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Taking power in the economy: gains and directions

Institute for Justice and Reconciliation

2004

SARPN acknowledges permission from the Institute for Justice and Reconciliation to post these chapter contributions from their publication Taking Power in the Economy. The full report can be accessed from: www.transformationaudit.co.za.
Readers wanting more details on the IJR can contact Friederike Bubenzer at: fidi@ijr.org.za
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Chapter 1: Economic growth and development
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Chapter Overview


Growth is the engine of transformation. Social, cultural and political transformation interact continuously and can be limited by the level of progress in economic transformation. Economic transformation is dependent on a stable and growing economy. Of course, growth needs to be deliberately pro-poor if it is to reduce inequality and alleviate poverty. Given an expanding population, the redistributive elements of black economic empowerment (BEE) and progressive policies like an extensive grant system need a growing economy to be sustainable. The marginalised sections of the economy need to be cared for, since alienation undermines the social stability required for investment and economic growth.

The economy has stabilised internally since 1994 and, despite international instability, South Africa has shown steady, slow growth. However, Stephen Gelb points out that fundamental shifts in the structure of the economy towards more highly skilled sectors during this period mean that it has also been ‘unequalising’. Mills Soko’s briefing on globalisation and the terms of South Africa’s engagement with the world trade system points to another set of factors influencing the type of growth beginning to predominate in South Africa.

In an ideal world, economic empowerment in South Africa would result from the development of dynamic black small and medium enterprises, together with a steady accumulation of equity ownership by a representative proportion of Africans, while employment equity opened up opportunities and professions. In reality, partly because of a poor environment for small entrepreneurships and productive investment, equity transfers remain the dominant driver of empowerment. Linda Ensor’s case study illustrates how most equity deals, which target a limited group of ‘BEE billionaires’, show a failure of imagination. More broad-based share deals are both possible and desirable.

Employment equity is a cornerstone of BEE. The briefing by Chifipa Mhango and Lebo Bodibe incorporates findings of the Commission for Employment Equity’s latest report, which shows uneven progress. While blacks occupy an increasing share of management positions and are the most likely to be promoted, on average blacks are also the most likely to lose their jobs. Amongst skilled professionals, African women have lost significant ground since 2000.


Chapter 4: South African poverty and inequality
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Chapter Overview


Poverty and inequality are primarily symptoms of exclusion – exclusion from employment, from education and from the economy. The twin drivers of transformation, economic growth and redistribution, should be effecting a reduction in poverty and narrowing inequality. However, more South Africans have sunk into poverty between 1996 and 2001, at least according to census data. Because there has been economic growth per capita, though, the combined effect is an unambiguous increase in inequality.

The main article investigates shifts in long-term poverty and inequality trends as represented by a careful comparison of new data from the 2001 census with the 1996 census. Income-related changes in this period show a clear increase in the proportion of the population in poverty, though not in absolute poverty. Not only does a higher proportion of the population fall into this ‘middle’ group of the poor in 2001 compared to 1996, but on average people within the group are closer to the level of destitution. This is particularly true for the African and coloured population groups. Coupled with an increased proportion of Africans in the upper income groups, this means that the long-term trend of increasing inequality within population groups has accelerated.

These findings need to be balanced against massive increases in access to services by the poor, particularly the poorest of the poor – although, as the data show, lack of income often prevents full take-up of the improved access. Such service increases were unequally balanced between provinces, with Limpopo residents enjoying faster increases than, for example, residents of the Eastern Cape.

However, our understanding of poverty and the progress against it is only as good as our data. Steven Friedman points out in his commentary that data problems should not stall the urgency of action, but that improved and more regular data are critical to any assessment of the success of redistributive interventions.

In a brief review of trend indicators since 2001, we argue that the increased take-up of grants alone, since the 1996–2001 period, together with accelerating economic growth, may be slowing further increases in poverty.



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