How SA is changing

Yes, transformation has occurred in South Africa since 1994. But no, South Africa is not yet transformed. 

In a study by Alternative Prosperity for finweek, the researchers selectively examined progress across four stages of economic life: education; work, earnings and accumulation; leadership, influence and ownership; and retirement. The results were surprising – and often also disappointing.

“The strongest message from our research is that we still have a long road before achieving black economic empowerment. In the years that followed our democracy there is reason to be disappointed. We are sure that this is not news to South Africans,” says Rudolph Fourie, director of Alternative Prosperity.

The results partly reflect the evolution of South African society and partly the effects of race-based policies and interventions to stimulate the inclusion of black people in the economy, such as laws on employment equity and black economic empowerment. (In this article, the term black is used to describe African, Indian and Coloured South Africans, as per legislation on BEE.) 

In general, though, access to education and the relative number of Africans passing matric and going into higher education, has increased significantly. There are more African academics, judges, doctors and accountants than in 1994 – so while nowhere near reflecting SA’s demographics, the numbers are increasing. 

The same can be said for ownership of shares and people in leadership positions. 

There are also now significantly more people who are being supported by pensions as more black people have become members of pension funds. To a large extent, the rapid transformation of government and its employees was the most significant contributor, Alternative Prosperity said. Black household ownership of cars and homes, and black membership of medical aids has also increased.

Work in progress

But for the most part, transformation in SA remains a work in progress. And many outcomes have not yet been achieved.

“It does not imply that no progress has been made against empowerment targets set. When studying empowerment over a typical economic lifecycle, we found a number of examples to be proud of," Fourie says.

One example is how the growth in the value of the South African economy (which includes listed and unlisted companies) has contributed to a healthy Government Employees Pension Fund (GEPF), by far the largest investor in the South African economy through its manager, the Public Investment Corporation (PIC).

"Since 1994, the GEPF has grown to a fully capitalised pension fund that, if sustained, will ensure that public servants retire with decent pensions. The fact that the fully transformed public sector employs a large part of the South African workforce, highlights the importance of making the connection between institutional investments and empowerment," he explains. 

Such positive stories are however dwarfed by the crisis in South African education. “In the case of education, it is clear that numbers have been advanced, but quality has not followed. Not at secondary level. The knock-on effect is being felt in further and higher education,” Fourie adds. 

Poverty and unemployment

An overriding impediment to transformation appears to be a lack of economic growth. GDP growth, which improved from 3.2% in 1994 to 5.6% in 2006, slipped back to an estimated 0.3% in 2016, according to the International Monetary Fund (IMF). It is forecasting growth of only 0.8% for 2017. 

Unemployment is up from 20% in 1994 to 27.1% in the third quarter of 2016. 

A breakdown of the numbers, based on the latest available data, shows 4.4m African people were out of work in 2014, up from 1.6m in 1994. Coloured unemployment has increased from 260 000 to about 504 000, white unemployment from 42 000 to 139 000 and Indian unemployment from 48 000 to 68 000. 

Youth unemployment remains one of SA’s most serious crises, with 54.2% of people between the ages of 15 and 35 currently unemployed. (This excludes people in education and training, and also people who have given up actively looking for work.)

Social welfare net

SA has expanded its social welfare net substantially since the late 1990s in an attempt to address poverty, and the percentage of people who benefitted from social grants rocketed from 12.7% of the population in 2003 to 30.1% in 2015, according to Stats SA. More than 17m South Africans currently receive some form of welfare grant.

While some have expressed concern and criticism that SA’s welfare spending, which totalled R121bn in the 2014/15 financial year, may not be sustainable, the researchers observed that government’s ability to provide social grants to the poorest of the poor can actually be seen as one of the key successes of pro-poor policy.

This is supported by the latest SA Child Gauge Report, which was published in 2016 by the Children’s Institute in partnership with Unicef SA. It found almost two-thirds of children in SA live below the upper band of the poverty line, but that the child support grant system has made a big impact on millions of children who would otherwise be living in extreme poverty.

The grant, which was introduced in 1998, has halved the proportion of children living below the food poverty line (the most severe poverty measure), from 58% of children in 2003 to 30% in 2014. In 2016, 12m children received the grants, with each recipient getting R360 a month. 

For the full research report by Alternative Prosperity, click here. Visit the company's website here. 

This is a shortened version of the cover story that originally appeared in the 2 February edition of finweek. Buy and download the magazine here.