Johannesburg - The World Bank says South Africa could more than halve its number of poor people to 4 million by 2030 if it addresses corruption, gets free higher education right and reduces policy uncertainty in its mining industry.
"Solutions are needed to foster inclusive growth, which in practice means improving the poor’s access to good jobs so they can fully participate in the economy," the World Bank said in an economic update on South Africa released on Tuesday.
South Africa has been using fiscal redistribution through social assistance with about 17 million South Africans receiving various forms of social grants, which cost the government more than R150bn annually.
However, the strategy has been unable to redress the rise in inequality since 1994, and is increasingly constrained by narrowing fiscal space.
"A credible path to sustainably redress inequalities is needed to reduce policy uncertainty and strengthen the social compact on which authorities plan to build consensus with business, labor, and civil society," said the World Bank.
The Washington-based lender said while race remains a central determinant of inequality, income inequality is now increasingly being determined by job status: employed versus unemployed, skilled versus unskilled.
The World Bank, however, projects that by 2030 inequality should be back down to its 1994 level, and South Africa should number 8.3 million poor people (at $1.90 a day), down from almost 10.5 million in 2017.
"But the number of poor people could be brought down further, to 4 million by 2030, through selected policy interventions."
How SA can get it right
Some of the short-term policies suggested by the World Bank include the need to address corruption, getting free higher education right, restoring policy certainty in mining, improving the competitiveness of strategic state-owned enterprises, further exposing South Africa’s large conglomerates to foreign competition, and facilitating skilled immigration.
In the long term, South Africa can reduce inequality levels by improving the quality of basic education delivered to students from poor backgrounds, and reinforcing the spatial integration between economic hubs - where jobs are located - and underserviced informal settlements.
According to the World Bank, these first set of reforms would raise labour demand and create the fiscal space needed to eventually build labour supply from the poor population through education and spatial integration.
The bank however noted that constructing this new South Africa will take time, and managing expectations will remain a challenge in a country where strong political rights combine with high inequality to demand rapid transformation.
“In this regard, continued efforts to effectively redistribute wealth to the poorest while protecting economic growth will need to complement the reforms discussed above to create skilled jobs for the poor.”