During the first decade of democracy in South Africa, the economy has recorded one of its longest periods of positive economic growth in the country’s history. One of the more vexing issues within the economic policy terrain in post-apartheid South Africa though, has been the impact of this consistently positive growth performance on social welfare, specifically income poverty and inequality. Many observers have highlighted the potential harmful consequences of persistently high levels of poverty and, particularly economic inequality, on the quality and sustainability of democracy (See for example Bermeo, 2009; Kapstein & Converse, 2008 and Wells & Krieckhaus, 2006). High levels of inequality have been linked to behaviours such as decreased voter turnout, depressed political engagement and high crime rates – all of which can have a negative impact on the quality of democracy. Increasing levels of income inequality also have the potential to divide citizens and contribute to social conflict. In such a situation, the diverse pressures on a government can lead to politicians resorting to surreptitious tactics such as “playing some voters off against each other” (Bermeo, 2009).
In 2005, government released its economic policy programme captured formally as the Accelerated and Shared Growth Initiative for South Africa (ASGISA) (The Presidency, 2005). ASGISA is distinguished, relative to its two predecessors, GEAR and the RDP, by its strong emphasis on defined, and very specific growth-enhancing projects. The delivery of physical infrastructure and a detailed programme for the provision of skills are just two examples of such interventions. It is important to note however, that in many senses, ASGISA is a continuation of the GEAR strategy. Having achieved the critical need for macroeconomic stability – arguably the core of GEAR – the emphasis has now shifted within ASGISA to a more detailed programme of activities designed to deliver the holy grail of 6% growth per annum.
The post-1994 period in the South African economy is characterized, perhaps most powerfully, by the fact that the economy recorded one of its longest periods of positive economic growth in the country’s history. One of the more vexing issues within the economic policy terrain in post-apartheid South Africa though, has been the impact of this consistently positive growth performance on social welfare. Many observers have highlighted the potentially harmful consequences of persistently high levels of poverty and particularly, economic inequality on the quality and sustainability of democracy. The evidence suggests, at best, six key trends which are noteworthy in terms of observing changes and challenges in South Africa’s second decade of democracy. Firstly, it is clear that both absolute and relative levels of poverty have fallen for African- and female-headed households. And it is a result invariant to the choice of poverty line. Secondly though, we continue to show that race and gender remain overwhelming determinants of this poverty profile. Thirdly, the trends in income inequality suggest that one of the world’s most unequal societies has quite possibly become the most unequal.
This study has two main objectives. The first objective is to provide a comprehensive overview of the changing levels of inequality in the post-apartheid South Africa and to identify the drivers of these changes. This also includes examining the relationship between economic growth, poverty and inequality over the period. The second objective is to evaluate the increased provision of social grants as a policy option to alleviate the impact of increasing inequality in South Africa.