by John Luiz, Michael Chibba

Poverty alleviation

Policy makers need to think again

John Luiz
John Luiz.JPG
South African policy makers are tackling poverty, inequality and unemployment with damage control measures that are not in the interests of the nation’s long-term health, found research from the University of Cape Town’s (UCT) Graduate School of Business (GSB). Rather South Africa should be spending more time on diagnosis to find ways to address its unique needs, experts say.

Poverty, inequality and unemployment have worsened globally over the last few decades – and South Africa is no exception. Here, we’ve felt the pinch of the global financial and economic crisis on our core developmental issues. 

Yet, policy makers continue to implement unsuitable solutions that only exacerbate the situation. This is according to research by John Luiz and Michael Chibba of the UCT GSB.

“Only through learning from our mistakes, and taking into account as many variables as possible, can South Africa address positive change,” says Luiz, a Professor of Business, Society, and Government at the GSB.

“Our findings show that the habit of government to diagnose problems without properly reviewing the infection is becoming a feature of policy making in South Africa. To date, there have been four key national initiatives in the post-Apartheid period to tackle poverty, inequality and unemployment issues, all of which have already, or are in the process of failing,” says Luiz. 

BEE, social grants no magic cure

According to the report, despite short-lived early attempts to promote a business-friendly environment, private sector development in South Africa has not been vigorously supported, and so has halted progress. Other manoeuvres, such as the politico-economic route taken to advance Black Economic Empowerment (BEE) policies, along with social grants, both of which are collectively at the core of the South African inclusive development strategy, have not done well. 

“State-led charters, consensus building, multi-partite negotiations, supportive regulations and laws, social programmes, monitoring and evaluation, and private sector development have been selectively – and on the whole, not very successfully – advanced”, the report states.

The dramatic expansion in social grants over the past decade has had a mildly favourable short-term impact on poverty, which is to be expected given the sizeable increases in social spending. But “social grants do not deal with the root causes of poverty in South Africa and are not thoroughly integrated into a comprehensive anti-poverty strategy. They can only be considered a quick fix,” says Luiz.

Long-term healing requires planning

These features show that structural inequality is embedded in the system, and growth by itself will not address poverty, inequality and unemployment problems. Instead, the report proposes, appropriate and innovative policies and programmes need to be assessed, planned, budgeted and implemented. As it stands, policies seem to be made almost on a whim, considering only what is needed, or worse, wanted, at the time, for any given situation.

Luiz and Chibba’s research indicates that there are five primary features that define the landscape of poverty, unemployment and inequality in South Africa that must be taken into account in order for successful initiatives or policies to be constructed.

These are: the historical context and enduring legacy of apartheid era policies; post-apartheid governmental leadership and public sector capacity; the validity, or lack of validity, of conceptual, methodological, strategic, and operational policies, strategies, and programmes to address poverty, inequality and unemployment; the politico-economic dimensions of decision-making in the nation; South Africa’s preparedness and resilience to external shocks; and both structural inequality and unemployment, which are inextricably tied to poverty.

While these features are in some cases acknowledged, the report states that “the policies and initiatives put into place to combat them do not adequately take their full effect into account. Poverty, inequality and unemployment problems are due to a host of specific failures accompanied by unique circumstances.”

Prevention measures

What can South Africa do to ensure that past mistakes are not repeated, and what new approaches should be adopted in the post-crisis period?

Luiz and Chibba believe that “First, there is a fundamental need to reorient policy so that the next generation's approach to poverty, inequality and unemployment problems is not a spin-off from conventional economics and thus more of the same. Instead, the new approach needs to be both eclectic and innovative that it should integrate the diverse and multidisciplinary aspects of poverty, inequality and unemployement matters and development – the profound interconnectedness of which continues to be largely ignored in policies and programmes in South Africa.” 

In preparing poverty, inequality and unemployment policies and programmes there is a need to ensure that they do not promote a sense of entitlement (and welfare dependency) but instead tackle income inequality head-on with comprehensive and successful policies. Developmental challenges must be viewed from a post-crisis lens that includes the use of emerging economics – and alternative models of development or new development paradigms is imperative if a real difference is to be made in tackling South Africa’s enduring poverty, inequality and unemployment issues. 

Lastly, these findings and recommendations must be made within a framework of action. This approach is comprehensive, realistic and implementable in addressing South Africa’s poverty, inequality and unemployment problems.

Back in 1973, Nobel prize-winning economist Amartya Sen wrote: “Poverty has been identified not merely with inequality, but also with unemployment.” Yet despite this being an accepted truth for over three decades, we are no closer to describing successful theories to guide action. Continued and absolute dependence on conventional economics and failed paradigms of the past means we are failing to deal with the most pressing issues facing South Africa today.

(This article, supplied by the University of Cape Town’s Graduate School of Business, is based on a research paper by Michael Chibba (of ICDEPR, Canada) and John Luiz (of UCT), entitled: Poverty, Inequality and Unemployment in South Africa: Context, Issues and the Way Forward, published in the Economic Society of Australia’s Economic Papers, Vol. 30, No. 3, September 2011)
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