Poverty alleviation in South Africa : can government fiscal expenditure on social services make a difference?

Abstract

This study examines how the South African government's expenditure on social services

impacts on the poverty levels in the country. To provide a background on poverty,

different concepts and views on the subject are reviewed and then the nature and

distribution of poverty in South Africa are discussed.

In post-apartheid South Africa, the thrust of macroeconomic framework and

corresponding policies implemented by the democratic government have been geared

towards poverty alleviation, employment creation and national output expansion

(economic growth). This study examines the trends in government expenditure on social

services and uses econometric analyses to further investigate the effects of government

spending on social services on the poverty levels in South Africa.

Economic growth and employment opportunities will have to exist and complement

fiscal redistribution to enable the poor lift themselves out of poverty in the long run.

Improved targeting methods that correctly identify the poor could also ensure that social

spending reaches the intended poor, thus narrowing the gap between macro policies and

the poor, and preventing a waste of resources.

Various poverty alleviation measures have been implemented, of which redistribution

through the budgetary policy is an important one. As part of its package towards

addressing the poverty problem, the post-apartheid government in South Africa has

consistently been injecting considerable amounts of resources on inter alia, education,

housing, welfare and health services. The initial results indicate that fiscal redistribution

on its own is inadequate in combating poverty in South Africa. Models that incorporate

economic growth and unemployment show that expenditure on social services do impact

on poverty alleviation, in particular expenditure on housing, education and welfare.

Further regression analyses show that poverty can be tackled through economic growth

and employment creation. In short, there cannot be significant fiscal redistribution unless

the South African economy registers high levels of economic growth and job creation.