SA in urgent need of economic reform to fight poverty

Jacques Moolman, president of the Cape Chamber of Commerce and Industry

South Africa is sadly absent from the latest list of developing countries that have dramatically reduced poverty levels over the past 15 years, according to the global Multidimensional Poverty Index (MPI).

Unlike fellow Brics members, China and India, which have more than halved their poverty levels, South Africa is lagging in its development goals.

The MPI, based on research conducted by Oxford University, is a measure of acute poverty covering more than 100 developing countries. The latest MPI was released two months ago by the United Nations Development Programme at around the time South Africa was in the midst of semi-permanent Stage 6 load shedding.

A standout feature of the latest MPI is that 25 countries halved their global MPI value within 15 years, “showing that progress at scale is attainable” the report noted. An example is Cambodia, which halved its MPI in 7.5 years (2014–2021/2022). The research authors note, however, that the latest scores are based on country data that predates the hugely negative impact of the Covid-19 pandemic.

While the MPI is no doubt a cause for celebration in some quarters, for us in South Africa the results are a reminder of missed opportunities. Our own poverty metrics make for dismal reading, notwithstanding initial progress in alleviating poverty post 1994. SA’s official unemployment rate is 32,6% according to the latest Quarterly Labour Force Survey. However, this percentage rockets up to 44.1% if one includes discouraged work seekers – those who have effectively given up hope of employment.

The tide of poverty, so clearly visible across South Africa, is all the more vexing when one considers international success stories of the kind highlighted by Oxford University. While other developing nations have successfully reduced poverty, South Africa faces persistent challenges that hinder its progress. These challenges include port inefficiencies, an energy crisis, bureaucratic hurdles, and underperforming government agencies, all of which create a challenging environment for businesses. The consequences are evident in the high unemployment rate and inability of many millions of people to earn even the most basic income.

In August 2023, Stats SA established the food poverty line at R760 per person per month, representing the minimum amount necessary for an individual to afford daily essential energy intake, often termed the “extreme” poverty line. Additionally, there are two more benchmarks: the lower-bound poverty line, fixed at R1 058 per person per month, which includes the food poverty line and the average non-food item expenditure by households meeting the food poverty line. The upper-bound poverty line is R1 558 per person per month, extending to households with food expenditures matching the food poverty line. Considering the national minimum wage of R25.42 per hour or R203.36 for an 8-hour workday over 22 days, general workers receive a maximum national minimum wage of R4 473.92. However, these wages are intended to support entire families, which, for South African workers, often means four individuals per wage earner. When divided among a family of four, the national minimum wage amounts to R1 118.48 per person, falling below the upper-bound poverty line of R1 417 per person per month. This stark contrast underscores the urgent need to address wage disparities and the challenge of enabling workers to adequately provide for their families in a financially strained environment, thereby reducing poverty in South African society.

However, addressing wage issues can only be achieved in a growing economy where businesses can operate efficiently and productively. Unfortunately, the current operating environment does not permit such conditions, with only minimal wage increases and, in many cases, job losses.

South Africa is at a critical crossroads in its quest for economic development and poverty reduction. We urgently require economic reform required to grow the economy such that we can lift more people out of poverty and give effect to the promise of a better life.

But as much as our current challenges retard our progress, the Chamber hopes they also present an opportunity to do things differently, and better, in the form of public-private partnerships in critical areas such as logistics, energy, and economic development.

The Cape Chamber of Commerce and Industry is advocating for reforms that will create an environment conducive to growth.

We believe South Africa has the potential to overcome our current challenges, but it will require unity and collaboration. Let us seize this moment to work together for a future where poverty reduction becomes a tangible reality. Through innovation, determination, and collective effort, we can build a brighter and more prosperous future.