Poverty And Extreme Inequality In South Africa

South Africa’s main objectives are to eliminate poverty and reduce inequality. South Africa is considered an upper middle-income country by virtue of the average national income per person or GDP per capita. However, this status masks extreme inequality in income and access to opportunities. Deep poverty is widespread, and constraints social development and economic progress. Per capita income growth is the only stable indicator of a country’s wellbeing. It tells us how much income there is to shared but does not converse the distribution of that income. Although South Africa does not have a single and specific official poverty line, R524 a month per person (in 2008 prices, updated to 2010) can be used as a rough guide. Using this as an indicator, the proportion of people living below the poverty line was about 53% in 1995 and fell to 48% in 2008. This is a very high level of poverty for a middle-income economy.

The diffusion of social grants was the most important contributor to falling income poverty from 2000. The share of the unfortunate 40% of the population in national income has remained largely stable at about 7%, but the composition of this income has changed quite dramatically. The contribution of wage income and payments to household income fell, and ware replaced by social grants, accounting for about 2% of GDP. South Africa is a vastly unequal country. According to the Income and Expenditure Survey, the Gini coefficient was 0.67 in 2005, which is very high by international standards. The incomes of both the richest and the poorest 20% of the population both rose by about 45% between 1995 and 2005. The poorest 20% of the population earns about 2.3% of national income, while the richest 20% earns about 70% of the income. There continues to be a substantial difference in average incomes by race group. The majority of low-income households are black. In 1995, median per capita expenditure amongst Africans was R333 a month compared to whites at R3443 a month. In 2008, median expenditure per capita for Africans was R454 a monthcompared to whites at R5 668 a month. The proportion of Africans in the top 20% of income earners increased from 39% in 1995 to 48% in 2009.

Inequality within the African population has increased sharply. Poverty tends to be concentrated in rural areas and especially former Bantustans. However, deep poverty is also found in cities with inward migration in search of work. Poverty rates Unemployment was allowed to grow over many years, after many years of economic stagnation and “separate development” policies. Over 25 years, there was no net job creation for a growing African population. Strict unemployment peaked in 2001 at 31%.

Broad unemployment, referring to people who would like to work but have become discouraged, is also a critical challenge, mostly affecting young black women living outside of urban areas. Positive and sustained growth between 1997 and 2008 did finally make inroads into unemployment, falling to 23%. The global economic downturn now poses uncertain challenges towards efforts to further reduce unemployment.

18 March 2020
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