Poverty and Policy in Post-Apartheid South Africa

Literature › Works

Haroon Bhorat (ed.); Ravi Kanbur (ed.) (2006). Poverty and Policy in Post-Apartheid South Africa. HSRC Press.

Type	book
Scope	Post-1994 South African economy
Method	mixed
Period studied	1970–2005
Regions	South Africa (national), KwaZulu-Natal, provincial comparisons (Eastern Cape, Limpopo, Gauteng, Western Cape)
Themes	inequality poverty unemployment, labour markets wages, macro fiscal finance debt, manufacturing industrial policy, mining migrant labour, education human capital, methods data sources, transition post apartheid, business and state
Citation key	ed2006

Argument

The volume asks how far South Africa's first decade of democracy reduced poverty, inequality and unemployment. Its premise is that data quality shapes the answer. In the legible chapters, Fedderke argues that long-run growth since 1970 has been constrained by falling investment, systemic political and economic uncertainty, market distortions (labour 'mispricing', high mark-ups, incomplete trade liberalisation) and a decline in the quality of human capital. Meth shows that the ANC/GDS pledges to 'halve' unemployment and poverty by 2014 are undefined, and that survey data, poverty lines and social-wage valuation are too weak to monitor them. He uses simulations to argue that the targets are probably unattainable or misleading. The introduction, which is garbled, summarises rising poverty, inequality and unemployment alongside improved access to services.

Evidence and method

Fedderke: sectoral growth-accounting decompositions, panel estimates for 28 manufacturing sectors, ARDL capital-flow models, a 1935–95 political instability index, and sectoral mining, labour and tariff data (SARB, Statistics South Africa, Fedderke's earlier papers). Meth: official OHS/LFS/IES/GHS series, ASSA AIDS-model projections, Ten Year Review statistics, ANC and GDS documents, and his own simulation model of poverty headcounts, poverty gaps and the social wage using categorical survey expenditure data.

Findings

• Growth and employment have fallen structurally while the sources of growth shifted from factor accumulation to TFP. (p. 34)

  not only have growth and employment creation in South Africa been subject to a long-term, structural decline, but the sources of economic growth have also shifted from capital accumulation to growth in total factor productivity.

• In the 1970s–80s growth was driven by capital and labour accumulation, with little technological contribution; in the 1990s labour contributed negatively. (p. 37)

  The 1970s and 1980s saw economic growth heavily led by capital and labour input accumulation, with very little contribution by technology.

• Uncertainty strongly depresses manufacturing investment, and political instability is the larger component. (p. 41)

  A striking finding is that uncertainty exercises a statistically significant and strong negative impact on investment expenditure in the South African manufacturing industry

• The systemic uncertainty measure is built from indicators of repressive state responses to reform pressure (apartheid-era instability index). (p. 41)

  Systemic uncertainty is defined here as political stability, measured as a weighted average of eleven indicators of repressive state responses to pressures for political reform

• Chronic private savings shortfall made investment dependent on capital inflows. (p. 43)

  Except for very brief periods in the 1960s and the early 1980s, South Africa’s private sector has not produced sufficient savings to meet its demand for physical capital formation.

• Mining employment fell sharply from the mid-1980s, concentrated in unskilled categories. (p. 52)

  high of 101 705 employees in coal mining in 1985 to 55 219 in 1997; for gold and uranium mining the decline was from 526 839 to 241 352 employees over the same period

• Real wage elasticities of employment in mining are negative. (p. 52)

  The real wage elasticities for the coal, gold and uranium, and diamond and other mining sectors were –0.44, –0.69, and –1.45 respectively.

• Manufacturing employment is wage-elastic; the elasticity rises in fuller specifications. (p. 55)

  For the 28 manufacturing sectors of the South African economy, the aggregate real wage elasticity is in the region of –0.5 to –0.55.

• Fedderke defines 'crony corporatism' as sectional cooperation among business, labour and government that curtails market efficiency. (p. 58)

  tacit cooperation agreements between big business, big labour and, to some extent, government, to serve relatively narrow sectional interests, and curtails the efficient functioning of markets to a significant degree.

• Apartheid's schooling legacy erodes the quality human capital needed for growth. (p. 61)

  Reflecting the legacy of the apartheid era, the proportion of matriculants in the historically ‘best’ parts of the schooling system has been in a steady decline, and in African schooling has been persistently low.

• The GDS 'halving unemployment' pledge does not say which measure is meant. (p. 384)

  There is no indication of which of the two measures of unemployment – the official or the expanded – the constituents had in mind.

• A statistical discontinuity in 1999/2000 makes official unemployment series non-comparable. (p. 390)

  The unemployment total that finally makes its way into the official statistics for the month of February 2000, 4 333 000, is one of several that could have been used.

• South Africa lacks an official poverty line. (p. 404)

  South Africa does not have an official poverty line (or pair of lines identifying a poverty critical range). This is not a desirable state of affairs.

• Survey expenditure is badly under-reported relative to national accounts. (p. 420)

  The GHS figure obtained using the actual survey results is R22.3 billion per month, whereas reported monthly consumption expenditure in the national accounts is R62.5 billion per month.

• Simulations show the halving-unemployment goal would need millions of jobs. (p. 451)

  To achieve this might require somewhere between 4 and 7 million jobs to have been created between 2003 and the year 2014.