chapter  7
42 Pages

South Africa

ByMARTIN ABEL, MEGAN BLAIR, RAISSA FABREGAS

South Africa’s economy has undergone radical changes since the fall of apartheid and the first democratic elections in April 1994. Economic growth stagnated during apartheid due to sanctions on international trade and investment, uncompetitive local industries, rigid exchange controls, restricted skills development and high levels of poverty and inequality (Aron et al., 2008). After the first democratic election, economic sanctions were dropped, labour restrictions were lifted and policies were put in place to advance the interests of African workers, who had been marginalized for many decades. Since the first democratic election, South Africa has had stable macro management and, as shown in Table 7.1, South Africa’s economy has grown steadily in both real and per capita terms. Over the same period, the schooling system transformed from one char-

acterized by highly skewed spending across racial groups to one based on equitable government funding. School enrolment rates rose, though learning achievements remain very poor in previously disadvantaged schools (van der Berg, 2007). The new, young labour market participants have more education, on average, than their parents had a generation ago. Two in five young adults graduate with Matric degrees (the qualification awarded to those who pass nationally set, standardized exams at the end of the final years of secondary schooling). Other countries, such as Brazil and India, have seen education gains trans-

late into productivity and employment growth, and large decreases in poverty and inequality. Job creation in a dynamic labour market served as the key pathway through which these societies generated high social returns to improved education and second-round effects to social transfers. South Africa has not made similar gains. Over the post-apartheid period,

poverty has fallen only sluggishly. Eighteen years after the first democratic election, the share of people living below a $2 per day poverty line has declined by no more than 4 percentage points from 34 per cent in 1993 to 30 per cent in 2008. These gains are often attributed to social policy reforms (a massive expansion of cash grant transfers) rather than economic development

(Leibbrandt et al., 2010). Of equal concern is the fact that inequality has risen further from its very high levels under apartheid (Leibbrandt et al., 2010). Just as the labour market was the key intermediary in the successes in

Brazil and India, so the unsatisfactory performance of the labour market sits centre-stage of South Africa’s disappointing development outcome. A net 2.74 million jobs were created between 1993 and 2008, 2.5 million of which were targeted at skilled labour, while unskilled workers lost a net 770,000 jobs. Over the same period, unemployment rates more than doubled from 14 per cent in 1993 to a peak of 29 per cent in 2001, before declining to 23 per cent in 2008. By the time of the economic crisis in 2010, the unemployment rate had reversed to 25 per cent, using the narrow definition of unemployment (National Treasury, 2011). If discouraged workers-who have stopped looking for work ‘because they do not anticipate finding any’—are included into this definition, the figure is substantially higher at about 32 per cent (StatsSA, 2012). Of the total population of 4 million unemployed, 75 per cent are long-term

unemployed and many young jobseekers report having limited or no formal work experience, even at age 30 (National Treasury, 2011). The informal sector is small, with only 6 per cent of South Africans working in selfemployment. The supply of labour is therefore directed primarily at jobs in the formal sector. In general, the labour market has not had a positive impact on poverty

because of the failure to pull individuals from poor households into employment. This unemployment situation worsened between 1993 and 2008, especially for those in the poorest households. The number of no-worker households has increased by 3 per cent in the past 15 years, pushing up the number of households relying on assistance, especially child grants, as their main form of income. Indeed, the improved aggregate poverty situation is due to increased support from social grants, not from the labour market. Even in one-worker households, the poverty incidence remains high. Because of high living costs and the fact that many workers are in low-paid employment, the presence of an employed person in a household is not a guarantee to escape poverty.