CAPE TOWN — The basic concepts are hardly rocket science. Get more of South Africa’s population educated as quickly as possible, increase policy certainty in mining and drastically reduce corruption. That’s what the World Bank recommends to literally halve the numbers of our poor people who, when stacked up against the richer half, represent the world’s worst Gini coefficient. Based on present realities in education, 2,2 million fewer South Africans should be living on R23 or less per day by 2030 – that’s progress, but nothing like what could be achieved should the Basic Education ministry come off its rock-bottom base-line. Our nose-diving economy during the Zuma years brings to mind the comparison of indigent, half-educated teenagers getting pregnant to secure a child welfare grant. An international bail-out at one stage seemed highly likely. Now we need to break away from the low growth and high inequality syndrome that has defined us for so long. As the author of this piece argues, inequality fuels the contestation of resources through taxation, expropriation, corruption and crime. This discourages investment needed to accelerate job creation and reduce inequality. – Chris Bateman
(Bloomberg) — South Africa could more than halve its number of poor people to 4 million by 2030 if it addresses corruption, gets free higher education right and reduces policy uncertainty in its mining industry, the World Bank said.
“Slow private investment growth and weak integration into global value chains prevent the country from reaping the new economic opportunities emerging around the globe, and from catching up with living standards in peer economies,” the Washington-based lender said in an economic update on South Africa released Tuesday.
When measuring the distribution of wealth using the Gini coefficient, South Africa, with a population of about 55 million people, ranks as the world’s most unequal among countries for which comparable data exists, the bank said. Progress in access to education since white-minority, apartheid rule ended in 1994 means the number of people living on $1.90 or less per day should drop to 8.3 million by 2030 from 10.5 million last year, it said.
While South Africa has the continent’s most-industrialized economy, expansion has failed to exceed 2 percent annually since 2013 as widespread graft allegations, political turmoil, policy uncertainty and the worst recorded drought in more than a century undermined output in the world’s largest platinum producer.
South Africa “needs to build on its comparative advantages — that of an industrial skilled economy — to develop new domestic and international markets through higher productivity and innovation,” the lender said. That will help the nation reduce its high dependency on commodity-price movements.
“Raising South Africa’s economic potential will require breaking away from the equilibrium of low growth and high inequality in which the country has been trapped for decades,” the bank said. “Inequality fuels the contestation of resources through taxation, expropriation, corruption and crime, which discourages the investment needed to accelerate job creation and reduce inequality.”
The government raised the value-added tax rate by one percentage point to 15 percent — the first increase since 1993 — a move that’s seen as hitting the poor hardest. That was part of plans announced in the budget in February to raise more revenue needed to stabilize debt and prevent a third junk credit rating.
About 17 million South Africans receive various forms of social grants, which cost the government more than 150 billion rand ($12 billion) annually in what is the single biggest program instituted by the post-apartheid government to alleviate poverty.
“Fiscal redistribution through social assistance, while sizeable and effectively targeted, has been unable to redress the rise in inequality since 1994, and is increasingly constrained by narrowing fiscal space,” the bank said.