Policy, Politics and Poverty in South Africa

Jeremy Seekings, Nicoli Nattrass, Kenneth A. Loparo

• Publisher: Palgrave Macmillan
• Year: 2015
• ISBN:
  9781137452696
• Topic: Economics
• Subtopic: Labour Economics
• Index: Economics

Seekings and Nattrass explain why poverty persisted in South Africa after the transition to democracy in 1994. The book examines how public policies both mitigated and reproduced poverty, and explains how and why these policies were adopted. The analysis offers lessons for the study of poverty elsewhere in the world.

1

Introduction: Neoliberalism, Social Democracy and Poverty

Felix started work as a gardener for a semi-private school in Cape Town in the 1980s. In 1994, he was living in a shack, in Imizamo Yethu, a largely unserviced ‘informal settlement’ in the Hout Bay valley. Soon after, his shack burnt down when a fire swept through the settlement, forcing him to rebuild and refurnish. In 2014, twenty years after the first democratic elections, he was still a gardener, but he was living in very different conditions. Much of the informal settlement of Imizamo Yethu had been transformed into a neighbourhood of two- and three-bedroomed houses, through what was in effect a public–private partnership that combined largely public funding with private management. Over the course of the preceding twenty years Felix’s wages had risen substantially in real terms, and he had a growing private pension fund. His employer had also assisted him in building a larger house than would have been possible with public funds alone. This enabled him to supplement his earnings with rent paid by tenants in his house (as well as in rooms built in the yard). Felix had also bought himself a second-hand car, and had extended the family’s home in the rural Eastern Cape. Felix was now a respectable, home-owning, working man and he voted proudly in each election. His life was still far from easy, however, and he struggled to pay the interest on the loans he had taken out to buy a car and furniture, and to build in the Eastern Cape. In many crucial respects, however, his life had changed for the better since 1994. The end of apartheid meant new opportunities for someone who had not complete school and who was barely literate or numerate. His life remained hard, but he knew very well that it was very much better than it had been under apartheid.

For his children, twenty years of democracy had proved less beneficial. They left school without passing the school-leaving examination (‘matric’) and with few skills. Felix’s son drifted into petty gangs, killed someone in a bar fight, and was then himself killed in retribution. Felix’s daughter became one of South Africa’s millions of unemployed young people, with poor prospects for finding work. She had two small children, and received two modest ‘child support grants’ for them, some of which she spent in shebeens (bars). She drifted between Cape Town and the Eastern Cape, becoming increasingly unemployable in a society with fewer and fewer opportunities for less-skilled people. She probably contracted HIV, although by 2014 she had not yet developed the illnesses associated with advanced stages of AIDS and so did not need to commence treatment with anti-retroviral drugs. When Felix retires, and his income falls, his daughter may well be pushed down into destitution. With no prospects for employment and a lifetime before she is eligible for an old-age pension, she might sell the house in Imizamo Yethu and return to the rural Eastern Cape to live off the proceeds for as long as possible.

These two accounts reflect some of the range of experiences of the ‘new’, democratic South Africa by the country’s large, poor population. Between 1994 and 2014 some poor people enjoyed an increase in their life opportunities and a rising standard of living. Others found opportunities to be elusive, and stagnated in poverty. Unfortunately, the experience of Felix was no more common than that of his two children. For people with few formal skills, democracy may have brought the vote, dignity, and a growing welfare state that provided income, housing, and health care. But the quality of schooling remained low, crime escalated, and formal employment opportunities shrank. This book examines this mixed picture of change in democratic South Africa, focusing on how and why there was a modest decline in poverty – but only a modest decline – despite democratization.

1.1 The legacy of poverty and the promise of change

Apartheid’s legacy to the democratic South Africa included shocking levels of income poverty. Researchers, political leaders and (of course) poor South Africans themselves had been aware of poverty long before 1994, but accurate data became available for the first time only in 1993, when the World Bank and the University of Cape Town joined together to conduct South Africa’s first countrywide income and expenditure survey (Wilson, 1996). Using a poverty line set at about R840 (i.e. about US$250 at the time) per month for an urban family comprising two adults and three children, and at a slightly lower level in rural areas, almost one half of the population of South Africa lived in poverty. In some parts of the country – notably the Eastern Cape and Northern Transvaal – about two-thirds of the population lived in poverty (Whiteford et al., 1995).

The poverty line widely used within South Africa was about 60 percent more generous than the standard international poverty measure of US$1 per person day (adjusted for local purchasing power). Even using the austere $1/day measure, however, as many as one in four South Africans lived in poverty in 1994, the year of the country’s first democratic elections and transition to democracy. Other statistics told a similar story: Even before AIDS was to sweep across South Africa, one in six South Africans was not expected to survive to the age of forty; the infant mortality rate (that is, deaths by the age of one) was 57 per 1,000 live births, and the child mortality rate (that is, deaths by the age of five) was 67 per 1,000 (UNDP, 1997: table 12; 1999: table 4).

Income poverty was not as high in South Africa as in most of the other countries in sub-Saharan Africa, as was often pointed out by apologists for apartheid. In countries such as Kenya, Swaziland, Uganda and Senegal, around 50 percent of the population had incomes below the equivalent of US$1 per day (adjusted for local purchasing power) – double the proportion in South Africa. The poverty rate was as high as 72 percent in Madagascar, and 85 percent in Zambia. Life expectancy at birth was a lot lower, and infant and child mortality much higher, in almost all other countries in sub-Saharan Africa (UNDP, 1997: table 8; 1999: table 4). The ‘human development index’ (HDI) calculated by the UNDP, taking into account life expectancy and educational attainment as well as income, was 0.72 in South Africa, higher than in any other sub-Saharan African country.¹ Botswana’s HDI score was 0.67, some other countries had HDI scores between 0.5 and 0.6, but many African countries had scores below 0.5. Sub-Saharan Africa as a whole had an aggregate HDI score of only 0.38 (UNDP, 1997: table 1). South Africa’s poverty rates had also fallen over time. The infant mortality rate, by one calculation, had fallen by one-half between 1960 and 1994 (UNDP, 1997: table 8).

Yet the South African poverty rate was much higher than that observed in other middle-income countries around the world, and it was falling at a much slower rate. The comparable income poverty rates in Chile, Mexico and Indonesia were about 15 percent, and in Jamaica, Malaysia and Tunisia the figure was about 5 percent. Only Brazil matched South Africa in terms of income poverty (UNDP, 1999: table 4). Brazil’s HDI score, however, was significantly higher (at 0.78) than that of South Africa. Indeed, two out of every three countries in Latin America and the Caribbean had HDI scores that were higher than that of South Africa. Infant mortality rates might have declined in South Africa during the late apartheid period, but they declined far faster in other countries such as Brazil, Korea, Tunisia and even poor Sri Lanka (UNDP, 1997: table 8).

Income poverty was strikingly visible and offensive in South Africa because it coexisted alongside great affluence, because this inequality correlated with race and because it was (at least in part) the consequence of the systematic racial discrimination that defined apartheid. Even though some African people had enjoyed rapid upward income and class mobility in the last years of apartheid, the formerly disfranchised African majority was, for the most part, poor, whilst the small white minority that had held power was conspicuously rich. The 1993 income data indicated that the poverty rate was 57 percent among African people, 20 percent among coloured people, 7 percent among Indian people and only 2 percent among white people. The average income per capita within the white South African minority was about 12 times the average within the African majority. Life expectancy at birth was approximately one decade longer for white people than for African (or coloured) people. African infants were about seven times more likely to die by the age of one than their white peers. Only one in five white adolescents but more than 70 percent of African adolescents born between 1966 and 1975 did not complete high school (Whiteford et al., 1995; May et al., 2000; Seekings and Nattrass, 2005).

It was the coexistence of poverty and affluence that explains why the poverty gap was small. The poverty gap, defined as the aggregate amount by which poor peoples’ incomes are below the poverty line, as a proportion of the total income in society, was just 5 percent in 1993 (Whiteford et al., 1995: 8). In other words, although more or less half of the population was poor, a perfectly targeted transfer of only 5 percent of national income from rich to poor would have sufficed to eliminate income poverty. Given that the richest 10 percent of households earned at least one-half of the national income, they would have had to forsake at most one-tenth of their aggregate income to have eliminated poverty.

Apartheid had perpetuated income poverty and exacerbated income inequality in very obvious ways. African people had been dispossessed of most of their land, faced restricted opportunities for employment or self-employment, were limited to low-quality public education and health care, and most were physically confined to impoverished parts of the countryside or cities. At the same time, the white minority had benefited from discriminatory public policies. Public revenues that might have been spent on poverty relief were spent instead on the military and police. Given these facts. it was hardly surprising that South Africa competed with Brazil and a handful of other countries for the indignity of having the most unequal distribution of income. Inequality and indignity in South Africa were perhaps made starker because racial and class segregation kept the rich and poor apart. Observers from all parts of the political spectrum unsurprisingly turned to crudely dualistic descriptions of this reality, distinguishing, for example, between the ‘first’ and ‘third world’ parts of the country or analyzing the political economy in terms of ‘internal colonialism’ or ‘colonialism of a special type’ or identifying two ‘nations’ (see McCarthy, 1990; Seekings and Nattrass, 2005).

The transition to democracy, marked by democratic elections in 1994, was therefore accompanied by hopes that income poverty and inequality would be reduced (although the poor themselves were more sanguine than political activists and intellectuals – see Charney, 1995; Nattrass and Seekings, 1998a). The poor were to be enfranchised, the pro-poor and pro-black African National Congress (ANC) would be elected into office, and public policies and private practices would be deracialized. The ANC promised ‘a better life for all’ in its 1994 election campaign. Its election manifesto – the Reconstruction and Development Programme (RDP) – promised that ‘attacking poverty and deprivation’ would be ‘the first priority of the democratic government’. The RDP would empower the poor to seize opportunities ‘to develop to their full potential’ and ‘to sustain themselves through productive activity’, with the state ensuring improved access to social security, public education and other services. All South Africans should enjoy ‘a decent living standard and economic security’ (ANC, 1994: 15, 16, 79).

The ANC-led government adopted a modernist approach to the challenge of development. The apartheid state never collected data on poverty among African people, but even before the 1994 election the ANC had offered strong support to the 1993 project run by the World Bank and the University of Cape Town to collect comprehensive and countrywide data on poverty and inequality. After taking office, the ANC-led government immediately transformed the parastatal statistics agency (which was renamed Statistics South Africa) and invested heavily in the collection of statistics on poverty. A major study of poverty and inequality was commissioned in 1995–96. A range of public policies were reoriented around ‘developmental’ concerns, as we shall see in the later chapters of this book. Public expenditure on education and health care was reallocated to provision in poorer neighbourhoods. Housing subsidies for the poor were introduced, and the welfare system extended (as well as being framed in terms of a more developmental discourse). Land reform and public works programmes were unveiled, and attempts were made to improve the provision of credit to the poor to facilitate entrepreneurship. The regulation of wages was extended to curtail ‘exploitative’, low-wage jobs.

Socio-economic rights were also included in the 1996 Constitution. Section 27 specified that ‘(1) Everyone has the right to have access to (a) health care services, … ; (b) sufficient food and water; and (c) social security, including, if they are unable to support themselves and their dependents, appropriate social assistance. (2) The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realization of each of these rights.’ Section 28 stipulated specific rights for children, and Section 29 establishes rights to education. These and other rights were said to be based on the ‘democratic values of human dignity, equality and freedom’ (section 7, para 2). The Constitutional Court stated that the realization of socio-economic rights was necessary if citizens were to enjoy the other rights enshrined in the constitution and if South Africa was to become a society based on the above values.

The ANC and the government claimed that they had made some progress in reducing poverty, and promised dramatic reductions in the future. In the 1999 elections, the ANC campaigned around the general theme that South Africa was ‘changing’, although this change needed to be ‘speeded up’ (Lodge, 1999). In 2003, in an assessment anticipating ten years of democratic government, the government acknowledged that poverty had grown, but implied that this was more than offset by redistributive measures (South Africa, 2003a). In the 2004 elections, the ANC claimed that it had laid the ‘foundation for a better life’, including two million new jobs and expanded public services. It called on citizens to vote for it ‘so that together we can do more to achieve a ‘Better Life for All’. Its election manifesto – entitled ‘A people’s contract to create work and fight poverty’ – emphasized the creation of ‘a more caring society’ and a ‘radical’ reduction in unemployment and poverty (ANC, 2004). The following year, a senior ANC member (and recent billionaire) Cyril Ramaphosa was quoted as saying that new data showed that South Africans had ‘never had it so good’ (SAARF, nd). In May 2006, President Mbeki himself told Parliament that ‘between 1994 and 2004, the real incomes of the poorest 20 percent of our population increased by 30 percent’ (Mbeki, 2006). Government documents claimed that poverty declined significantly after 1994 (South Africa, 2006a, 2008a). In 2009, the ANC claimed to have ‘pushed back the frontiers of poverty’ through job creation, the expansion of social grants, and public housing and services. The ANC recognised, however, that ‘much more needs to be done’ – and it presented itself as a renewed organization, ready to do so. ‘Working together we can do more’ was its cautious slogan (ANC, 2009). In 2014, the government’s Twenty Year Review reported that ‘the two overriding objectives of eradicating poverty and reducing inequality’ had been ‘the central focus of government policy since 1994’, and that ‘remarkable progress’ had been made (South Africa, 2014a: 164). The income poverty rate had declined by a variety of measures and regardless of the choice of poverty line. The decline in poverty was much more dramatic if access to public services was also taken into account (ibid.: 44). In the 2014 elections, the ANC claimed to have made progress in reducing poverty, whilst recognising that much remained to be done (with its manifesto rather lamely proclaiming ‘Together we move South Africa forward’: ANC, 2014).

1.2 Disappointment and the spectre of neoliberalism

This generally positive representation of progress since 1994 contrasts with the negative assessments made by many South African and foreign observers. In one version of this critique, the journalist John Pilger proclaimed that ‘apartheid did not die’ (Pilger, 2006). Affluent spaces in the new South Africa might be populated by black people wearing matching Gucci sunglasses and suits alongside still privileged white people, Pilger claimed, but the lives of the poor were unchanged, to the extent that the poor – or ‘poors’, as they were sometimes called (Desai, 2002) – had risen in protest, in the streets and through ‘new’ social movements. Pilger was a journalist, but he was also linked into networks of left-wing scholars (and scholar-activists). Together, they constructed what became a fashionable – and perhaps even ‘conventional’ – wisdom about post-apartheid South Africa: That the racialized inequities of apartheid gave way to new ‘market’ inequities, as the post-apartheid political elite embraced (or was enveloped by) global ‘neoliberalism’.

According to this analysis, the persistence of poverty and inequality is explained in terms of the power of neoliberal ideology, which rested, in turn, on the power of international and (to a lesser extent) domestic capital. The International Monetary Fund and World Bank are said to have served as persuasive advocates – or even enforcers of – macroeconomic orthodoxy. Senior members of the government – including Thabo Mbeki (deputy president until 1999, then president until 2008), Trevor Manuel (Minister of Trade and Industry from 1994 to 1995, and then Minister of Finance until 2009), Alec Erwin (Manuel’s successor at Trade and Industry) and Pravin Gordhan (Manuel’s successor as Minister of Finance, from 2009 to 2014) – supposedly exploited their positions to ram through business-friendly policies, shifting the ANC from a pro-poor to a pro-business, ‘neoliberal’ position. The starting point of this supposed neoliberal approach was the alleged sidelining of the RDP and the adoption of the Growth, Employment and Redistribution (GEAR) macroeconomic strategy in 1996. The South African Communist Party (SACP) and the Congress of South African Trade Unions (Cosatu) later denounced this as the ‘1996 class project’, as a faction within the ANC that supposedly advanced the interests of global, local and prospective capital.

The veteran Canadian political economist John Saul made an evocative contribution to this emergent narrative. ‘A tragedy is being enacted in South Africa’, declared Saul in a classic and typically elegant 2001 essay on the ‘post-apartheid denouement’, as ‘many of the most desperately poor [people] in the world are being sacrificed on the altar of the neoliberal logic of global capitalism’. ‘South Africa’s dramatic transition to a democratic dispensation (‘One Person, One Vote, in a United South Africa’) has been twinned with a simultaneous transition towards an ever more sweeping neoliberal socioeconomic dispensation that has negated in practice a great deal of the country’s democratic advance’. Saul did not underestimate the importance of democratization. But he was aghast at what he saw as the appeasement, by democratically-elected ANC leaders, of ‘the wielders of corporate power’. As the ANC withdrew ‘from any form of genuine class struggle’ and abandoned ‘any economic strategy that might have been expected directly to service the immediate material requirements of the vast mass of desperately impoverished South Africans’, corporate elites were left with ‘increasingly self-satisfied smirks on their faces’. By the mid-1990s, he argued, the ANC had abandoned even moderately Keynesian programmes and adopted the economic policies of the late apartheid government. The central premise, Saul wrote, ‘could hardly be clearer: ask not what capital can do for South Africa but what South Africa can do for capital’ (Saul, 2001: 429–40).

‘Was the ANC leadership pushed or did it jump?’, Saul asked. In his essay he provided several answers. He quoted approvingly one assessment that ‘Mandela’s evolving position on fiscal responsibility was a direct response to pressures from foreign investors and governments’ (ibid.: 436, quoting the international relations scholar Chris Landsberg) – as well as domestic capital. This pressure was not the kind exerted on so many hapless countries across the global South, whose dependence on emergency credit from the International Monetary Fund (IMF) rendered them captives to its dictates (and also those of its ‘sister’ organization the World Bank) – because South Africa had not experienced foreign exchange crises. Rather, Saul implies, it took the form of persuasion. Citing work by Patrick Bond (1996), Saul describes how large domestic corporates (including the financial giants Nedcor, Old Mutual and Sanlam) sponsored ‘scenario-planning’ exercises through which ANC leaders were inducted into the neoliberal club. Saul pointed also to the enthusiastic penetration of the capitalist elite by many ANC and allied leaders, in the name of a ‘patriotic bou...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• Acknowledgements
• 1. Introduction: Neoliberalism, Social Democracy and Poverty
• 2. Poverty Amidst Affluence
• 3. Workers, the State and Wages
• 4. The Economic Growth Path
• 5. Class and Status
• 6. Income Support Through the Welfare State
• 7. The Welfare State, Public Services and the ‘Social Wage’
• 8. The Capacity and Accountability of the Democratic State
• 9. The Power of Business and Labour
• 10. The ‘Rebellion of the Poor’, Social Movements and the Limits of Insurgent Citizenship
• 11. Conclusion
• Notes
• Bibliography
• Index