Poverty and inequality have been pressing issues since the end of Apartheid in 1994. Therefore, this essay aims to address the pertinent issue of redistribution as a means of decreasing inequality within South Africa. This blog post will proceed by analyzing the characteristics of inequality within the country before analyzing whether the government has done a good job with its redistributive policies or not by scrutinizing their recent strategies and spending patterns. The post will thereafter conclude by advising government as to what it can do within the next twenty years to reduce inequality.
In a study measuring poverty within South Africa, Woolard and Liebbrandt (1999), found that there were significant disparities in equality amongst racial groups and geographical regions. The highest level of poverty was seen amongst Africans from rural areas where access to basic services, employment, education and transport were limited.
The level of poverty however, has significantly decreased within South Africa after Apartheid. In a study measuring poverty from 2006 to 2011, Statistics South Africa found that this reduction in poverty was largely due to a larger social safety net, above-inflation wage increases, increases in formal housing and better access credit through unsecured lending (Statistics South Africa, 2014).
Despite the fact that poverty has decreased, Finn, Woolard, and Liebbrandt (2012) found that inequality has actually been increasing within the country between 1993 and 2008. Furthermore, it was found that the highest level of inequality was present amongst the African population. Moreover, they found that the labour market was the main contributor to the high level of income inequality. This is due to the fact that the labour market is demanding employees who have completed secondary education or tertiary education.
The South African government has actively used social grants as a means of decreasing inequality within the country (Leibbrandt, Finn, & Woolard, 2012). Although government initially saw social grants as a short-term solution, they have played an instrumental role in reducing poverty within the country (Statistics South Africa, 2014). That said, over the next three years, the South African government will continue to spend R410 billion on social grants (National Treasury, 2014). The rationale behind the issuing of social grants is that it allows recipients to increase their ability to actively look for work, send their kids to school and have access to better nutrition relative to those who do not receive the subsidy (Overseas Development Institute, 2006).
Although social grants have played a significant role in recent times, government needs to ensure that they actively decrease the spending on grants over time. This is because large amount of spending on social grants would crowd out private sector investment in the future. Also, social grants, which are cash transfers, decrease the incentive to work and find employment; this invariably increases the recipients’ dependence on the government for their livelihood (Black, Calitz, & Steenkamp, 2012). Finally, giving child support grants could induce moral hazard and perpetuate the cycle of poverty (Currie, 2007).
Education has been identified by government, as a long-term solution to reducing poverty and inequality within the country (The National Planning Committee, 2011). In 2013/2014 alone, the government has allocated 20% of its budget towards education (National Treasury, 2014). Education is important because it improves marginal productivity and benefits the beneficiaries in terms of higher expected labour earnings (Economics Online, 2014). However, the South African education system can best be described as partial, distorted and fundamentally dysfunctional as it has failed to produce students with adequate levels of human capital that prepares them for the labour market. Moreover, the racial disparities are still starkly evident within the education system (Fedderke, De Kadt, & Luiz, 2000). It can be said then, that the education systems inability to produce students who are adequately skilled, particularly in previously disadvantaged areas, has stifled the governments ability to decrease inequality and poverty within the country.
In order to solve the problems with the education within the next twenty years, the government needs to ensure that students receive a high quality level of education. This will inevitably ensure that the labour supply is adequately skilled and can be absorbed into the labour market. Ensuring that their significant spending on education is efficient and effective should do this. Moreover, government should focus on bridging the racial disparities present today by mitigating the principal agent problem and corruption within the system. Finally, a yearly national compliance test should be written so that teachers adhere to the certain standards (The National Planning Committee, 2011).
It is not the government’s job to employ people; that should be left to the private sector. Therefore beyond decreasing social grants whilst simultaneously improving the education system over time, the government should also ensure a more flexible labour market. It is argued that then, the private sector will be adequately positioned to hire people (Hartley, 2014). This in turn would ensure that South Africans are able to earn an income and have a better standard of living.
In conclusion, this post analyzed the inequality and poverty within South Africa. Thereafter, it proceeded by scrutinizing government’s redistribution strategy with specific focus on social grants and education and argued that in order for inequality and poverty to decrease over time, the government would need to ensure that they decrease spending on social grants whilst simultaneously improving the quality of education received by the students. This coupled with more flexible labour markets, would create an environment where the private sector is able to employ adequately skilled people. These conditions would ensure a decrease in poverty and inequality within 20 years.