OPINION: Economic inequalities have led to an increase in the rate of crime, which has also led to other economic problems such as brain drain, discouraging investment stifling growth and unemployment persistence, writes Mzweleni Mthethwa.
Recently, the United Nations held a ‘Summit of the Future,’ in which world leaders pledged to some 58 actions to respond to such issues as conflict, development and inequality.
However, there shortage of initiatives to respond to these, especially within Africa. The issue is prioritisation.
In particular, when we turn to the African Union’s Agenda 2063, ‘Aspiration 1’ deserves the most urgent attention. It calls for “A prosperous Africa based on inclusive growth and sustainable development.”
If we are determined, we can eradicate poverty in one generation and build shared prosperity through the social and economic transformation of the continent. Partnership platforms such as the BRICS Plus, set to meet in late October in Russia, can help expedite the realisation of this noble goal.
South Africa’s membership and leadership within that body should materially benefit the country and the continent. Its experience with the challenges of poverty and inequality should inspire practical action.
Poverty and inequality in South Africa post 1994
Inequality and poverty have co-existed from generation to generation for decades in both developed and developing countries.
This is in spite of many interventions meant to eradicate the problem at hand. These have been without any success in eliminating the problem, hence a solution remains elusive.
Most of the developed countries have restrictions on benefits to the poor resulting in their welfare being left behind, thus causing the escalation of poverty and further exclusion and widening the gap among the social groups.
The Gini coefficient is a tool for measuring the overall income concentration among both non-poor and poor, its ratio ranges between 0 and 1, where 0 implies that each individual receives the same income and 1 implies that only one individual receives all the income.
The results show that for the entire period from 1960 to 2015, the Gini coefficient for South Africa has been significantly increasing on average by 0.35 units per year.
In trying to respond to the issue of poverty and inequality post-apartheid South Africa as a developing country with an open economy, and functioning as a gateway to Africa, has developed many policies aimed at combating poverty, increasing economic growth, reducing import controls and decreasing the budget deficit.
However, it remains one of the most unequal countries in the world in terms of income inequality. Approximately over 40% of South African citizens survive on social grants.
The social security system has failed to address the issue of providing income to the majority, who remain unemployed and are left vulnerable without a safety net to protect them against poverty.
Unemployment in South Africa
Currently, in South Africa, there are 8.4 million unemployed people, which is an increase from the 5.2 million people the country had a decade ago, Statistics SA reported, meaning that the economic policies are failing to address structural unemployment, even though many pro-poor policies have been put into place by the democratic government in trying to fight poverty and inequality as a consequence of unemployment.
Inequality is also shown through the lack of the right to get natural resources; a two-tiered educational system; a dual health system; and other socio-economic dimensions.
Therefore, in responding to this issue in the South African government has had a fiscal framework since 1994, which is based on two main key pillars.
The first is the increase in social expenditure which includes education, health services and welfare, with the main aim of improving life opportunities and improving the living standard for the majority of citizens.
The second, there has been more emphasis on infrastructure development to create the necessary conditions for economic development.
Additionally, the number of welfare assistance recipients has been rising since April 1998 from 2.4 million to more than 28 million in 2024.
The policy landscape
Democratic South Africa inherited massive inequalities in education, health, and basic infrastructure, such as access to safe water, sanitation, and housing, as consequences of past economic policies under the apartheid regime.
Only a quarter of Africans had access to piped water in their houses while Asians and Whites had universal access, as a result of the apartheid regime.
Economic inequalities have led to an increase in the rate of crime, which has also led to other economic problems such as brain drain, discouraging investment stifling growth and unemployment persistent.
Given all these challenges, the South African democratic government presented new policies such as the Reconstruction and Development Program (RDP) in 1994, self-described as an integrated, coherent socio-economic framework.
RDP set ambitious goals, such as job creation through public works programs, redistribution through land reform, and major infrastructure projects in housing, services, and social security.
The Growth, Employment, and Redistribution (GEAR) program of 1996 presented a formal macroeconomic framework for growth, followed the RDP and was aimed at increasing growth and stimulating job creation.
Consequently, the achievements post-1994 period were price stability, increasing spending levels in education and pension programs, and access to certain basic services and infrastructure improved significantly.
However, Gross Domestic Product per capita grew at an annual rate of approximately 0.6 percent which is in line with baseline projections rather than the Integrated Scenario projections of GEAR, and unemployment kept increasing steadily.
Final consumption expenditure by households also grew by less than 1% per capita annually between 1995 and 2000. The failure of the economy to grow and create enough jobs led to the long-run failure of GEAR.
Empirical economic studies clearly indicate that inequality and poverty continue to co-exist in both developed and developing countries, even though there have been many interventions to try and eradicate the problem at hand without any success in eliminating the problem, hence a solution remains elusive.
The AU Agenda 2063 gives an Africa-wide impetus for confronting these developmental bottlenecks. The recently concluded BRICS summit, which saw the first-time participation of Ethiopia and Egypt alongside South Africa as fully fledged members, presents the economic and political tools to achieve these goals.
* Mzweleni Mthethwa is a student leader at the University of Zululand and a young emerging researcher in the Department of Economics, also he is the President General of the BRICS Student Commission. He recently participated in the Global Leadership Student Exchange Programme supported by the Department of Higher Education and Training in South Africa and Ethiopia organised by the University of Johannesburg.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.