Poverty and unemployment bedevil South Africa

31 July 2008, Posted in News

Poverty and unemployment bedevil South Africa

Just why is South Africa battling to overcome poverty and unemployment? NevaMakgetla uses statistics and international comparisons to sharpen our understanding of these problems.

Poverty, arising above all from joblessness, remains unusually high in South Africa compared to other middle-income developing countries.

In 2005/6, a major government study of incomes and expenditure found that:* Half of all households, with between three and four people in the average household, lived on less than R600 per person month*

The poorest 20% of households lived on less than R1000 a month* In contrast, the richest 10% of households got over R15 000 a month.

High levels of poverty go hand in hand with very deep inequalities. The following graph shows that in South Africa, the very rich get an unusually large share of total income by international standards.

Thus, in 2000, the richest 10% of households got 45% of income. In contrast, the poorest 60% of households get only 20% of national income. Only a few countries are as unequal as South Africa. Most are in Latin America.

Inequality in South Africa compared to other middle-income countries Source: World Bank. 2007. World Development Indicators. Downloaded from www.worldbank.org in January 2007.

In the past five years, growth in employment combined with an expansion in social grants, especially to children, has done something to improve conditions for the poorest of the poor.

As the following graph shows, children went hungry at least sometimes in a quarter of households in 2002, but the figure dropped to one in seven households in 2006.

Incidence of child hunger, 2002 to 2006Source: Statistics South Africa. 2007. General Household Survey 2006. Table 8, page xxxvi. Downloaded from www.statssa.gov.za in October 2007.

The main cause of huge poverty and inequality in South Africa is joblessness. The poorest households rely on social grants, because they can’t earn an income – and households that don’t qualify for a social grant are the poorest of all.

The following chart shows that earned income, whether from self employment (mostly hawking) or paid employment, provides only two fifths of income for the poorest 20% of households, and less than half for the poorest half of households. In contrast, it makes up over four fifths of income for the top 30 deciles.

Source of income by decile, 2005/6Note: (a) For poor households, most other income comes from remittances and family support; for richer households, it is mostly profits on various kinds of investment, including pension funds.

The attributed rent calculated by Statistics South Africa for homeowners has been excluded from total income. Source: Statistics South Africa. 2008. Income and Expenditure Survey 2005/6, Table 3.2, page 153.

There is no question that South Africa has unusually high levels of unemployment. The following chart shows that, compared to other countries, very few people in South Africa have any kind of employment, whether it is self-employment or a paid job.

Employed people as a share of working-age population in South Africa and 88 other countriesSource: Calculated from, International Labour Organisation. Labour Statistics Database. Series on total and economically active population by age group. Downloaded from laborsta.ilo.org in May 2007.

The result of this situation is that South Africa has an extraordinarily large number of households dependent on state grants. Almost two million households, or around one in seven, get most of their income from social grants – old-age pensions, child-support or disability grants.

But these grants are not enough to support a whole household. The old-age and disability pensions are under R1000 a month, and the child-care grant is less than R300 a month.

Two factors mostly lead to high unemployment in South Africa. First, under apartheid, black people were pushed into the least developed parts of the country – the former homelands – and deprived of assets and education.

As a result, it is hard for them to start their own enterprises or co-ops. Many still live very far from work opportunities.

The following graph shows that while 40% of South Africans live in rural areas, only around 10% have agricultural employment. It is not surprising, then, that poverty remains deepest in the former homeland areas.

Rural population and agricultural employment in South Africa compared to the rest of the world, 2004Source: Calculated from, FAO, The State of Food and Agriculture 2006, Statistical Annex, Table A4.

Second, agriculture and mining, which used to create some employment for lower skilled workers, have lost jobs in the past fifteen years. Manufacturing has also grown little if at all.

There has been a lot of job creation since 2002, but virtually all of it has taken place in construction and retail, as the following chart shows.

Employment by major sectors, March 2002 to March 2008Source: Calculated from, Statistics South Africa, relevant labour force surveys for March 2002 to March 2007.

Neva Makgetla is policy coordinator in the Presidency

Points for discussion:

Given these facts, how do you think we should tackle the unemployment and poverty problems?


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