Poverty and Inequality in the First Decade of South Africa's Democracy: What can be Learnt from Panel Data from KwaZulu-Natal?

Abstract

Despite striking indicators depicting high per capita Gross Domestic Product together with poor social indicators, changes in the incidence and severity of money-metric poverty in South Africa since 1993 have been a source of debate. Household surveys suggest that poverty appears to have persisted during the 1990s, with perhaps some improvement since 2000. Inequality remains high, and is probably widening, but there has been delivery in terms of social services such as water and electricity. Panel data that track the circumstances of the same people contribute towards a deeper understanding of the complex story of poverty and inequality in South Africa. Data from the KwaZulu-Natal Income Dynamics Study (KIDS) collected between 1993 and 2004 show increasing poverty and inequality in the mid-1990s, with a partial reversal of some of these trends in the post-1998 period. The improved well-being of at least some next-generation households is a hopeful sign in these data. In addition, government transfers do seem to have contributed towards dampening the impact of market-generated inequality, reducing the spread of the expenditure distribution and lifting up the very lowest part of the distribution. In particular, the introduction of the Child Support Grant has dramatically increased the number of recipients of grants. This is reflected in the KIDS data, which show that the amount of transfers per-household has doubled.