Erasibo Consulting

This is a new research report on income trends in South Africa.

This report presents a detailed analysis of changes in both poverty and inequality since the fall of Apartheid, and the potential drivers of such developments. Use is made of national survey data from 1993, 2000 and 2008. These data show that South Africa’s high aggregate level of income inequality increased between 1993 and 2008. The same is true of inequality within each of South Africa’s four major racial groups. Income poverty has fallen slightly in the aggregate but it persists at acute levels for the African and Coloured racial groups. Poverty in urban areas has increased. There have been continual improvements in non-monetary well-being (for example, access to piped water, electricity and formal housing) over the entire post-Apartheid period up to 2008.

From a policy point of view it is important to flag the fact that intra-African inequality and poverty trends increasingly dominate aggregate inequality and poverty in South Africa. Race-based redistribution may become less effective over time relative to policies addressing increasing inequality within each racial group and especially within the African group. Rising inequality within the labour market – due both to rising unemployment and rising earnings inequality – lies behind rising levels of aggregate inequality. These labour market trends have prevented the labour market from playing a positive role in poverty alleviation. Social assistance grants (mainly the child support grant, the disability grant and the old-age pension) alter the levels of inequality only marginally but have been crucial in reducing poverty among the poorest households. There are still a large number of families that are ineligible for grants because of the lack of appropriate documents. This suggests that there is an important role for the Department of Home Affairs in easing the process of vital registration.

This report presents a detailed analysis of changes in both poverty and inequality since the fall ofApartheid, and the potential drivers of such developments. Use is made of national survey data from 1993,2000 and 2008. These data show that South Africa’s high aggregate level of income inequality increasedbetween 1993 and 2008. The same is true of inequality within each of South Africa’s four major racialgroups. Income poverty has fallen slightly in the aggregate but it persists at acute levels for the African andColoured racial groups. Poverty in urban areas has increased. There have been continual improvements innon-monetary well-being (for example, access to piped water, electricity and formal housing) over theentire post-Apartheid period up to 2008.2. From a policy point of view it is important to flag the fact that intra-African inequality andpoverty trends increasingly dominate aggregate inequality and poverty in South Africa. Race-basedredistribution may become less effective over time relative to policies addressing increasing inequalitywithin each racial group and especially within the African group. Rising inequality within the labourmarket – due both to rising unemployment and rising earnings inequality – lies behind rising levels ofaggregate inequality. These labour market trends have prevented the labour market from playing a positiverole in poverty alleviation. Social assistance grants (mainly the child support grant, the disability grant andthe old-age pension) alter the levels of inequality only marginally but have been crucial in reducingpoverty among the poorest households. There are still a large number of families that are ineligible forgrants because of the lack of appropriate documents. This suggests that there is an important role for theDepartment of Home Affairs in easing the process of vital registration.

Trends in SA Income Distribution

Cross reference this study against this presentation for more depth.

This is the presentation delivered by Prof Haroon Bhorat at Parliament earlier this month (should have put it up earlier), he and his collegeaues used the 1995 and 2005 Income and Expenditure Survey reports to give an overview of inequality and poverty over the past ten years in South Africa.

Their research shows that:

• Inequality in South Africa increased in the period 1995-2005.
• Absolute levels of inequality remained high and race as well as gender was still critically associated with poverty.
• Income inequality was rising and was very high by international standards and income inequality between African and white people were driving the overall inequality.
• Since 1995 a disproportionate share of economic growth has gone to the top of the income band and social transfer programmes were a key source of rising incomes at the bottom end of the income band.
• South Africa was entrenching its reputation as a very unequal society.
• Social grant transfer programmes were a key source of rising incomes at the bottom end of the income band
• The international trend showed a declining share of national income across a number of countries.

The question raised by Minister Ebrahim Patel (Minister for Economic Development) was whether the country was seeing market outcomes based on economic activities over the last couple of years, regarding rising inequality, with state interventions that partially mitigated the effect on inequality.

This study when compared against the rest of the data coming out of government’s review of its performance shows us the magnitude of the challenge still facing the country.