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World Bank publishes the third South African Economic Update

The World Bank has published an updated economic report on South Africa which focuses on inequality of opportunity for children and access to employment. The objective of the report is to spur debate to move our policies closer towards attaining equality of opportunity for every individual in the country.

The report notes that South Africa was unable, in the first quarter of 2012, to sustain the slight economic gains made in the last quarter of 2011. The sluggish economy, together with skill shortages, labour market rigidities and chronically low savings and investment rates, has contributed to increasing youth unemployment rates. In addition, the limited growth that did take place has been highly uneven, perpetuating inequality and exclusion. The report confirms that South Africa remains one of the most unequal societies in the world, with the top quintile accounting for 58% of the country’s income and the bottom quintile accounting for 0.5%. The report concludes that the inability to create employment lies at the heart of high inequality levels. Social grants have been a saving grace, as, without these, people and households living below the fortieth percentile would have experienced income declines in the first ten years after apartheid. Even with grants, however, income inequality in South Africa remains unacceptably high.

The key to breaking this cycle is improving access to a basic set of services – especially in the early years for the most marginalised children and families and improving employment levels, especially among the youth.

The report adds: “Major challenges are the limited and unequal access to safe water on site and improved sanitation and the opportunity to finish primary school on time or be exposed to ECD programs, along with the general lack of physical safety – all of which create the conditions for children to develop their human potential.”

In the employment context, high levels of inequality of employment opportunity among youth are caused by factors beyond their control – such as the quality of education they receive, their race and location.

The focus of policy developments in the coming years must be on ensuring that every child has the opportunity to advance through guaranteed access to early childhood development services, to quality education, health care and essential infrastructure. The report finds that South Africa is currently marked by high levels of inequality of opportunity as access to services varies widely across services and regions. In comparison to other countries, South Africa fares well on school attendance, “but ranks below most comparators on the HOI for completing primary school on time and access to safe water on site, improved sanitation, and even electricity”. The key determinants of inequality of opportunity are location (whether a child lives in a township/informal settlement or a rural areas as opposed to an urban area) and the education level of the head of the household.

The report concludes that there are “no simple, elegant policy solutions” for ensuring equality of opportunity for those that are persistently marginalised. However, based on international experience, the way forward must be marked by the development of a dynamic system “involving policy experimentation (from incentives for training and hiring young workers to monitorable and incentive-based delivery of public services), backed by rigorous impact evaluation and greater participation of communities in the actual delivery of basic public service delivery and in the feedback loops for policymakers”.



Click here to view the World Bank report.