One Kind of Freedom: Poverty Dynamics in Post-apartheid South Africa
Introduction
Analysis of South Africa's first nationally representative household income and living standards survey1 indicated that half of all black South Africans lived in poverty in 1993, a stunning portrayal of material deprivation and inequality in an upper middle-income country with a per capita income in excess of $3,000.2 In a report for the South African Inter-Ministerial Committee on Poverty and Inequality, May and Woolard (1998) calculated the UNDP's Human Development Index (HDI) for specific South African ethnic and regional groupings, and found that the 1992 HDI for the “African” population of South Africa ranked between the HDI of Swaziland and Lesotho, while the HDI for whites was between that of Italy and Israel.
Drawing on a 1998 re-survey of households in the 1993 dataset, this paper explores post-apartheid poverty dynamics, asking whether the end of apartheid has been only one kind of freedom that has left a majority of black households stuck in a poverty trap from which they cannot escape.3 The goal of this paper is to not only document the gross degree of mobility into and out of poverty during 1993–98, but also to look for clues regarding the degree to which those observed to move out of poverty were simply “stochastically poor” in 1993 (i.e., unlucky in 1993), or whether the new freedoms permitted by the post-apartheid economy enabled them to successfully accumulate and structurally move out of poverty.
This paper is organized as follows. Using concepts from dynamic programming analysis, Section 2 develops the dynamic analogues to single-period poverty measures that are needed for the empirical analysis and tries to move the theoretically important idea of poverty traps closer to empirical implementation. It also suggests that the commonly used dynamic poverty concepts of chronic and transitory poverty confuse distinct sorts of poverty and in particular are an unreliable guide to the number of households caught in a poverty trap. Section 3 then introduces the 1993–98 panel dataset and describes the South African macroeconomic situation over this time period. Section 4 explores the dataset as two cross-sections, documenting a pattern of increasing poverty and inequality for this cohort of African and Indian households. Section 5 then exploits the panel nature of the data and explores mobility within South Africa, first estimating the joint distribution of well-being and then exploring various log-linear mobility models based on the transition matrix which describes the movement of households across real livelihood levels. While these estimates show a class-differentiated mobility pattern (with the initially well-off tending to move ahead and the initially poor tending to fall behind), they do not distinguish stochastic from structural mobility. Using various measures of shocks to distinguish unlucky from structurally poor households, it is estimated that up to 60% of South Africa's poor households are caught in a structural, post-apartheid poverty trap. Section 6 concludes the paper with a few reflections on the need for South Africa to shift toward microeconomic policies that can make markets, and time, work better for its least well-off citizens.
Section snippets
Dynamic poverty concepts
Apartheid in South Africa actively dispossessed black people and limited their ability to accumulate and use assets. Using data from the 1993 national household survey, Carter and May (1999) tried to move beyond an enumeration of apartheid's poverty with an exploration of the structural bases of that poverty. They showed that in the immediate post-apartheid era, the poor were disproportionately found among households that shared similar endowments and faced similar constraints to the use of
The Kwazulu-Natal income dynamics study (KIDS)
Several panel data sets exist which have been used to analyze income mobility and poverty transitions. Examples include studies of the determinants of income mobility using the Côte d'Ivoire Living Standards Survey (Grootaert & Kanbur, 1995), access to rural assets using the International Crops Research Institute Semi-Arid Tropics Village Level Studies in India (Gaiha & Deolalikar, 1993) and the influence of family history on children's well-being using the Panel Study of Income Dynamics in the
Changes in poverty and income distribution, 1993–98
Table 1 presents a headcount poverty measure constructed using information from the 1993 and 1998 household subsistence lines (HSLs) calculated by the Institute for Planning Research at the University of Port Elizabeth (see Potgieter, 1993a, Potgieter, 1993b; Potigeter, 1998). The HSL is built up based on fixed household subsistence costs (to cover shelter, fuel and transport), as well as food and basic clothing costs calibrated to individual resident household members' age and sex. Using the
Mobility and poverty dynamics
While provocative in its portrayal of an unequalizing post-apartheid income distribution process within the African and Indian populations, the analysis in the prior section is uninformative about whether initially poor households have become systematically worse off over time, or whether Figure 2 has been generated by significant upward and downward mobility in which initially poor and non-poor households have swapped places in the income distribution. Distinguishing between these two cases is
Conclusions
Just over five years ago, South Africa's first freely elected, post-apartheid government inherited an economy marked by deep economic inequality and levels poverty and living standards characteristic of much poorer economies. This paper takes a first look at the dynamics of post-apartheid income distribution. Using the KwaZulu-Natal Income Dynamics study of approximately 1,200 black households over 1993–98, this paper finds that poverty rates have increased from 27% to 43% among this cohort,
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