An off-the-cuff remark by a leading trade unionist that millions of South Africans were economically better off under apartheid than under democratic rule has highlighted the country's stubborn poverty rates, but also scored points for the unionist's favoured candidate in an increasingly fractious presidential succession race.

"Many of the millions who are unemployed, or whose jobs have been casualised, are even worse off than under apartheid: about 20 million of our people are still mired in poverty, we still face many challenges, and the task of transformation is far from complete," said Zwelinzima Vavi, general-secretary of the country's largest trade union federation, the Congress of South African Trade Unions (COSATU).

He has since retracted his remarks, made in Cape Town at the 20th anniversary celebrations of municipal unions, but according to UNAIDS, about a third of South Africa's roughly 48 million people live on US$2 or less a day, even though the country is Africa's economic powerhouse and contributes about 25 percent of its gross domestic product.

President Thabo Mbeki, whose second and final term of office ends in 2009, has presided over a growing disparity in income between rich and poor, which now ranks as one of the widest in the world. His policies have been criticised not only in the ruling African National Congress (ANC) party's ranks, but also among its political allies for serving the interests of a politically connected elite at the expense of the poor.

Jacob Zuma, sacked by Mbeki from his post as deputy president on allegations of corruption, is currently favoured as the country's next president because of the apparent support he enjoys by most of COSATU, the South African Communist Party and elements of the ANC, who believe that a Zuma presidency will be pro-poor, although, when drawn on issues of policy, the possible president-in-waiting has endorsed the economic status quo.

Government cites its success

Finance minister Trevor Manuel told parliament in his mid-term budget review in late October that all income groups were earning about 22 percent more than they were in 1999, and that "in 1996, just over half our people did not have water in their homes; today, over 88 percent of people have access to piped water. In 1996, only 64 percent of our people lived in formal houses; today, over 70 percent enjoy this right."

He said South Africa was in its ninth year of the longest economic upswing since national accounts had been kept, and income across all groups had risen by 22 percent per person since 1999. "These are substantial steps towards our medium-term economic goals: growth of 6 percent a year or more, an unemployment rate of below 14 percent by 2014, and an aggregate poverty rate half that recorded in 2004."

Government policy for poverty reduction is predicated on growth, and in his speech Manuel predicted economic growth of 4.9 percent in 2007 and 4.5 percent in 2008, before returning to about 5 percent a year in 2009 and 2010.

Independent economist Sampie Terreblanche has lauded some of the ANC's attempts to alleviate poverty since coming to power in a society that had been greatly skewed by apartheid's racial economic imbalances, yet noted that "The ANC has failed dismally in its main task: to shift back the frontiers of poverty," at a recent book launch in Cape Town.

Black diamonds

"ANC policies over the past 13 years have created a black elite, the co-called 'black diamonds', of [around] 2 million people, and a black middle class of [about] 6 million. The gap between the [roughly] 8 million rich blacks and the 20 to 25 million poor blacks has become dangerously big. The other 10 to 15 million blacks are neither poor nor rich," said Terreblanche, who was involved in clandestine meetings with the then banned ANC in the 1980s.

"The fact that [about] 20 percent of blacks have become rich, and even very rich, while 60 percent of blacks remain poor and have to live in deteriorating socio-economic conditions, is a deplorable and dangerous state of affairs."
Terreblanche said poverty was "not only an income and resource phenomenon", but a set of multiple deprivations, and it "is as if the ANC does not understand the strong dynamism of the pauperisation process that perpetuates and intensifies itself from one generation to another."

The policy of black economic empowerment designed to overcome the economic injustices of the past had "become derailed by corruption, nepotism and careerism ... [and] built a comprehensive network of patronage," he said, and "this network became entangled in the power struggle within the ANC concerning the successor of Thabo Mbeki."

Ironically, the major beneficiaries of the ANC's free market polices are those that accrued their wealth under apartheid. "We are faced with the contradictory situation that at least 80 percent of the whites who were already rich in 1994 - thanks to apartheid - are now much richer, while 60 percent of the blacks who were already poor in 1994 - as a direct result of apartheid - are now poorer," Terreblanche commented.

He told IRIN that Manuel's assertion that poverty could be halved by current policies by 2014 was "absolute nonsense", and was an example of how the ANC solved poverty through "rhetoric".

The 11 million social grants provided by government to specific groups, such as pensioners, "provides a safety net of sorts", as the recipients used it as a contribution to extended family networks, Terreblanche told IRIN.

Government has not introduced a comprehensive safety net for the poor, although it has discussed, but never adopted, a basic income grant. Terreblanche told IRIN that if government "were to announce it will spend R100 billion [$15 billion] on the poor", international credit bureaus would downgrade South Africa's ranking for adopting "populist policies".

Prof Haroon Bhorat, director of the Development Policy Research Unit at the University of Cape Town's School of Economics, told IRIN that poverty levels had decreased from 2000 onwards, primarily because of the expansion of the social security system, and because the extended family system remained a crucial element for ameliorating the impact of poverty.

The success of trickle-down economics, as adopted by the government, depended on whether the "distribution of the gains from growth is equitable ... So this is the rub. We do have positive growth, macro-stability and asset provision to the poor," he said.

"However, the nature of this 5 to 6 percent growth has been to increase incomes of the rich by far more than [those of] the poor. This has caused income inequality to rise. For an already highly unequal society this is a frightening prospect."

A declining economy

The outlook for the South African economy, according to Moeletsi Mbeki, brother of President Thabo Mbeki and deputy chairperson of the South African Institute of International Affairs, was "a long, slow decline".

In a speech to the Chamber of Mines in Johannesburg, Mbeki reportedly said, "the fastest-growing sectors of the economy" were financial services, real estate, business services, construction, trade, transport and communications, which "do not export, and they absorb the least amount of labour", while the exporting sectors, such as manufacturing and mining, "which should absorb the most labour are, in fact, declining".

Mbeki reportedly said the declining economy, where manufacturing as a proportion of GDP "is down from 25 percent in the early 1980s to 16 percent [currently]", was unable to create sufficient jobs, while payment of excessive salaries was unsustainable.

"If South Africa is to develop in the 21st century, and get rid of endemic poverty and high unemployment, the elite in this country cannot continue to enjoy the standards of living of the middle classes of the West without the equivalent productivity, which is the case at present."