Poverty and Inequality in South Africa
Introduction
During the 1990s increasing recognition has been given to the role of institutions in the formulation, implementation and evaluation of development policy. In addressing poverty and inequality, therefore, themes such as governance, public service reform, effective public management and civil society have dominated discussion and research agendas. This chapter analyses the evolving institutional context in South Africa in terms of policy formulation and implementation processes, focusing on the constitutional framework within which the country is operating, and highlighting the key issue of public accountability and effectiveness in service provision.
Framework
Institutions are patterns of behaviour or systems of legitimate enforceable rules, recognised and valued by society and embedded in social relations. Organisations are purposeful, structured, role-bound units where people get together to carry out particular functions. Organisations are also institutions; both organisations and institutions shape social, political and economic behaviour. From an economic perspective, institutions can be viewed as transaction cost-minimising arrangements; from a broader social and political perspective, institutions determine the capacity for governance. Governance is the exercise of political, economic and administrative authority to manage a nation’s affairs; it is possible to talk about good or bad governance practice with respect to every institution and organisation in society, from civil society to the state.
Effective governance can take place only if state institutions function properly and are responsive to the needs of individuals in society, especially the poor and marginalised. However, other processes are equally important, such as a culture of human rights, the rule of law, gender equality and open electoral processes. Democratic reforms do not necessarily help the poor unless the institutions of government are improved, in terms of being mechanisms for popular participation, the administration of justice, and bureaucracies stimulated by incentives and held accountable by performance measures. Likewise, macroeconomic reforms do not necessarily help the poor unless market institutions are improved through better systems of property rights, contract laws, etc.
Institutional failure can undermine attempts to address poverty and inequality through the rules and structures of the institutions themselves, through the non-delivery of the services the institutions are meant to provide, and through the behaviour and attitudes of the people within the institutions. The success of development initiatives thus largely depends on the strengths and weaknesses of the underlying institutional environment. Institutions can be assessed against four criteria: efficiency (i.e., cost-effective delivery); equity (development must reach the poor); adaptability (as society changes, institutions must be able to change needs and priorities); and accountability (institutions and their officials must be held responsible for their actions).
The Constitution
The Constitution sets in place a democratic system of government and provides citizen with the opportunity to elect individuals and political parties into government to represent their interests. In this way the Constitution influences how, where and by whom policy is formulated and implemented. The Constitution strives to establish a system in which various levels and structures of government actively co-operate with each other, as a means of enhancing governance and the efficiency of government structures and promoting participation by citizens. For example, where provincial or local governments lack capacity to deliver services, the principle of co-operative governance obliges higher levels of government to help these structures to perform their duties - not simply to take over their functions, as has historically been the case.
The division of powers and functions between various levels of government will increase capacity to address poverty and inequality to the extent that the institutions concerned maintain the necessary capacity and integrity. While national government is responsible for establishing norms and standards regarding redistribution and equity, thus providing a framework within which service delivery will occur equitably, a significant proportion of services delivery that will impact on poverty and inequality is the responsibility of provincial or local government.
National government
An evaluation of the performance of national government would require an evaluation of the different government departments. From an institutional perspective, three issues are relevant in assessing the actions of government departments: the initiation of projects and programmes, the design and planning of these, and the process of resource allocation and co-ordination. Theoretically, identification of development projects and applications for services are the responsibility of communities and local authorities, occurring within parameters set by national or provincial policy. In practice, however, projects and services are delivered through several different channels, which can cause much political and administrative confusion. A far more effective means of service delivery would be to provide a single channel through which communities can direct their demands, despite the fact that there are so many service providers.
Two remedies for improving the performance of the state that are commonly considered are rightsizing and fiscal discipline, both of which have been proposed in South Africa. However, there are several other reasons why government departments might fail in their attempts to deliver services, including: soft budgeting lines, where overspending is easily sanctioned; civil service salaries that are not competitive with the private sector, thus eroding motivation; inadequate mechanisms to measure performance and hold departments to account; the pursuit of personal agendas rather than developmental goals by officials, or a simple lack of commitment to the poor; and poor behaviour and attitudes of officials towards the poor. In this respect many of the dynamics of the past extend into initiatives currently underway to reconstruct the public service; the result is unco-ordinated and inexperienced government structures.
Provinces
The Constitution grants extensive legislative and executive powers to the provinces, ranging from key service delivery functions such as education, health and welfare to more facilitative functions such as town, regional and development planning. These powers are, however, concurrent or shared powers between the provinces and the national government, and the latter is able to set a wide range of norms and standards for service delivery which the provinces are expected to implement. Only thereafter do the provinces have an important legislative role in their own right. However, the introduction of the National Council of Provinces (NCOP) will mean that provincial legislatures will be increasingly involved in national law-making processes.
Several provincial legislatures, being new institutions, have had to ‘learn by doing’; some suffer from severe capacity constraints. Several provincial administrations are in a state of financial and administrative difficulty. Importantly, no legislation exists for provincial development planning, and consequently provinces are not required to ensure that their development policies are coherent, compatible, effective or even in existence before they compile their budgets. Despite these problems, some provincial legislatures are attempting to create processes and structures that will facilitate interaction with and the involvement of civil society. In KwaZulu-Natal, for example, both civil society and the provincial cabinet have accepted a provincial growth and development strategy with a strong poverty-reduction focus.
Local government
In terms of the Constitution, municipalities have a mandate to govern, to provide services and to promote social and economic development. Several pieces of legislation enhance the developmental role of local government, such as the Development Facilitation Act (DFA) empowering municipalities to establish statutory land development objectives setting out a clear approach to land development for each locality. Several provinces have passed regulations requiring that these land development objectives also cover economic development goals. The Department of Constitutional Development is promoting the use of Integrated Development Planning (IDP) by municipalities, and this is likely to shape the actions of local government in implementing policies intended to reduce poverty and inequality.
Local government has been described as the ‘hands and feet’ of reconstruction and development in South Africa, and it is true that in the absence of effective local delivery government is powerless to implement its policies and provide services. Many local governments have encountered problems, including lack of economic viability due to a rent boycott culture, inadequate private sector investment and insolvency of former black authorities; absence of local administration in some areas; poor service provision in townships; and community suspicion of government due to past experience of apartheid structures. On the positive side, local authorities have generally recognised the need to change existing mindsets and institutional arrangements in order that development goals might be met. Many of the suggestions put forwards by local authorities in terms of change management strategies have centred on the improvement of incentives and information.
Non-governmental organisations (NGOs) and civil society
Under apartheid, the NGO sector fulfilled an important social service delivery function in the absence of adequate state provision to the disadvantaged majority. The number of NGOs and voluntary organisations participating in development is uncertain; the NGO Coalition claims anywhere from 17,000 to 30,000 members. In 1994 the government subsidised over 2,000 welfare-related posts in the NGO sector, which highlights the role NGOs play in the delivery of services not provided by government. A significant number of NGOs are religious organisations. Prior to the 1994 elections most international donor funding for development projects in South Africa was channelled through NGOs, but since then donors have shifted their focus to government and to bilateral aid.
The Transitional National Development Trust (TNDT) was launched in early 1996 as an RDP project, and constitutes an interim step towards an appropriate vehicle for the co-ordination of funding to NGOs and CBOs. The focus was to include, but not be restricted to, funding from the international donor community, and government’s establishment of the Trust was seen as a signal to international donors of the crucial role played by NGOs. Priority sectors of the TNDT are education and training, health, rural development, urban development, and SMMEs. In future, however, a National Development Agency (NDA) is envisaged by government and NEDLAC as the appropriate vehicle for the co-ordination of funding to NGOs and CBOs, for which the TNDT was conceived as a ‘testing ground’.
The Independent Development Trust (IDT) was established in 1990 by the previous government, with a brief to promote and allocate funds to development for the poorest of the poor, in the areas of education, housing, job creation, health and rural development. The Trust had paid out R2.4 billion in project funding by the end of 1996, maintaining its access to funds through carefully managed borrowing and investment. The Trust’s future purpose will not be development funding but development facilitation.
NGOs and CBOs have been quite successful at achieving development goals, and have advantages over government as delivery mechanisms in that they:
However, the weaknesses of NGOs tend to be that owing to their size they may not be able to undertake large-scale or complex projects. Their administrative capacity may be weak, they may lack resources and they may not be able to scale their activities up to a regional or national level. They may also have an urban bias and hence neglect the rural poor.
Integrative and regulatory structures
Poverty and inequality are multi-dimensional phenomena, and therefore remedial strategies require effective co-ordination, integration, and regulation of policies along sectoral and vertical lines. Currently South Africa does not have a dedicated mechanism for co-ordinating poverty-related policies. Apart from the cabinet and parliamentary processes, including their sub-committees, there are few other mechanisms to ensure proper co-ordination of social sector policies or a sub-set thereof to improve synergy among them.
The RDP sets the institutional framework for the reduction of poverty and inequality owing to the important role of the programme in integrating South Africa’s development policy. The RDP Programme began with a centralised ministry and provincial structures, and played an initiating role, raising the ‘development literacy’ of South Africans and launching projects and research. Despite the closure of the RDP office in 1996, the RDP as a policy has not been done away with: an RDP Fund still exists, and RDP structures at a provincial level remain in place in a revised form. Members of the programme management team have been shifted into various government departments where they work with the Director-General to prioritise, plan, budget and co-ordinate. This allows the developmental approach of the RDP to be reflected in the projects that have been brought into the line function of the department’s budget as a whole, and design and planning occur in a far more integrated manner. The danger is that because the RDP is not funded by the exchequer but by international grant aid, many projects will not be integrated into main budgets and will fall away when foreign donors lose interest.
The Financial and Fiscal Commission (FFC) makes recommendations on fundamental principles of the system of inter-governmental fiscal relations, and associated provincial and national financial issues. This has been crucial because centralised revenue collection and decentralised expenditure in the multi-tiered structure of government has great potential for conflict on financial issues. Under co-operative government the main challenge faced by the FFC will be to advise on ways in which efficient use can be made of scarce fiscal resources. The Constitutional Court is independent of government, but has a strong impact on the development of co-operative governance through the decisions it makes about constitutional issues, including inter-governmental relations. The primary task of the Department of Constitutional Development is to support the development and promotion of the new Constitution, but it is also involved in the co-ordination of intergovernmental structures and relations and the provision of advice on several institutional issues.
The National Economic Development and Labour Advisory Council (NEDLAC) is primarily an accord-making body that facilitates discussion and information exchange between government, organised labour, business and community groups. It reviews all labour legislation and social and economic policy, and is able to provide input thereon before these are submitted to parliament. Hence, NEDLAC plays a strong initiating role, but being a forum it is largely divorced from the implementation and delivery of specific projects directed towards alleviation of poverty and inequality. While this policy- and agreement-making process occurs at a national level with selected representatives accountable to their constituencies, it is not clear that they are accountable at a provincial or local level, where the impact (or lack thereof) of development initiatives is felt. The organisations represented, therefore, must build strong links at all levels within their own organisations if the process is to be successful.
The major element of co-operative governance at national level is the newly-constituted National Council of Provinces (NCOP), which will play a crucial role in the national law-making process by representing provincial views at the apex of the national legislative process. The NCOP is also expected to play a role in allowing local government to state its interests in the national law-making process. The NCOP is thus, in many ways, the fulcrum of co-operative governance. The NGO Coalition, launched in 1995, is the result of the government’s call for the NGO sector to organise itself. The Coalition saw its primary purpose as the creation of an ‘enabling fiscal and legal environment’ for NGOs.
Probably the most important concern relating to the existing integrative structures in South Africa is the apparent lack of a strategic centre in national government. As a result, there is no institutional vantage point from which the coherence and consistency of anti-poverty policies can be examined. This means that there is no arena in which apparently divergent policies such as the pro-growth GEAR and the pro-redistributive Municipal Infrastructure Programme (MIP) can be reconciled. The same issue is also relevant among the various fora. For example, the development chamber in NEDLAC does not seem to have been effectively utilised to ensure the support and participation of NGOs, business and labour in municipal infrastructure. Instead, the concentration has been more on economic and labour issues. The poor progress with the National Development Agency reinforces this and runs the risk of suffocating South Africa’s previously vibrant NGO sector.
Corruption
In South Africa the perception exists that "white-collar crimes" and corruption have become rife in private and public institutions. According to Transparency International’s 1995 Corruption Perception Index , South Africa scores a disquieting 5,62 (21 out of 41 countries).
Various reasons are given for this status quo. In particular, during the apartheid era, South Africa provided an environment which was structurally conducive to corruption where a culture of secrecy resulted in lack of transparent and accountable systems, advantageous to criminality. Official corruption at all levels was high, particularly in the "homelands" where it was more overt, and a mind-set of opportunism and not-so-legal enrichment spread far beyond government structures.
The fact that so many South Africans think that corruption within public life not only exists, but is on the increase, may be because authorities are making more vigorous attempts than ever before to check corruption. Hence, a side effect of the more open style of government means that there is more information on corruption than ever before. The argument is that instances of corruption are more likely to be discovered and publicised in a democratic South Africa, compared to the relative lack of scrutiny that the former government received.
The government’s National Crime Prevention Strategy (NCPS) places corruption as a priority crime concern on its agenda. It is hoped that the Open Democracy Bill, should it come into law, will become a real deterrent to misconduct for it will serve to deter malpractice and encourage organisations across the public, private and voluntary sectors to adopt more open and accountable cultures with codes of ethics that encourage the effective internal reporting of malpractice.
The Office for Serious Economic Offences (OSEO) is one of the principal weapons in the fight against corruption, this office is poorly equipped, and is continually plagued by staff shortages and lack of skilled personnel.
The Public Protector is concerned with maladministration in the broadest sense, rather than the investigation of crime, which plays a peripheral role. Currently resources are inhibiting the establishment of a further nine regional satellites offices to make the office’s services more accessible. Because of staff shortages and the fact that cases have increased by about 400% from 69 cases in June 1996 to 289 cases in August 1996, the office, which has a backlog on cases averaging five months, is not able to handle cases effectively.
Conclusion
A critical constraint is that the institutional linkages between the different spheres of government are weak and underdeveloped, and there is confusion over roles and responsibilities between the various spheres of government. This makes the process of designing and implementing a programme of co-operative governance much more difficult. There are a number of possible solutions to these problems:
Successful delivery of programmes and projects aimed at poverty alleviation and reduction of inequality will depend largely on the extent to which existing institutions function effectively and equitably. Good policy is not enough - it will only be effective if supported by a flexible, effective and strong institutional environment.
Introduction
Any attempt to spatially demarcate the South African poverty challenge would be a crude analysis, because the impact of the migrant labour system has been to link the rural and urban economies through the movement of people. The basic needs of both the urban and rural poor that have not been addressed cover most facets of living and working, including the absence not only of jobs and incomes, but also of housing, services, education and health facilities, etc. Spatially-targeted policies therefore need to be coupled to wider policy frameworks in order to address this totality of needs. What is required in South Africa is an integrated set of programmes designed to strengthen the assets of the urban and rural poor and to enhance their geographically marginal access to existing livelihood opportunities. This section considers the implementation of government programmes that have important spatial implications, while Section 9 examines policies which attempt to redistribute assets and livelihood opportunities.
The spatial context of poverty and inequality
Urban areas
Under apartheid the poor were shifted to the margins of urban areas and more importantly to the margins of the country, thus focusing the core of South Africa’s poverty in the rural areas. However, due to urbanisation and the breakdown of discriminatory controls on access to the cities, more than half (55%) of the population of South Africa now lives in urban areas, and so the urban policy context is of vital significance for addressing poverty and inequality. The incidence, depth and severity of poverty are highest in South Africa’s small towns, followed by secondary cities, and lowest in the country’s four metropolitan areas. Overall, the poverty rate (i.e., percentage of households classified as poor) for all urban households is 24.4%, while for metropolitan areas it is 15.4%, for secondary cities 26.7%, and for small towns 35.1%. Hence, while the absolute number of urban poor is greatest in the metropolitan areas, in relative terms the poverty burden is most severe in South Africa’s small towns and secondary cities.
Due to the decline in agriculture or lack of a substantial economic base, more than two-thirds of small towns recorded real economic decline during the early 1990s. The situation in secondary cities is more variable because of their different economic bases and regional contexts for growth. While some secondary cities (such as Nelspruit or Witbank-Middelburg) have considerable economic growth potential, many (such as in the Free State goldfields and the Eastern Cape) face very serious challenges of urban poverty due to a decline in particular economic sectors. For example, the downturn in gold mining has caused a major local employment crisis in Welkom.
As far as the metropolitan areas are concerned, while the largest concentration of urban poor occurs in the Gauteng region, metropolitan Durban and metropolitan Port Elizabeth carry a weighty poverty share relative to their population size as a whole. The areas of informal or shack settlements in urban areas are major local concentrations of urban poverty, but certain significant differences are evident in terms of the different levels of urban settlement. There is an alarming poverty problem located in the shack settlements of secondary cities and small towns.
Rural areas
The rural areas of South Africa suffer from a legacy of inappropriate production and investment decisions by government and the rural population. For many rural people in the former homeland areas, economic and social decisions remain conditioned by their unequal and distorted access to markets, services and opportunities. In contrast, the non-homeland rural areas are characterised by an over-capitalised, over-mechanised, job-shedding commercial agriculture. Asset ownership and distribution patterns remain those formed by apartheid; in particular, landlessness and over-crowding persist in the former homeland areas. A huge backlog in rural infrastructure persists, and urbanisation runs the risk of simply relocating rural poverty into urban slums. The high cost of delivering services to rural communities with limited economic potential results in tension between goals of fiscal discipline and those of decreasing poverty and inequality. The rural areas of South Africa have a population of about 16.9 million people, 45% of the country’s total population. While poverty is not primarily a rural issue, the risk of becoming and remaining poor remains significantly higher in rural than in urban areas. Using income-based or calorie-based poverty lines, half of the households and two thirds of the people in rural areas can be classified as poor. Over 70% of rural African households live in conditions which are inadequate or intolerable in terms of their access to shelter, energy, water and sanitation, and rural women are a particularly vulnerable group.
Rethinking spatial policy and spatial poverty issues
During the last decade, a considerable re-thinking of spatial policy has occurred. Within the NGO sector during the 1980s, and in ANC policy documents during the early 1990s, the spatial dimension of policy was fairly prominent. By the time the new government gazetted its Urban Development Strategy in 1995, emphasis in spatial policy had shifted from provision of housing and services as the leading solution for poverty, towards job creation as the key priority. However, the new Urban and Rural Development Frameworks seek a more balanced approach.
The greatest share of South Africa’s population increase is still expected to occur in the metropolitan areas, hence the need to keep the national development focus on the economic prospects offered by the these areas. It is recommended that within the metropolitan areas policy should focus on expansion of income-earning opportunities coupled with housing and service provision, with specific poverty-alleviation initiatives targeting localised areas such as female-headed households in shack settlements. However, rural areas, small towns and secondary cities deserve a special focus in policy formulation for poverty alleviation, since they carry a disproportionately heavy burden of poverty. Accordingly, spatial policy should prioritise the cases of (most) small towns and their rural hinterlands, and (many) secondary cities. The spatial policy framework dealing with these issues may be thought of as comprising two linked thrusts: (1) the restructuring of the apartheid space economy which has determined where economic growth is distributed, and (2) the spatial allocation of infrastructure.
Restructuring the apartheid space economy
At the heart of a spatial policy that assists in reducing poverty must be an improvement of programmes which strengthen the asset base of the poor (covered in Section 9). Nevertheless, in order for asset strengthening programmes to be effective, the geographic dislocation between livelihoods, assets and infrastructure of the poor must be reduced, and a set of policy mechanisms must be provided to encourage people, jobs and infrastructure to be closer together. To this end, the following key intervention points are aimed at restructuring the apartheid space economy.
The Manufacturing Development Programme
The Manufacturing Development Programme (MDP) aims to promote or jump-start new investment in manufacturing, and to replace the discredited Regional Industrial Development Programme (RIDP). The MDP programme of locational incentives is not directly associated with poverty alleviation, but represents a step towards a position of encouraging the poor to migrate away from areas of cumulative disadvantage towards other areas where job creation and livelihood opportunities are being created. Those locations targeted under the MDP tax holiday scheme will undoubtedly enjoy several positive benefits, including poverty reduction resulting from job creation.
Spatial Development Initiatives
The Spatial Development Initiatives aim to unlock the inherent and under-utilised economic development potential of certain spatial locations. Again, the SDIs are not primarily geared to poverty reduction, but to fast-track and boost new investment, growth and employment opportunities. Nevertheless, the SDIs can be useful in alleviating poverty if they achieve their goals of sustainable job creation, SMME development and the upgrading of business opportunities in historically disadvantaged communities - the location of several proposed SDIs cuts across geographical zones of major poverty.
Local economic development planning
Local Economic Development (LED) involves local government assuming new responsibilities for LED planning, which often occurs in partnership with other local stakeholders including the private sector, communities, trade unions, or NGOs. However, capacity to undertake and implement LED is markedly uneven across metropolitan areas and among secondary cities and small towns, leaving the danger that LED might create a divide between potential ‘winners’ and ‘losers’. The success or failure of the various forms of LED being attempted by local authorities will be crucial in determining where poverty eradication is addressed effectively.
The National Spatial Development Framework
The key issues in the National Spatial Development Framework (NSDF) are to define where growth and decline would occur in the space economy, to consider government investment in infrastructure and shelter programmes, and to align provincial with national and local development strategies. Its objective of a more rational and co-ordinated geographical allocation of government expenditure will assist in poverty alleviation and inequality reduction if it prevents a spatial divorce between jobs growing in one area, and houses and infrastructure being built in other areas. This is particularly important because aspects of other existing policies may entrench the spatially distorted patterns of African urbanisation created by apartheid. It is recommended that the work of the NSDF process be built upon as a core base for developing and defining a post-apartheid spatial policy.
The spatial distribution of infrastructure
Social and economic infrastructure is a core asset of the poor which not only allows them immediate improvements in quality of life, but increases their economic productivity. As the importance of expanding social infrastructure, for example education and health facilities, has been stressed in earlier sections of this Report, the focus in this section is specifically upon productive economic infrastructure. While providing water, sanitation or transport for the poor will not eradicate poverty, effective delivery of such infrastructure services is important both to meet the basic needs of the poor and to redress inequalities in service provision inherited from apartheid.
The Rural Development Framework
The Rural Development Framework (RDF) has a powerful focus on poverty, addressing the issues of how to involve rural people in decisions of local government that affect their lives; how to increase employment and economic growth; how to promote affordable infrastructure and improve services; how to ensure social sustainability; and how to enhance the capacity of rural local government to plan and implement. The RDF’s vision for rural development has two key elements: a focus on governance and the provision of infrastructure and services; and a focus on an enabling framework for rural livelihoods to expand, mainly by restoring economic rights to marginalised areas. It is argued that without provision of infrastructure, economic activities cannot thrive, while without an expansion of economic activity people will be unable to pay for services and government will therefore be unable to provide them. According to the RDF, rural development requires a number of key elements:
The Urban Development Framework
As a consequence of apartheid, urban settlements in South Africa are extremely dysfunctional and do not serve the needs of the majority of the poor. The design of South African urban areas is wasteful, inefficient, inequitable and costly to manage and maintain. Metropolitan areas, secondary cities and even small towns are characterised by separation of residential areas by race and income levels, peripheral development and urban sprawl, with corresponding unequal access to amenities, infrastructure and livelihood opportunities. Key policy elements for undoing the ‘spatial fix’ of the apartheid city are identified in the Urban Development Framework of the Department of Housing. Other useful policy interventions are emerging out of initiatives to develop the old apartheid-created townships. Several of the major programmes set down in the Urban Development Framework for restructuring the apartheid city are potentially effective in alleviating poverty and inequality:
The major condition required for the enactment and successful implementation of these measures is the effective functioning and building of capacity within local government.
Municipal Infrastructure Investment Framework (MIIF)
Although the provision of infrastructure occurs at local government level, there is a complex set of institutions responsible for funding urban services. The Municipal Infrastructure Investment Framework (MIIF) provides the national policy framework for investment in infrastructure, bringing together the various programmes and financing approaches which are to address service backlogs. The policy approach rests on a commitment to a basic minimum level of services for all in the medium term, the principle that consumers should pay for services, and a welfare role for national government to support those consumers who cannot afford the basic level of services. Overall, the effective handling of the contradiction between cost-recovery and subsidies will strongly influence the economic and social sustainability of infrastructure policy and programmes.
Consolidated Municipal Infrastructure Programme (CMIP and MIP)
There are several key delivery programmes that directly affect the delivery of infrastructure. The Municipal Infrastructure Programme (MIP) is a once-off capital grant funding programme for the construction of municipal infrastructure. To ensure continued provision and to guarantee that housing development is supported in terms of backward linkages into external bulk and connector infrastructure the Consolidated Municipal Infrastructure Programme (CMIP) was launched to integrate all existing grant funding programmes. Labour-based construction and the addressing of unemployment are emphasised by MIP and CMIP, which is an important contribution towards improving conditions for the poor in communities where projects are being implemented.
Rural Administrative Infrastructure Development (RAID) Programme
The RAID Programme is a national programme for rural municipalities established by the Department of Constitutional Affairs. It provides once-off grants to Provincial Administrations to fund physical infrastructure for rural local government administrations and capacity building for their officials and support staff. RAID aims to assist rural local government to have a well-defined physical presence, by providing a known point of contact between communities and their elected representatives, a secure place for receipt of payments for services, and a fixed venue for municipal meetings. The Programme is intended to benefit primary rural local government, and not structures at regional or district level; provinces which have opted for structures other than primary local government bodies will benefit less from the grant.
Departmental programmes
Several government departments are acting to aid the redistribution of infrastructure, as has been discussed in previous sections. The Department of Water Affairs and Forestry’s Local Government Support Programme is particularly important, building capacity through the establishment of Area-based Planning Fora which provide the basis for more integrated provision of water and sanitation.
Conclusion
The most important problems threatening the ability of infrastructural programmes to alleviate poverty and inequality are the interlinked issues of low levels of service payments, subsidies and tariffs. Low levels of service payments by users confounds local government’s capacity to deliver sustainable services, since this compounds a difficult financial position for many municipalities. Essentially, the issue is that government has committed itself both to universal delivery, and to fiscal restraint and hence cost recovery. The contradictions between these two commitments are best resolved by establishing a consistent national policy approach to service delivery and pricing.
The implementation of rural development policy
A central concern of the RDF is the institutional context of rural development: a range of institutions currently share responsibility for the implementation of rural development policy, cutting across all three tiers of government with little clarity as to the roles and responsibilities at each tier:
The need for a national spatial policy
It is important that well-intentioned government programmes seeking to reduce poverty through strengthening the assets of the poor do not inadvertently ‘freeze’ in place the spatial structures inherited from apartheid; this would leave the poor with little choice other than to continue under the harsh commuter and migrancy systems established under apartheid. Accordingly, it is recommended that a national spatial policy for South Africa be defined and developed in order to resolve apartheid’s spatial inequalities, and to ensure that the existing disjunctions between the livelihoods, assets and infrastructures of the country’s poor are overcome.
Introduction
Poverty is not a static condition among individuals, households or communities: while some are permanently poor, others move into and out of poverty due to life-cycle and other changes. For this reason the dynamic concept of vulnerability to poverty is applied to understand these processes of change. Vulnerability to poverty is countered by accumulating assets and managing them in such a way that sustainable livelihoods can be generated. Therefore, as was discussed in Section 1, poverty is characterised not only by a lack of assets and inability to accumulate them, but also by an inability to devise an appropriate coping or management strategy in the face of shocks or crises. In Sections 4, 5 and 6 certain key national policy issues regarding the strengthening of human capabilities, social and institutional entitlements and human-made capital have been dealt with. This section focuses on specific policy intervention concerned with the promotion or strengthening of livelihoods. Overall, these are policies that potentially serve either to directly increase the assets of South Africa’s poor or to improve their range of choice with respect to alternative coping strategies.
SMME development
The policy framework for SMMEs
The set of programmes for assisting small, medium and micro (SMME) non-farm enterprises offers a means of addressing poverty by strengthening existing coping strategies, or by offering alternative livelihoods for those engaged in the informal sector. They also have potential for redressing apartheid inequalities through upgrading micro-enterprise development and the condition of the emerging SMME economy, which is dominated by historically disadvantaged communities. The SMME sector is not homogeneous, but segmented into three sets of enterprises: survivalist enterprises, growth-oriented micro-enterprise, and the formal SMME economy presently dominated by white-owned businesses. The majority of the people working in the SMME sector, especially women constrained by patriarchy and child care responsibilities, are unlikely ever to make the transition out of survivalist enterprise; most will stay behind and remain poor.
Assessing the policy framework
National government views SMMEs as key vehicles for attaining several different objectives, viz. employment generation, income redistribution, and enhancement of industrial competitiveness. These are very divergent objectives and the policy instruments required to effect them are equally divergent; policy-makers therefore have to prioritise objectives in order to be able to allocate resources effectively. Hence, while government’s total budgetary allocation for SMME programmes needs to be increased from its current level of 2.9% of Department of Trade and Industry (DTI) funding, before this takes place the directions and priorities of the SMME programme should be re-assessed, to enable more appropriate targeting of funds and support programming.
Assessing the SMME programmes
At the core of SMME programmes are the policy interventions introduced by the new institutions implementing the national SMME development strategy, in particular Ntsika Enterprise Promotion Agency (Ntsika) and Khula Enterprise Finance (Khula). In launching these programmes, national government severely underestimated the problems of establishing the new support institutions, the capacity of these new support institutions to implement a wide range of new policy initiatives, and the capacity of the existing NGO network to become involved in the new programmes.
At the heart of Ntsika’s interventions is the establishment of a network of local business service centres (LBSCs) which will deliver non-financial support to SMMEs, and which make a real contribution towards poverty reduction as well as the reduction of racial economic inequalities. Other Ntsika initiatives can potentially also impact on poverty and address inequality, such as the proposed Manufacturing Advisory Centres, which aim to strengthen the competitiveness of more established SMMEs. The Khula lending programme has been in operation only since January 1997, but officials concede that the volume of loans made has not been sufficient to meet SMME needs. Of real significance for reducing poverty and inequality, however, is the enactment of initiatives to enhance access of SMMEs to both government and large private sector procurement/linkage programmes. The impact of these initiatives on survivalist enterprises will be limited, however.
National programmes for SMME development have hitherto focused primarily on the needs of urban SMMEs; there is a pressing need for a set of targeted interventions to address the special challenges of rural SMME development, without which rural SMME development is unlikely to happen. Outside of national programmes, however, it should be recognised that local government can play a significant role in assisting SMME development through land use zoning, establishment of formal and periodic markets, etc., and their policies can have a particularly profound impact on survivalist enterprises. The activities of local government, rather than national SMME programmes, may be the most critical interventions for urban poverty reduction and for addressing inequality.
Small-scale agriculture
Only 3% (4 million ha) of South Africa is considered high-potential agricultural land; for this and other reasons farmers often farm in marginal lands, of poor quality with limited water supplies. About 26% of African rural households currently have access to a plot of land for crop cultivation, while some 24% of African rural households own livestock. Ownership of agricultural and other productive equipment is limited to 18% and 8% of rural African households respectively. Although agricultural production makes a small contribution to household income, over one third of rural households continue to engage in agricultural production, making it the third most important livelihood tactic used in rural areas after remittances and wages from low-skilled jobs.
The vision and principles for agricultural development
The White Paper on Agriculture (1995) sets a clear vision for the future of rural areas in South Africa, with far-reaching implications for poverty and inequality, particularly as agriculture is often the major factor in rural economic growth. The White Paper reflects the fact that, while agricultural development is a function of provincial government, agriculture has a national character as an integrated sector. It recognises that the role of departments of agriculture in the rural community must be co-ordinated with the roles of other government departments, NGOs and private enterprise, and that development of rural infrastructure is needed in order to open up agricultural opportunities.
The White Paper stresses that its intention is to provide a set of broad principles for the restructuring and future development of the sector, which is to be based upon an efficient and economically viable market-directed farming sector. Key recommendations include proposals that government should assist farmers to identify and use their comparative advantages; that special attention should be given to the needs of small-scale farmers to ensure equitable access to markets; that access to agricultural financing should be broadened to include previously disadvantaged and beginner farmers; and that access to existing institutional infrastructure such as the co-operative system should be broadened to include those previously denied access.
Assessing the vision
The White Paper emphasises the importance of comparative advantage, market forces and limiting state intervention to correcting market imperfections. However, it does not specify the manner or extent of state intervention, and given that rural populations face highly distorted, thin or missing markets this omission is critical. The vision for the rural economy therefore does not seem to provide meaningful direction for the bulk of the rural population for whom deregulation offers little, and who have few comparative advantages. Greater emphasis should be placed on understanding the real conditions faced by the majority of rural households, and on identifying the leverage that government is able to bring to bear on markets. The work being done to develop such supply-side measures will have major implications for the reduction of poverty and inequality in rural areas.
Departmental initiatives for agriculture
The Broadening Access to Agriculture Thrust (BATAT) was envisaged as a supply-side initiative of the national Department of Agriculture, aimed at widening access to agriculture for those who previously lacked access. It thus represented a potentially important component of policies intending to redress the marginalisation of rural communities. BATAT was similar to the Farmer Support Programmes initiated by the DBSA in 1986, but initiated a new programme of farmer support and production loans. As a specific programme, however, BATAT has apparently failed to materialise; although the programme is mentioned in the Rural Development Framework (RDF), it appears to lack institutional form. Nevertheless, BATAT’s core policy ideas persist and will continue to feature in the policy landscape. It is therefore important that the critical lesson learnt from the BATAT experience is absorbed into policy analysis: such programmes of intervention need to identify real clients with real demands.
Peri-urban agriculture
The development of peri-urban agriculture has been suggested as an option for livelihoods opportunities for the urban poor. Especially in the peri-urban areas of secondary cities and small towns, the potential for promoting greater access of the poor to natural resources and of establishing an active peri-urban agricultural sector requires serious investigation and support measures designed to improve access of the poor to cultivable land. Policy to facilitate such development needs to be formulated, and should be based on clear identification of legal, institutional and economic constraints (such as traditional land use planning and urban management practices), and recommendations on addressing such constraints.
Community gardens
In rural areas, the role of micro-scale agriculture on community gardens offers similar livelihood opportunities to peri-urban agriculture. Notwithstanding that experience of community garden schemes in the former homelands has been ambiguous, partly due to poor support and impossible logistics, gardening remains an important coping strategy, particularly for women, who use these activities to ensure that they retain control over a source of income.
Housing
Housing is a critical asset for the urban poor, and can cushion them against the impact of poverty. Housing not only provides shelter and space for human development, but may be used as a base for home enterprise, may be rented out or sold, and a secure house is an important form of collateral for credit. Policies and programmes focusing on housing as an asset can assist households to become less vulnerable to poverty, offering them a greater number of choices and opportunities for development.
The policy framework and key programmes
The South African housing sector has not been operating well in terms both of supply of and demand for low-cost housing. Supply-side constraints include under-investment (in terms of share of the national government budget), the limited capacity of the construction sector, institutional bottlenecks, and the fear of risk among financial institutions. Demand-side constraints include low incomes, high unemployment, circular migration, a history of prohibition on African home ownership, spatial inefficiencies of high transport costs, and limited access to credit from the formal financial sector. Major inequalities characterise the housing sector: for whites the average floor area per person is about 33 square metres, whereas for Africans it is 9 square metres in formal housing and a meagre 4-5 square metres in informal housing. Overall, it is clear that the current housing situation does not offer the poor an asset that can reduce their vulnerability and promote their socio-economic development.
The 1994 White Paper on Housing aimed to give all South Africans access to a permanent residential structure with secure tenure and adequate water, sanitation, waste disposal and electricity services. The housing policy framework was articulated around several programmes, the most far-reaching and important of which is the national subsidy scheme administered through Provincial Housing Boards, and which provides a once-off capital subsidy for land, housing and infrastructure to those earning less than R3,500 per month. The subsidy scheme represents a compromise between popular demands for the state to deliver complete houses for all, and a concern to spread housing benefits widely. A second key area of intervention concerns the expansion of housing credit to the poor through making the enormous resources in the financial sector available by assuming some of the risks inherent in lending to low-income groups. Finally, the housing policy framework seeks to rationalise the institutional environment in order to achieve delivery and to circumvent political conflicts. Central government is empowered by the Constitution to set parameters for provincial housing policy, while provinces are empowered to either adopt policy developed by central government or to formulate new policy.
Assessing the policy framework and housing programmes
In evaluating the impact of current housing policy and practice on poverty and inequality it is clear that the new policy marks a significant break with the apartheid past. Firstly, a pro-poor housing policy framework has been set up which is strongly committed to addressing the housing needs of the poor and confronting apartheid legacies and imbalances. Secondly, the poor population is specifically targeted through the housing subsidy system, a considerable improvement on its apartheid forerunner. However, there is evidence that women still suffer discrimination under the workings of the new subsidy scheme, and gaps existing in the current housing subsidy must be filled to ensure that gender equality becomes a reality.
Overall, the implementation of policy has demonstrated both achievements and failures that will need to be addressed in order to optimise the government’s future impact on reducing poverty and inequality in the housing sector. A positive feature of evolving policy and housing programmes is that they allow for a considerable variety of housing delivery systems, which if carefully selected and well-managed, can assist in addressing the diverse needs and aspirations of the poor. Although surveys of housing project beneficiaries disclose dissatisfaction with aspects of the housing process, particularly lack of amenities, costs and inadequacies of information, many comment on the positive improvements in their lives that the housing subsidy has provided, including water supply, sanitation and a feeling of ownership and security.
Land reform and redistribution
Land reform has the potential to address the situation of the rural poor directly, and, if carried out carefully, poor women. This is critical, because rural people and particularly rural women are disproportionately poor and there are a limited number of interventions that seem well suited to assist them. Land reform also has the potential to restructure the agrarian economy of South Africa, and thereby change patterns of inequality in rural areas.
The context of land hunger
About 68% of black rural households desire farmland, and it can be assumed that some of the 32% who do not desire agricultural land do indeed want land for residential or other purposes. The demand is uneven from province to province due to the varying viability of farming. Most people want small amounts of land, with 48% of those wanting farmland wanting 1 ha or less. Those with a small amount of land (less than 1 ha) want less than those with none or those with more; this suggests that those with none to begin with want it to meet welfare needs, while those with relatively large amounts seek it for commercial purposes.
The national land reform programme
The national land reform programme emphasises issues of equality, with particular attention being paid to the interests of the rural poor and rural women. It has been operationalised in three elements:
Tenure reform is arguably the branch of the land reform programme which will have the most far-reaching consequences, because of the masses of people (about 6 million households) involved. By contrast, land redistribution is unlikely to affect more than 1.5 million households over the next ten years, while land restitution is unlikely to affect more than 500,000 households. However, there are three significant constraints on the future rate of delivery of the land reform programme. Firstly, the most pressing constraint at present is administrative capacity, particularly at local level, and more work is required to develop policy links between local government and both national and provincial land reform offices. Secondly, once administrative constraints are removed there will be an inadequate budget with which to make substantial progress, unless the allocation to land reform is increased: the budget for 1997/98 can accommodate only about 1.4% of black rural households demanding farmland. Thirdly, the availability of state land is an important constraint: it is not nearly as abundant as is popularly perceived, and its disposal is not uncomplicated.
Assessment of the land reform programme
The progress of land reform has been undeniably slow, due in part to the need to set up institutional structures and develop appropriate delivery mechanisms, as well as the complexity of existing and proposed tenure arrangements. However, delivery capacity has already shown strong evidence of improving due to commitments of provincial and local government to play an expanded role, and also because budget increases will hopefully be forthcoming. Now that many administrative and technical issues have been resolved, it is important that the Department of Land Affairs continues to expand capacity, both in terms of departmental staff and in terms of local support personnel. It is also important that future government budgets allocate a greater share to land reform, and that provincial and local government capacity for land administration and support services is developed.
Micro finance
Improving access to financial markets is an important market reform that can assist in the reduction of poverty and inequality. Four spheres of financing are particularly relevant in the reduction of poverty: financing of land, financing of housing, and financing of farm and non-farm production.
Financing land reform and land development
The White Paper on South African Land Policy (1997) sets out the grants offered in support of the national land reform programme, including grants for households to acquire land, enhance tenure and invest in on-farm infrastructure, and for local authorities to acquire land for productive use as municipal commonage for the benefit of poor and disadvantaged residents. Shifts in policy and changes to the grant structure set out in the White Paper may lead to some diversification of land reform programmes and projects, including the initiation of projects that open or extend livelihood opportunities. However, the provisions in the White Paper for diversifying projects and for drawing local government into the land reform process are partial and unsatisfactory. Without decentralisation of land reform to the district/regional level, it will be difficult to incorporate land reform into local economic development.
Housing finance
Government is attempting to gain the co-operation of private sector financial institutions in the provision of housing finance by assuming some of the risks usually taken by the private sector. The most significant risk interventions are the creation of a mortgage indemnity scheme to normalise the existing lending environment by offering special arrangements to those who have defaulted on loan repayments; the Product Defect Warranty Scheme in which housing developers must provide guarantees against defects; and the National Urban Reconstruction and Housing Agency which uses guarantee funds to mobilise bridging and end-user finance for purposes of low-income housing. In addition, a National Housing Finance Corporation was launched in 1996 to mobilise wholesale finance for the housing sector, including facilitation of the activities of the non-traditional lending sector.
Farm and non-farm production finance
Currently, only the manufacturing enterprises in the informal sector have any hope of receiving financial help, yet the majority of informal sector activity occurs in services and small-scale agriculture. Programmes are needed which contribute to economic growth through SMME development while also assisting the self-employed poor in the services and agricultural sub-sectors. Government policy in South Africa has investigated the provision of finance to both farm and non-farm activities through grant funding (in the case of the former) and lending schemes (for the latter).
The purpose of the grant fund for small farming development is to assist ‘emerging farmers’ and small-scale food producers to develop and/or improve their production efficiency. Two main types of project are identified: those oriented to economic growth and which aim for higher efficiency, and those aimed at empowering the poorest of the poor and which have a food security orientation. The projects generally targeted have been small-scale irrigation schemes and community gardens. The importance of this grant funding cannot be over-emphasised, because this is one of the very few programmes that attempts to improve the asset base of the poor. A requirement for business plans from grant applicants should mean that projects will be better planned than in the past, and there should also be better extension support through the integrated provincial departments of agriculture.
Improvements need to be effected also in the important expansion of finance to non-farm SMMEs through on-lending. The volume of loans made to NGOs by the Khula lending programme since commencement in January 1997 is currently insufficient to meet the needs of the SMME community. Moreover, the geographical reach of the programme is uneven, there is a bias towards lending to more established SMMEs rather than survivalist enterprises, and the impact of the programme has been limited by the reluctance of commercial banks to participate.
Assessing finance programmes
How effective the different grants will be at a provincial and local level will depend on a number of factors, including local government capacity to access and manage the grants and in some cases manage and maintain the facility created; provincial government capacity to formulate policy and plan the process; and the capacity of the intended beneficiaries to take up opportunities, for improving access to financial markets can have a positive impact only if there are latent productive opportunities that can be taken up or opened up.
Sustainable livelihoods
Sustainable development can be defined as development which meets present needs without compromising the ability of future generations to meet their needs. It should include both social and economic dimensions of development. The concept is open to varying interpretations, and the term should be contextualised when environmental policy is discussed. It is clear, however, that several factors threaten sustainable environmental development in poor areas.
The context of sustainable livelihoods
The poorest sections of the population typically live in the most fragile, degraded and marginal areas of the country. This is largely the result of previous land policies and the creation of the former homeland areas, with consequent landlessness, overpopulation, overgrazing and increased land degradation in many rural areas. The poor also often live in degraded urban environments, including sites close to waste disposal areas or vulnerable to flooding. Environmental problems experienced by the poor therefore include alienation of people from the land; land degradation caused by overcrowding and unsustainable agricultural practices; lack of access to clean water; health problems caused by air pollution; lack of access to safe and efficient energy sources; exposure to hazardous waste; and land and water degradation resulting from mining operations.
Livelihoods and disasters
Disasters are serious disruptions of the functioning of society, causing widespread human, material, or environmental losses that exceed the ability of the affected society to cope. Disasters can be either natural (e.g. floods) or human-made (e.g. losses of life and/or property through war or civil strife), and either ‘slow-onset’ (such as drought) or sudden (e.g. floods). Disasters are very costly both in terms of the losses incurred and in terms of relief and rehabilitation, and have a profound impact on the poor and vulnerable by reducing their assets and entitlements and sometimes causing a collapse in livelihoods.
The poor usually live on the margin of subsistence and lack reserves to cope adequately (or at all) with the serious disruption brought by a disaster. Other more advantaged groups in South Africa are also affected by disasters, but have usually been heavily subsidised and/or assisted (e.g., white commercial farmers during drought periods). Drought is probably the most common form of disaster affecting rural communities, occurring with varying magnitude almost every year in some part of the country, and affecting the rural poor in several ways including loss of subsistence crops and cattle, loss of agricultural jobs, and food price inflation. Other kinds of disaster such as fire are often overlooked relative to wider-scale disasters such as floods and drought, but fire disasters are an increasing problem in poor urban areas where shack settlements are densely located.
Despite the fact that regions and communities in South Africa regularly experience disaster, until recently there has been no official national disaster plan or strategy, and reactions to disasters have been largely crisis-management responses undertaken without co-ordination by a national disaster management body. Civil Protection has played a role in assisting with disasters, particularly floods. Drought policies have had an exclusively agricultural bias, particularly towards the need of white commercial farmers, but since the early 1990s the relief focus has shifted to include the rural poor. NGOs such as Operation Hunger, the Independent Development Trust (IDT) and Mvula Trust have played an important role in disaster relief. Some local private sector involvement has occurred, such as provision of disaster relief funds by banks and the media.
Government response to sustainable development
There has been little integrated management of environmental issues that impact on the poor. Several current policy initiatives will impact upon South African environments, including White Papers on the environment, housing, water supply and sanitation; discussion papers on forestry and biodiversity; and the Rural and Urban Development Frameworks. The White Paper on the Environment has been compiled following a wide and comprehensive process of consultation, in which the poor and people in rural areas were able to make inputs. Importantly, it calls for the formulation of a National Environmental Strategy and actions plans, and the regular compilation of a ‘state of the art’ report on physical, socio-economic, political, ecological and legal aspects of the environment. The principles of inclusion, integrated environmental management, environmental education and partnerships are upheld, and the overall goal of sustainability appears to be foremost. Continuing commitment to these goals should result in positive spin-offs for the poor.
Details of a national disaster management strategy are still being finalised by relevant government departments, the elements under consideration including a National Disaster Management Committee with similar structures at provincial and local level, with the Department of Constitutional Development having overall responsibility for the disaster management function. There are, however, several constraints on the effective management of disasters in South Africa, including lack of capacity in national and provincial departments and local governments, a lack of clarity over lines of responsibility in disaster management, lack of co-ordination between the Department of Agriculture’s policy formulation on disaster management and that of the proposed National Disaster Management Committee, and the need for an effective and appropriate early warning system.
Assessment of policy for sustainable development
One challenge facing government is to achieve rapid delivery of services and infrastructure in an environmentally sustainable way. Another is to distinguish between those environmental issues requiring a national focus, and those more efficiently handled at provincial or local level. Further, the use of environmental resources and their impact on livelihoods of the poor needs to be more fully understood. Effective environmental management should enable equitable access to resources, so that situations where the poor are forced to adopt unsustainable survival tactics can be avoided. Community-based natural resource management (CBNRM) is one of the ways in which the poor can manage their environment and their livelihoods, which are based on this environment. Constraints to CBNRM include ownership and leadership problems, and sustainable development policies and natural resource management require the development of appropriate local government institutions and tenure structures.
Social assets
Growing evidence that social assets may be as critical as human capital in development processes has resulted in its increased recognition in poverty reduction programmes.
The significance of social assets
Social assets refer to features of social organisation such as networks, norms and trust relationships that make people collectively productive, and which facilitate mutually beneficial co-operation. These assets lessen vulnerability to poverty, and are a base for action to overcome conditions of extreme poverty and to respond positively to economic opportunities. It is best considered, at a minimum, as a crucial ingredient in any poverty alleviation programme, for without it, productive assets and human capital can be squandered. An integrated approach to poverty alleviation has to recognise the importance of social assets in any strategic framework.
Violence and social assets
On the one hand, support networks among households in poor communities subjected to apartheid repression helped to consolidate and nurture social assets. On the other hand, the forced displacement of communities systematically destroyed the fabric of many poor communities, thereby negatively affecting social cohesion. High levels of violence and escalating crime created a society permeated by fear and mistrust; in turn, as communities lacked basic forms or networks of co-operation, violence resulted due to this breaking down of stocks of social assets. In this way, cycles of violence and high levels of crime inherited from apartheid threaten the ability of the poor to utilise all their assets in an efficient and productive manner.
Facilitating social assets
An important contribution to improving social assets will be made by interventions that address crime prevention, policing and the effectiveness of the judicial system. Another useful set of interventions can occur at the local level; these might involve pro-active interventions to enhance participatory and community-driven approaches to local development processes, such as in strengthening social compacts in housing. Targeting support mechanisms and funding to NGOs that seek to build and enhance social assets amongst poor women would be another such policy option.
Conclusion
The over-riding priority is to set in place a series of coherent policies and co-ordinated programmes designed to strengthen the asset base of the poor in respect of labour, human capital, productive capital, and social capital. A critical foundation for poverty reduction, however, will be to establish a policy framework for sustained labour-intensive macroeconomic expansion which would offer new income opportunities for both urban and rural poor. In addition, it would provide necessary resources for a range of government-led interventions designed to enhance the assets of the poor, including both the transfer of assets and the reform of markets, and, if necessary, specific targeted policy interventions to address particular social or geographical segments of poverty.
10: A Strategy for the Reduction of Poverty and Inequality
Introduction
The eradication of poverty and inequality and the meeting of basic needs are primary goals of the government, but are not the only ones that the government is trying to attain. Nevertheless, achieving a reduction in poverty and inequality is a fundamental challenge in South Africa without which, international experience suggests, the human development, economic and employment goals of the government may be hindered. The plethora of programmes identified by the PIR shows that government is undeniably committed to poverty reduction and a more egalitarian distribution of income and wealth, but the question of how best to achieve this remains unresolved. Nonetheless, the PIR has indicated some important areas of success: among others, significant progress has been made in the provision of affordable health care, clean water, urban infrastructure and the electrification drive. Moreover, the progress that has been made in the formulation of policies contributing towards the dismantling of apartheid has also been important.
The Elements of a strategy for the reduction of poverty and inequality
The legacy of apartheid: poverty traps
The majority of relevant research studies provide a convincing case that many of the distortions and dynamics introduced by apartheid have the potential to become self-perpetuating, and would therefore continue to reproduce poverty and perpetuate inequality. The poverty traps set by apartheid remain an important explanation for the persistence of poverty in South Africa. These refer to the absence of complementary assets and services and a poverty of opportunity whereby people are unable to take full advantage of the few assets that they do have. With the contraction of the South African economy, households previously dependent upon wage income now find themselves with neither the wage, nor the assets from which to generate an income.
Breaking out of the trap
The approach to the reduction of poverty and inequality in South Africa recommended by the PIR is based on recognition of the specific history of the country. However, it is still possible to divide the policy measures that are being adopted into three general categories:
All three categories can assist in breaking the forces that perpetuate a vicious circle of poverty at one extreme, while encouraging income, wealth and opportunity to be amassed at the other. In terms of the assessment criteria identified in Section 1, policies and programmes will achieve this to the extent that they:
Although government has not yet put forward an integrated strategy for the reduction of poverty and inequality, the elements of such a strategy can be discerned from both the RDP document and many policies, strategies and programmes that have been initiated by the government. The principle components of this strategy appear to be based on:
Linking Growth and Human Development
Creating the link between economic growth and human development is probably the most challenging task facing the South African government in terms of achieving a reduction in poverty and inequality. Central to this is the relationship between the macroeconomic framework and the monetary and fiscal policies implied by this framework and the implementation of sectoral policies. Growth has to be translated into human development if it is to benefit the population, and this link determines the structure and quality of growth that is achieved. Where markets function efficiently this will occur without state intervention, the main purpose of which is to correct for market failure, and more particularly to provide for those who cannot provide for themselves.
Fiscal and monetary policy
Fiscal policy, through appropriate public investment expenditure, can ensure that poor and unemployed people can take advantage of emerging job and income-creating opportunities. Through supply-side incentives it can also direct investment toward more labour-intensive industries. Government expenditure has correctly emphasised social spending but, until recently, high and middle income groups still benefited significantly more from this expenditure than the poorest groups. More targeted measures are required if the benefits accruing to the poor are to be increased.
However, in the short and medium term, all sectors in the area of human development are affected by financial constraints. The ongoing challenge for government is, therefore, to strengthen the voice of those who have been disadvantaged and to stand fast against the strong voices of those who are advantaged. This is needed at both the inter-provincial and intra-provincial level, where the national departments will need to play a strong leadership and monitoring role.
Sectoral policies
In general, most government departments recognise the past and ongoing disparities and all have developed both general sectoral policies and more specific policies and programmes. In some cases, such as free health care and the building of schools and clinics, there has already been substantial progress in implementation. However, most departments have been more successful in implementing existing initiatives than in introducing new ones, and where new initiatives have been introduced, departments have often had to struggle with organisational and structural blockages. It seems that the more integrated the new programmes are into the ‘normal’ workings of departments, the greater their success.
With respect to education and training, areas of education funding likely to have an important impact for poor households are early childhood development, the childhood years of free and compulsory schooling, adult basic education and training, and further vocational training for previously disadvantaged adults. While education is relatively well-resourced in aggregate, there are severe deficiencies in the quality and distribution of both human and physical resources. Accordingly, a range of measures which could improve access to quality education and training are recommended:
With regard to health care, practical steps have been taken to redress health sector inequities and to address poverty, probably the most significant of which has been free provision of certain health services for certain categories of patient. However, there have been difficulties in moving from policy and programme development to implementation, due partly to inadequate management capacity, but also to structural obstacles and constraints, particularly financial ones. Hence, the pace of redistribution of health care resources between and within provinces is likely to be slow. A major gap is a coherent policy on private sector health care. The following recommendations are made:
Recent plans for responding to the HIV/AIDS epidemic are more detailed and explicit than previous policy, but are probably still over-ambitious. Some progress in the implementation of strategies has been made, but the recruitment of all government departments into developing their own responses to the epidemic has been hesitant and slow. It is recommended that:
The welfare system is vital to combating poverty and must be strengthened and sustained. A range of interventions could be introduced to use the available resources more effectively, including: integrating the pension system with other financial systems to allow pension money to be expended over the month, and savings to accumulate; elimination of corruption within the service; improving the efficiency of delivery; and addressing barriers to accessing pensions. However, there are some obstacles that may interfere with the realisation of the goals of social welfare. Most fundamentally, at the level of implementation there is as yet no general agreement or understanding on the definition of social welfare. It is therefore recommended that:
Malnutrition in South Africa is as much related to living conditions and the social and psychological consequences of poverty, as to the economic dimension of poverty. There is an urgent need for research on causality, which should be closely linked to policy and programme interventions, to provide information required for decision making by policy makers and programme planners. It is recommended that:
With regard to safety, poorer areas, and in particular the former homeland regions, are severely under-resourced. It is recommended that:
Redistribution of assets and opportunities
Reducing poverty and inequality in South Africa will require substantial changes in the distribution of incomes, wealth and economic power. The elements of such redistribution revolve around access to livelihoods, housing, infrastructure, land and water.
Sustainable livelihoods
Access to other forms of income and to assets may strengthen the distribution of income within the household, and measures such as public works programmes that improve women’s access to income may shift intra-household income distribution in favour of women. In addition, gaining secure access to a pension is a crucial survival strategy for women, and measures that protect this source of income should form an important part of any rural development programme.
In terms of the management of disasters that undermine livelihoods, it is recommended that the approach adopted should cover all aspects of the disaster management cycle. Some of the activities required for effective preparation are vulnerability assessment, planning, information systems, institutional framework development, warning systems, public education and training, development of a short-term and longer-term mitigation strategy, and improved forecasts.
Agriculture remains an important source of livelihood for at least two groups, the poorest who have no source of cash income, and those for whom self-employment is an important income source and who are the most well-off in terms of income and assets. Current policy appears to meet the needs of the latter group, but does not recognise the needs and constraints of the former. Many of these cultivators are women, for whom agriculture is one of several livelihoods being undertaken. It is recommended that:
The national government views SMMEs as key instruments for attaining several different objectives, viz. employment generation, income redistribution and the enhancement of competitiveness, particularly of small-scale manufacturing operations. Although government’s SMME development strategy will undoubtedly contribute to redressing severe racial inequities inherited from the apartheid period, it would be dangerous for policy-makers to rely on SMMEs as the main agent for economic redistribution. Outside national programmes, sight should not be lost of the potentially significant role of local government intervention for assisting SMME development; the activities of local government, rather than national SMME programmes, may be the most critical interventions for local poverty reduction and for addressing inequality. It is recommended that:
Public works programmes are an important component of the strategy for poverty reduction. Besides their direct impact on poverty through employment creation and infrastructure provision, public works programmes can make a broader contribution through skills training and provision of information. Seasonal stress in terms of income, expenditure and nutrition forms a significant aspect of poverty in South Africa. By scheduling public works programmes at those times of the year in which such stress occurs, the greatest impact can be achieved, although care should be taken that this does not coincide with labour requirements for agricultural production. It is recommended that:
One option for wealth redistribution that could be considered by government is the use of the restructuring of state assets to redistribute assets to poor households through mass privatisation. This involves the distribution of shares in state enterprises to the public, usually allocated in the form of a voucher. This would provide poor households with an asset that could be used as collateral, or as a long-term investment. It is recommended that ways should be investigated in which the benefits of privatisation can reach the poor as a means of reducing wealth inequalities.
Housing and shelter
A positive feature of evolving policy and housing programmes is that they allow for a considerable variety of housing delivery systems which, if carefully selected and well-managed, can assist in addressing the diverse needs and aspirations of the poor. However, many poorest of the poor, especially women, still fall outside the parameters of eligibility for housing subsidies, and informal housing is still the most prevalent means by which the poor access shelter. It is recommended that:
Infrastructure and services
Service level decisions often have a major impact on the bulk and connector infrastructure requirements, which could have major cost implications. With regard to energy, an important flaw in the focus on electrification is that most of the poor continue to meet their energy needs using multiple-fuel or fuel-switching strategies. Consequently, at the household level electricity is not necessarily a solution to energy poverty. Moreover, there is a mismatch between consumer demand and agent supply strategies and, not surprisingly, the Accelerated Electrification Programme is running into a crisis around cost. It is recommended that:
Water
Between the DCD and the DWAF a substantial number of people in disadvantaged areas are being connected to water supply and sanitation services. Although water supply makes a massive difference to the lives of people, even more aspects of poverty are addressed when good sanitation systems are in place. Until people have both, there are still significant risks to health. Sanitation delivery has not yet taken off, although there has been an important process of getting different departments on board and formulating policy recommendations. It is recommended that:
Land reform
The land reform programme has evolved with attention focused on issues of equality, and particular attention has been paid to the interests of the rural poor, especially women. The most pressing constraint on delivery by the land reform programme is administrative rather than financial, at national, provincial and local levels. It is recommended that:
Market reforms
Labour market
Poverty inside the labour market emerges as an important social problem leading to tensions and cleavages between groups along gender, regional or racial lines. In particularly, the labour markets that are open to the poor in South Africa seem to be highly restrictive in terms of the possibility of improving social and economic conditions. This is particularly true in the case of agricultural and domestic work and mining. In both instances low wages, insecure working conditions and poor access to services seem to have resulted in little, if any, occupational or social mobility. It is recommended that:
Financial markets
Although access to financial services has been show to be of critical importance in the reduction of poverty and inequality, policy for micro-finance in South Africa appears to be both under-developed and lacking in coherence. Encouraging the widening of access for potential investors to formal sector credit institutions is a neglected area for government intervention. Increases in the number of savers as well as the rate of savings should become a priority for government and the private financial sector. The widespread use of stokvels as a mechanism for saving could be a starting point in this regard. It is recommended that:
Spatial development
Urban restructuring
Overall, the urban poor will be assisted by programmes in human development and infrastructure service delivery which augment their assets, expand their existing coping or household management strategies, or facilitate new opportunities. Specific targeted interventions may be required to deal with particular social or geographical dimensions of urban poverty in South Africa. It is recommended that a coherent national urbanisation policy be developed urgently to confront apartheid’s spatial inequalities, and thereby ensure that the existing disjunctions between the livelihoods, assets and infrastructures of South Africa’s urban poor are overcome.
Rural development
There is an urgent need for a co-ordinating function to be established for rural development. This is recognised by the Rural Development Framework, but no recommendation is made in this regard. It is suggested that the Department of Constitutional Development be allocated this function, and that an appropriately resourced unit be established. This unit should investigate extending the work of the Department in assisting local government and local service providers, ensuring that this assistance takes into account the capacity constraints specific to rural areas.
Transportation
Improving the current state of transportation is one way in which spatial inefficiencies can be reduced. Measures include ensuring accessible and affordable transport for pensioners, school children and people with disabilities. It is recommended that:
Spatial Development Initiatives
The long-term success of the SDI programme and, by implication, its contribution towards poverty alleviation and inequality reduction, is far from assured. The SDI concept cannot be employed every where in South Africa, and there is a risk that the SDI programmes might divert resources, including managerial and technical capacity to focus on a limited number of areas. Second, their successful planning, design and implementation necessitates a commitment to the process by all spheres of government to ensure that SDIs fulfil their role as a fast-track development initiative. Third, SDIs must not be seen as a panacea for regional poverty alleviation and an excuse for the non-development or implementation of poverty alleviation programmes in areas where they occur. Fourth, the impact of SDIs on poverty alleviation will be enhanced by inter-sectoral linkage with, for example, programmes of land reform and SMME development. It is recommended that:
Institutional reforms
Devolution of power
The devolution of political power makes progress in many areas of human development reliant on the capacity, policy and commitment of provincial governments; consequently, ways will need to be found to ensure that every province has the capacity and commitment to address the huge inter-provincial disparities which remain. In addition, the system of local government faces extreme challenges. It is recommended that:
Integrative structures
There is a need for integrative structures to co-ordinate policy formulation and implementation in many areas relevant to the reduction of poverty and inequality. The creation of ‘clusters’ of ministries has laid the basis for such inter-sectoral work. The recent establishment of a Co-ordination and Implementation Unit (CIU) in the Office of the Deputy President would also strengthen such inter-sectoral co-operation. There are also important and valuable institutions functioning among the poor that are controlled and operated by the poor themselves. There are important roles for NGOs to play, which include reaching those who are most vulnerable. NGOs can also play a brokering role in establishing partnerships between CBOs and can play a useful function in transcending capacity constraints in local government structures. It is recommended that:
Development planning
No legislation exists in any legislation or regulations for provincial development planning. The provincial growth and development planning initiative that commenced in 1996 appears to have been abandoned. As a result, provinces are not required to ensure that their development policies are coherent, compatible, effective or even in existence before they compile their budgets. Incentives for performance in accordance with development priorities need to be improved. This could be done through linking pay to performance, or somehow providing incentives to civil servants based upon measurable impact on poverty and inequality. Finally, all forms of corruption need to be dealt with effectively and quickly. The public needs to see commitment by government to dealing with corrupt officials. It is recommended that preparation of provincial medium-term expenditure frameworks be grounded in provincial growth and development strategies.
Information and technology
Development information flowing down to communities, and flowing up from communities to civil servants needs to be made user-friendly. It is critical that the capacity to ensure that information flows take place is built up as a priority. Routine functioning and information transfer built into the activities of departments would assist this. It is also important that an effective government information system is established which translates and disseminates information, and retains a specific focus on the poor. It is recommended that:
Monitoring and evaluation
At this stage there is no effective form of monitoring and evaluation of delivery programmes in South Africa. The strategic management of policies to reduce poverty and inequality requires that such a system be established, and this section therefore outlines the elements of a long-term strategy for monitoring progress, and a short-term strategy for managing disaster or the short-term impact of policy change.
Principles, criteria and considerations
The desired properties of the indicators used for monitoring are unambiguity, consistency, specificity, sensitivity and ease of collection. Further, the indicators need to fulfil the following criteria in order to effectively measure progress in reducing poverty and inequality:
In devising indicators and methods of monitoring, the unit of analysis is an important consideration. For example, one programme might be best monitored at the individual level, another at the household level and a third at the ‘community’ level. In addition, monitoring data should be disaggregated by race, gender, and location (province/gender) at the least. Race should be collected in the standard categories of African, coloured, Indian and white to show how individuals from groups subject to different legislation, regulations, etc during apartheid are faring in the new South Africa. Agreement is required on a consistent definition of ‘urban’ versus ‘rural’, and an important consideration in data collection concerning poverty in urban areas relates to definition of formal versus informal income categories. Although conceptually useful, the problems of empirical definition of the informal sector are so immense that it might be best to abandon such categories entirely and instead, shift to adopt alternative classifications of income opportunities (e.g., by size, occupation type, position in labour market and so forth).
All bodies collecting data should be encouraged to use the same concepts and definitions to allow for meaningful analysis of the different data sources. CSS could play a role in establishing some of these standard definitions. In other cases, where the concepts relate quite clearly to a particular sector, the relevant department could assume responsibility.
Institutions and mechanisms
An exercise was undertaken in 1997 to gauge the type of indicators presently used to measure the impact of Government programmes, from which three main observations are evident:
The departments responsible for a particular programme or policy should bear primary responsibility for developing appropriate indicators. Monitoring and evaluation should make use of this information to the greatest extent possible, so as to avoid extra burdens on staff and other resources. Government agencies need to be clear as to the target of their activities, and those who perform services on behalf of government should be subject to the same reporting and monitoring obligations as government agencies; monitoring will promote accountable and effective use of these resources. A central monitoring advisory service, such as CSS, could be considered to provide support and to ensure conformity with national standards and definitions and thereby ensure comparability. Departments should also work with CSS in establishing how regular CSS instruments (e.g. October Household Survey, labour studies) might incorporate some of their concerns. It is critical that the important role of CSS be recognised in providing the information that is required for the strategic monitoring of government policies. Right-sizing, in this context, may require that additional resources be directed to this service and the duplication of its statistics gathering function be prevented.
A general monitoring mechanism is potentially an expanded October Household Survey, which would need to be revised in order to be sensitive to the issues raised above. It is unlikely, however, that all the required indicators could be secured in this survey and that specific monitoring mechanisms might be necessary in the context of the effects on small enterprise development, housing or infrastructural provision. South Africa should not follow international standards slavishly in designing its instruments, definitions, etc.; where other measures are found to be more appropriate to the local situation, international definitions should be adapted.
Establishing a monitoring system
In monitoring for the medium- and long-term, it must be remembered that macroeconomic policy has a significant impact on a country’s capacity to address poverty and inequality, determining as it does the level and rate of growth of output and employment, how output is produced, and how output and employment are distributed. The key issue in monitoring the impact of macroeconomic policy is to assess the impact of macroeconomic policy instruments. These instruments impact differently on different groups within society, as well as on different sectors and spatial areas of the economy. Consequently, understanding the key markers of poverty and inequality and the causes underlying them enables prioritisation of the key areas of intervention required, which in turn enables development of the appropriate inputs, outputs and outcomes. Budgetary analysis, for example, is one way of providing information about key input measures for all government activities.
A matrix of suggested guidelines for monitoring the performance of various critical policy instruments is provided in the PIR. In the matrix, macroeconomic policy instruments could be considered the inputs, and impacts on the economy and on poverty could be considered the expected outcomes. Appropriate indicators can be developed for each outcome. A number of steps can be identified in the phasing of this programme:
The process of developing indicators will be an important first step. Indicators for the measurement of poverty and inequality need to be developed (especially at provincial level within Government), utilising a Government-defined definition of poverty and inequality. Indicators at Community level need to be developed alongside Government-level indicators.
With respect to monitoring for the short-term, food security is an extremely responsive indicator that identifies groups on or below the poverty line. In some cases this indicator is more appropriate than income measures of the poor, as it focuses on the capacity of the individual to stay alive, avoid malnutrition and the availability of basic foods. This indicator also shows who is at most risk as regards health, and can act as an early warning system that certain groups or areas will not be able to sustain a minimum nutrition intake. Hence, monitoring the incidence of poverty in South Africa should move towards the incorporation of a food security index. This is probably best gathered by means of surveys conducted in sentinel sites, that is, in areas and households that are representative of generic categories from which trends can be monitored.
It is recommended that the food information approach be adopted in South Africa to provide short-term monitoring information that assists in disaster management. This system should be characterised by the following features:
Successfully implementing the proposed food security early warning system will require flexibility at a local level so as to permit appropriate implementation. Once established, the proposed system would provide information that takes account of the complex realities of the poor. The approach is grounded on a recognition of the integration of food security into the broader system of household survival and subsistence. The system has the potential to contribute towards the upliftment of poor communities in South Africa by facilitating an information generation and planning process.
Conclusion
The challenge facing the new South African government is immense, and from the perspective of policy formulation the government has responded in a credible fashion. From the perspective of implementation, however, current progress has not met expectations; the most important reasons for this relate to the underlying distortions in economic markets and social institutions introduced by apartheid, which continue to produce and reproduce poverty and inequality in South Africa.
The purpose of the PIR has been to offer a critical insight into the coherence and effectiveness of this policy response, and thereby contribute towards the monitoring and evaluation of government’s actions. Viewing poverty and inequality as both lack of access of households to income and services and inability of households to generate income, allows for a more strategic and dynamic position on poverty alleviation policy. Broadly, two groups of policy prescriptions can be distinguished: short-term redistributive policies for income and asset transfers, and medium-term growth policies that foster the optimal use of household assets. In the long term, policies that result in sustainable development and economic growth are seen as the key factors influencing the ability of households to break out of a cycle of poverty.