A key point of the forecast is that South Africa will be unable to reach the levels of economic growth necessary to make serious inroads against unemployment and therefore poverty and inequality. The SA Institute of Race Relations presented data to show how the economic growth booms of the post-Boer War and post-Second World War periods set the foundation for the Afrikaners to escape poverty. In both periods economic growth rates of between 5%-6% were sustained over significant periods of time. Present day South Africa struggled to maintain a growth rate of over 4%-5% per annum during one of the greatest commodity booms that the world has known. For 2009 it is unlikely that the economy will see a growth rate of much over 1%. A growth rate of 4% by 2011 is seen as optimistic.
High levels of unemployment are therefore set to remain a defining characteristic of South Africa in the period to 2020. While StatsSA puts the official unemployment rate at under 25% their definition requires that unemployed South Africans actively look for work in order to be classified as unemployed. The proportion of Africans who want to work but cannot find a job, or make no effort to find one, is closer to 45%.
As a result poverty and state dependency are two features of South Africa that will feature prominently in the period to 2020.
Statistics show that the proportion of South Africans living on less than R3 000 per annum has fallen from just over 50% to just over 40% over roughly a decade. In large part the rollout of perhaps the biggest social welfare programme in the developing world must get the credit for this. Today three out of ten African households get their single largest source of income from the state while a quarter of all South Africans receive social welfare. Many of these welfare recipients have become heavily dependent on the Government. They are people who live from hand to mouth on the productivity of other South Africans. Any reduction in welfare funding, whether caused directly through declining tax revenues, or indirectly through the effects of inflation, will directly erode the living standards of a quarter of the population.
In the absence of an effective public education system such dependency is forecast to continue in the decade to 2020. Only half of the roughly one million children who were in grade 10 in 2006 wrote their new Outcomes Based Education matric exams in 2008. Of the original 2006 cohort only 30% passed while 8% passed the new mathematics exam. The Department of Education refused the Institute access to a racial breakdown of these results although we expect that such a breakdown would show that white children in public schools continue to receive far better education than black children.
The result of a failing school system is in turn reflected in university graduation figures. While African students are now a significant majority of university graduates, white graduates still make up roughly half of all engineering and business graduates.
The implications for employment equity and other empowerment policies should be obvious. The Government and certain employment equity advocates, however, continue to pursue the narrow minded view that the failure of employment equity can only be a reflection of a resistance to transformation. Data is presented from one of these organisations, the Black Management Forum, to show the extreme extent to which white and Indian South Africans are ‘overrepresented’ in senior management jobs in South Africa. This data shows that 90% of all senior management jobs in South Africa are still held by whites. Rather than being used to promote more stringent enforcement of current employment equity policies the statistics should indicate the need for a change in policy direction.
Closely related to the question of employment equity is that of Black Economic Empowerment (BEE). Despite the value of BEE expenditure beating the value of foreign direct investment into South Africa for almost every year of the past decade, the black middle class remains disappointingly small. The term ‘black diamonds’ is often misused as being synonymous with the term ‘black middle class’. It is not. Many of the 2.6 million ‘black diamonds’ earn such paltry incomes that it is dishonest to suggest that they are even lower middle class. Even if the black middle class were 2.6 million strong, that would only mean that the small white middle class has now been joined by an equally small black middle class.
It is not completely surprising therefore that white households today earn ten times more than their African compatriots. If that situation is ever to be mended it will require a major rethink of the policy environment tasked with improving the lives of poor South Africans. The inequality inherent in the overall empowerment and employment equity picture will hang as a Damoclesian sword over race and social relations in South Africa in the years to 2020.
This is not a warning only to white South Africans. The new black elite who have joined the middle classes, even as their fellow countrymen remain in poverty, should be equally concerned. The Afrikaner economic upliftment of the early 20th century saw most Afrikaners becoming richer – not a small elite. Societal instability resulting from inequality will not take cognisance of the colour of the middle classes. It is perfectly possible that future resentment towards the new ‘black rich’ may come to rival that towards the historical white elite.
Service delivery will not serve as an antidote to poverty even though this project has been one of the ANC’s most successful interventions. While the numbers of every kind of government provided ‘service’ are up – housing by 2.6 million units – the proportion of households without certain services remains fairly constant. Household size in South Africa has fallen by a quarter over a decade meaning that new demand simply outstripped what might otherwise have been a service delivery success. It is unlikely that the Government will be able to build any more houses or toilets any faster or any better than they have to date. Continued reliance on state led service delivery must therefore translate into the maintenance of living standard inequalities.
On the health front the Government’s efforts have not been successful. The proportion of pregnant women testing positive for HIV increased from 1% in the early 1990s to close on 30% by the mid 2000s. As a result life expectancy has fallen from 63 in the late 1980s to 50 today. In KwaZulu-Natal the figure is 43 - on a par with the world’s poorest countries. The reluctant roll out of ARV drugs in the last days of the Mbeki administration may have some effect on life expectancy. The ghosts of the estimated 300 000 people who died unnecessarily as a result of the decisions made by the Mbeki cabinet will haunt South Africa to 2020 and beyond. That haunting will include the social fallout resulting from over 1 million AIDS orphans.
Crime is expected to maintain levels out of all proportion with the country’s history or present social and economic conditions. You are 50 times more likely to be murdered in South Africa than in Germany. Therefore even though most crime levels peaked in the period around 2002/3 it is scandalous for the Government to call their efforts at fighting crime ‘successful’. South Africa would need to see a 95% drop in violent crime levels for its criminal justice indicators to begin matching international, or for that matter, African norms.
The Institute suspects that much of the explanation for South Africa’s social ills can be found in family relations – the State of which are themselves a social ill. Comparing family structures and relations of African children to those of white children makes for alarming reading. White children are so much more likely to grow up in stable two parent families, where one or both parents work, that it is wishful to think that African children can be expected to compete equally with whites later in life. More than any crime prevention strategy or black economic empowerment policy, simply, working to fix a crisis in the South African family will serve our future well.
Unfortunately many of these concerns do not receive the attention they demand. South Africa’s political leadership has spent 18 months prioritising infighting over the governing the country. This included a period of global turmoil and slowdown that appeared to play second fiddle to party politics in the minds of South Africa’s political leaders. Unfortunately it is also likely that the model of government we are likely to see emanating from this process is one where Parliament and the Government as a whole are regarded as a sub-committee of the ANC. It is too much to hope that such a model will be either effective or responsive to the challenges facing the country.
The forecast played down economic ‘quick fixes’ including the possibility of using monetary policy to boost growth through lowering interest rates. The Institute said that it was expecting too much of the Reserve Bank to think that monetary policy could overcome the numerous other constraints on economic growth. With a poor public education system, inappropriate labour market policy, and empowerment policy that curbed the free flow of capital, aggressively cutting interest rates simply risked runaway inflation. This would have a devastating effect on the incomes of poor South Africans dependent on social welfare. The Reserve Bank had little choice but to err on the side of caution until such a time as the education system, labour market policy, and empowerment policy worked to remove, not introduce, hurdles to future economic growth. The current cutting of rates even as inflation increased could be seen as reckless politicking in the run-up to an election.
It is through effective government, good public education, and promoting the free flow of capital that much of the developing world will experience a halving of poverty levels in the 25 years to 2015. It is arguable whether any of these three conditions exist in South Africa today, although it is probable that their introduction is the only likely formula for South Africa to grow out of poverty. Where they are introduced it has now been shown that poor countries can become lower middle class countries in only 20 years. Even where current policy failures are reversed the lag time to implementation of better policy may only come to pass midway into South Africa’s third decade of democracy. The forecast to 2020 must therefore be one of maintenance of the current status quo, qualified only by the risks of social instability.
Source - SAIRR Today: A view to 2020 - 3rd April 2009 — SAIRR
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