Sungula Nkabinde
SOUTH Africa is an example of how flawed a poverty reduction strategy focused solely on economic growth can be, according to a report published last week as the Group of 20 (G20) finance ministers met in Mexico.
The report, titled Left behind by the G20, shows how inequality has increased since 1990 in 14 of 18 countries in the bloc, whose 20th member is the EU. Saudi Arabia was not included in the analysis due to a lack of data.
South Africa is the worst, with the highest level of income inequality in the G20 and, if this were to continue to 2020, authors of the report predicted that even strong growth in gross domestic product (GDP) would not prevent an increase in extreme poverty.
“Looking ahead, inequality in South Africa is so high that our model predicts that, even if it remains static and is accompanied by strong GDP growth of around 3.7 percent, the number of people living in absolute poverty in South Africa is likely to increase,” reads the report. “The poverty rate would fall, but not enough to offset the impact of a rapidly growing population, so the absolute number of people living in poverty would still rise.”
Caroline Pearce, a co-author of the report, said the analysis exposed the “complacency” of the government’s assumption that economic growth would trickle down to the poor.
“The fact is poor people missed out on their fair share of the prosperity of the boom years and have been hit hardest by the crisis that followed. If the G20 wants to tackle poverty it needs to do more than promote growth – it needs to adopt policies that boost the incomes of the poor and protect them from environmental degradation,” Pearce said.
Anger about inequality was a key driving force behind the protests of the Occupy Movement staged around the world last year. Protests took place in more than 80 countries amid anger that a mere 1 percent of the global population was enjoying 35.8 percent of the world’s wealth. The report, which shows that inequality increased fastest in Russia, China, Japan and South Africa between 1990 and 2010, predicts that more than a million more people will be pushed into poverty in South Africa during the next decade unless inequality is addressed.
Brazil did better with nearly 12 million people escaping absolute poverty – an income of less than $1.25 (about R10) a day – bringing the proportion of people living in poverty down from 11.2 percent to 3.8 percent.
Pearce said the fact that South Africa and Brazil had similar growth rates proved that governments played a crucial role in reducing poverty and inequality.
The report lists five key policies governments can adopt to reduce inequality and recommends that policies be tailored to the national context. These include redistribution and cash transfers, access to education and health care, progressive taxation and the removal of barriers to equal rights and opportunities for women.