Pro-poor growth and social protection in South Africa: Exploring the interactions

This study evaluates the impact of South Africa's long-term economic growth on household poverty and inequality between 1995 and 2005. We find a decline in aggregate levels of poverty, but increasing levels of inequality. The evidence suggests that the growth model provides substantial redistributive income support to the poor through the social grant programme, whilst offering few returns to those in the middle of the distribution.     

Financial intermediation,regulation and the formal microcredit sector in South Africa

This article evaluates demand- and supply-side aspects of the formal microcredit sector in South Africa and the environment in which the sector is regulated. Although South Africa has a competitive financial sector relative to a sample of upper middle-income countries, the historical bias towards formal sector banking resulted in a lack of appropriate credit instruments for poorer people. In 1992, new regulations facilitated the legalisation of microfinance institutions and, by 2000, the sector had grown to over 2 per cent of total credit extended by the monetary sector, with over 1 300 institutions supplying microcredit to the public. The article presents the first statistics of different types of microcredit institutions as well as some of their disbursement trends, recorded since 1999 by the Micro Finance Regulatory Council. Thereafter, the demand for credit is assessed between 1995 and 2000, before best-practice regulation and South Africa's degree of compliance are discussed.     

Trade policy,productivity and learning: Evidence in South Africa

The theoretical argument in support of trade liberalisation is based, in part, on exports that foster dynamic efficiency gains primarily through learning and technological upgrading. Using data collected in the motor vehicle components industry, the article explores whether there is any evidence in the South African manufacturing sector to support this hypothesis. Although the conclusions are tentative, the author finds no unambiguous empirical support for the argument that, in the South African context, trade liberalisation fosters learning and innovation at the level of the firm.     

Considering the efficacy of value-added tax zero-rating as pro-poor policy: The case of South Africa

The use of value-added tax (VAT) zero-rating has become widely accepted internationally to mitigate the regressivity of the tax. From an economic perspective, it remains contestable whether VAT zero-rating is the most cost-effective way of targeting the poor. This article addresses some topical issues on VAT zero-rating in South Africa. We first ask whether (conceptually) zero-rating should be a consideration within the context of tax theory literature, and then quantify the impact on the poor if zero-rating was to be removed, as well as the tax revenue implications thereof. We compare the cost of VAT zero-rating with the benefit, using data sourced from the Income and Expenditure Survey 2010/11 and the Estimates of National Expenditure. Our findings show that VAT zero-rating (compared with existing social transfer programmes) is not cost-effective when targeting the poor.     

Pro-poor birth coverage and child health in Africa

This paper explores which African countries had relatively low rates of underweight children and relatively high birth coverage (percentage of births with a skilled attendant) in the poorest quintile. Swaziland and Rwanda emerged as relatively ‘pro-poor’ in that both measures were more than one standard deviation better than predicted by GDP per capita. Unlike Swaziland, Rwanda’s status as an outlier was eliminated in regressions controlling also for urbanisation, medical professionals per 1000 people and health spending, suggesting that its pro-poor outcomes were related to these factors. AIDS funding may have helped Swaziland provide primary health care to the poor, but its high birth coverage preceded the HIV epidemic. Although relatively pro-poor in international terms, Swaziland and Rwanda emerged as relatively unequal by the CIX measure of health inequality with regard to percentage of underweight children across quintiles. It is important not to conflate relatively equal with relatively pro-poor health outcomes.     

Revisiting wage subsidies: How pro-poor is a South African wage subsidy likely to be?

Wage subsidies have been used in both developed and developing countries to raise employment. After a decade of deliberation, the South African Government recently announced the introduction of a wage subsidy scheme. Given the intrinsic link between unemployment and poverty in South Africa, the belief is that a wage subsidy programme sufficient in scope will also make inroads into poverty. However, the way in which jobs are distributed among poor and non-poor jobseekers is crucial. Our general equilibrium microsimulation model confirms the expectation that a higher wage elasticity of labour demand is associated with larger reductions in poverty. We also find that a greater proportion of new jobs accrue to poor jobseekers when the elasticity is high. While youth-targeting does not improve the poverty-reducing effect of the policy, sectors such as textiles, accommodation, and construction services with their pro-poor employment profiles are good candidates for targeting.     

Contributing to the African Renaissance vision: The role of South African higher education institutions

President Mbeki is emphasising the vision of an African Renaissance in many of his public addresses. Many multifaceted inputs are required to realise this vision, and human resources development is one of the cornerstones of this ideal. South African higher education institutions could play a major role in this quest by sharing their expertise to upgrade the scientific, economic and educational competencies of all people in Africa. Data analysis shows considerable potential for attracting students from Africa, especially from the Southern African Development Community, to study at South African institutions. Current initiatives for facilitating intellectual mobility across the country's borders lack vision, however. Academic exchange programmes in other countries could serve as models to kick-start the contributions of higher education institutions in South Africa in realising Mr Mbeki's vision for an African Renaissance.     

The productivity–wage relationship in South Africa: an empirical investigation

This article investigates the relationship between labour productivity, average real wages and the unemployment rate in South Africa at the macroeconomic level, using time‐series econometric techniques. There is strong evidence of a structural break in 1990, after which time all three variables rose rapidly. The break appears to have negatively affected the level of employment in the first instance, and subsequently fed through into per worker wages and productivity. A long‐term equilibrium (cointegrating) relationship was found between real wages and productivity, but unemployment was apparently unconnected to the system, which lends support to the insider–outsider theory. A long‐term wage–productivity elasticity of 0,58 indicates that productivity has grown more rapidly than wages, which is consistent with the finding that labour's share of gross output has been shrinking over the past decade. These trends may be explained plausibly by the adoption of job‐shedding technology and capital intensification.     

What we have learnt from post-1994 innovations in pro-poor service delivery in South Africa: a case study-based analysis

Service delivery is vital for alleviating poverty in South Africa. This paper contributes to the dialogue on how to maximise the impact of pro-poor service delivery by considering evidence from a wide selection of case studies to distinguish the successes and failures of post-1994 pro-poor service delivery. Case evidence brings to light four important points: that decentralisation and participation can reinforce historical distributions of privilege; that community ownership is neither a necessary nor a sufficient condition for effective service delivery to individuals in rural communities; that when managed well private outsourcing can benefit the poor; and that the abolition of user fees is often not the best way to ensure access to basic services. The paper cautions against overly ambitious and idealistic policy making. When a policy fails because of its lack of flexibility or its disregard for the constraints of the implementation context, this failure should be attributed to short-sighted policy making and not to implementation failure.     

Labour unions and wage inequality among African men in South Africa

One Achilles' heel of post-Apartheid South Africa is the growing intra-racial income inequality, particularly among Africans. This paper examines the role of labour unions in explaining this phenomenon among African men given that labour markets are at the core of income inequality in South Africa. Using cross-sectional data drawn from Labour Force Surveys for 2001–10, we find a monotonically declining union wage premium. Further, our results indicate that unions have both compressionary and disequalising effects on wages. The disequalising effect dominates the compressionary effect, suggesting that unions have a net effect of increasing wage inequality among African men in South Africa. This finding implies that there is scope for unions to reduce inequality through initiatives that promote wage compression.     

Total factor productivity in South African agriculture, 1947‐91

Indices of total factor productivity (TFP) measure aggregate output per unit of aggregate input, providing a guide to the efficiency of agricultural production. This article outlines the relationship between production functions and TFP indices. Then, an index is constructed for South African agriculture for the period 1947‐91. The index shows that TFP grew at an average rate of 1,3 per cent per annum. However, TFP growth has increased since the reforms of the early 1980s. Since capital has been more realistically priced relative to labour, greater productivity growth has gone together with increasing employment, which must have improved social welfare.     

Tenure security and productivity in small‐scale agriculture in Zimbabwe: Implications for South Africa

This article tests empirically the interaction between land tenure security and agricultural productivity in small‐scale agriculture in Zimbabwe. Data for the analysis were gathered during April and August of 1995 by means of an interview survey of farmers in the small‐scale commercial sector, communal area and Model A resettlement area of Zimbabwe. Two‐stage least squares regression estimates reveal that land tenure security has a positive and significant influence on investment incentives and agricultural productivity in the sample. This result has two important implications for proposed land reforms in South .. Africa. Firstly, the result lends support to the notion that indigenous tenure institutions in communal areas of South Africa are a constraint on agricultural development. Secondly, it is clear that a national land redistribution policy must be accompanied by innovative tenure institutions which facilitate economic interaction and internalise externalities on land resettled by individuals and groups. This is particularly important in South Africa where groups of up to 300 families are being settled on commercial farms under a group ownership model.     

Hiring on the basis of expected productivity in a South African clothing firm

Using information from the personnel files of a South Africanclothing firm, I explore the in- and outflow of weekly-paidworkers. These employees form a separate labour market withinthe company. Data was available concerning both the productivityof current workers, and the characteristics of rejected applicantsand fired workers. This makes it possible to identify the characteristicswhich are screened out at entry and the characteristics thatinfluence productivity. This allows for an empirical analysisof discrimination at job-entry. Hiring decisions were foundto be consistent with expected productivity. The observed screeningout of African workers at job entry could be explained by statisticaldiscrimination, i.e., the actual productivity of African workersin this firm was found to be significantly lower than the productivityof workers of other ethnic backgrounds. The effect of educationon productivity was found to be very small.