societies.
  • Progress in changing the racial profile of earnings is only significant at the top of the income spectrum. The proportion of Africans in the top 20 percent of income earners has increased from 39 percent in 1995 to 48 percent in 2009 (Bhorat & Van der Westhuizen 2011b). Inequality within the African population has increased sharply highlighting the skewed distribution of opportunities (Leibbrandt et al 2010).

Figure 3.1 compares the different sources of income. The graphs chart the declining significance of labour market income (i.e. wages) in the three bottom deciles, which correspond to the poorest sections of the population, and the rapid escalation in the significance of grant income.

Figure 3.1: Income component shares of total income by decile

As the figure suggests, poverty for the worst-off sections of the population would be far worse if social assistance grants were removed. A very different redistribution of wealth has taken place from the white corporate sector to the emergent black business sector in the form of black economic empowerment, estimated at R533 billion between 1995 and 2009 (The Presidency 2010).

Income and income inequality trends point to new processes of class development in the wake of apartheid. These trends demonstrate both the rapid growth of a black middle class and elite, and the maintenance, or even expansion, of an impoverished and destitute majority that is excluded from participation in the labour market and subsists on the social grant system.

South Africa has to answer whether this growth path is a desirable and sustainable. If not, what policies can promote a more egalitarian path of growth and human development?

 

Pro-poor growth and social protection in South Africa: Exploring the interactions - (1,740 KB)

Trends in South African income distribution and poverty since the fall of apartheid - OECD - (1,066 KB)

The Role of Social Assistance in Poverty Reduction: The Present and the Future - (535 KB)