‘Curse’ of the three Cousins: The Triple Burden of Poverty, Inequality and Unemployment and search for Alternatives i

1. ‘Curse’ of the three Cousins: The Triple Burden of Poverty, Inequality and Unemployment and search for Alternatives in Southern Africa Deprose Muchena OSISA

2. Update from Egypt "ما هو عليه مع القادة الأفارقة، والتشبث والتمسك دائما على السلطة. إعطاء الآخرين فرصة من فضلك، هل أنت لا يمل من الوظيفة لأكثر من 30 سنوات، اعطاء الآخرين فرصة أأ.".

3. Global Outlook • 2009 experienced a wrenching recession which deepened global poverty; widened the inequality gap between rich and poor. • 2010 was a year of stimulus- driven recovery • 2011 will discover how the economy fares once artificial support is removed but prospects for growth are still conservative • Growth firmed up at 2.7% in 2010 and is expected to hit the 3.2% mark for 2011

4. Global Outlook • Poverty and inequality forecasts remain bleak- based on latest projections • 5 million additional children to suffer severe malnutrition • 50 million more people entered the poverty bracket in 2009 as a result of the global economic crisis • Some 64 million more people were expected to enter the poverty bracket by end of 2010

5. Key issues: Poverty and inequality • Unemployment is rising, the gulf between the “resource rich” and the “resource poor” is widening and poverty is growing . • This has far reaching implications on human development, welfare indicators and on programmes to eradicate poverty in particular. • Literature suggests that anti-poverty measures have been more successful in areas where there existed less inequalities prior to reforms. • Literature also suggests that to be successful inequality busting and anti poverty measures require good governance and democratic economic policy making to thrive. • State and civil society programmers must show an understanding the origins and underlying causes of inequality. • Interventions should focus on initiatives that tackle the structural causes of poverty and inequality in the region.

6. State of inequality in Southern Africa

7. Inequality between illustrated • Belgium= 10 million people (2006) • Belgian GDP in 2006= US$467.3 billion • SADC= 250 million people ( 2006) • SADC GDP $374.2 billion- (2006)

8. Therefore The Gini coefficient, a measure of the level of inequality in the distribution of income is extremely high in the region. In a society where everyone is equal, the coefficient is 0, and if one person holds all resources, it will be 1. Thus, its value is between 0 and 1. The higher the figure, the greater the level of inequality. Most industrialised countries have Gini coefficients of between 0.24 and 0.36 but the USA has a coefficient of 0.4. Countries with the highest coefficient (and thus the highest levels of inequality) include Brazil, Namibia, South Africa and Botswana. When analysing the social and economic performance in Southern Africa, we need to keep in mind that national statistics hide the actual inequalitiesthat exist within countries. The indicators for countries like South Africa, Namibia and Botswana hide the poverty of the majority behind the enormous wealth of a small minority of the population. Poverty levels in Southern Africa worsened during the implementation of neo-liberal policies. Botswana for example had average economic growth rates of 13% between 1970 and 1990 but could not eradicate the high levels of poverty. What matters is not the quantity of growth but its quality. Only inclusive, broad-based growth promotes sustainable human development.

9. Inequality between illustrated • Belgium= 10 million people (2006) • Belgian GDP in 2006= US$467.3 billion • SADC= 250 million people ( 2006) • SADC GDP $374.2 billion- (2006)

10. A regional economic overview : i) Settler based economiessuch as Zimbabwe, South Africa and to some extent Namibia. Productive forces there are developed to some degree in the formal sector, due to import substitution strategies before independence. But inequality is massive. ii) South Africa’s periphery economies such as Botswana, Namibia, Lesotho Swaziland (BLNS). They depend on South Africa for imports and employment an remittances. iii) Mineral rentier economiessuch as Angola, Zambia, Botswana, Namibia and the Democratic Republic of Congo. They depend on a single or small number of rich export commodities like minerals or oil. iv) Agrarian economieslike Malawi, Mozambique and Tanzania depend on a narrow range of export agricultural products. They are among the poorest countries in the region, depend on rain fed agriculture and are thus vulnerable to food security in changing climate context.

11. Regional Paradox - rich but poor! • Mozambique – still depend of 50% of national budget support directly from development aid ( Donors). (Polana vs Machaken) • Lesotho, Malawi and Zambia- 35 % annual budget support • Botswana- recipient of 1, 5 billion from the ABD in the last year for the first time in many years. • Angola- even though not entirely dependent on ODA, it is starting to receive money from the IMF and more from China. (Beware of debt trap)---- Poverty and Inequalities are high- Miramar vs Boa vista) • Zimbabwe waiting for donor resources to take off recovery US$8bn- Structural, historical and systematic. (Borrowdale vs DZ) • Economic growth has not led to human development ( Jobless, ruthless, futureless, rootless and voiceless growth patterns are evident)

12. Structural problem • Region inherited structural legacies that continue to shape, produce and reproduce underdevelopment which leads to a developmental crisis. • The Problem of grafted capitalism: • After colonisation, the region, like the rest of the developing world inherited special type of social formation where the capitalist sector of the economy was grafted onto a pre-capitalist form of production in a distorted manner. • This kind of capitalism did not transform the economy as a whole, thus failing to produce dynamic growth and development. It was totally dependant on external factors such as markets in, and capital from Europe.

13. Inherited underdevelopment..... Africa was thus shaped by a grafted capitalism rather than an endogenously (internally) evolved capitalism. The legacy of Dualism and Enclavity:Consequent upon a grafted capitalism, enclave development followed- in which a developed and diversified formal economy sits alongside an underdeveloped peasant-based subsistence rural economy. This structure created three conceptual sectors of the Southern African economy which feed on each other but remain structurally problematic in the main.

14. Producing three less than optimally developed sectors of the economy Formal Sector: which consists of capitalists and wage workers, catering for less than 20% of the labour force. This sector consists of enterprises of various sizes (either state-owned or privately owned) and is relatively productive compared to the other sectors. External forces such as Africa’s trading partners and foreign investors shape output and production methods Urban Informal sector: This is a residual factor which has come to have a high degree of permanence. Characterised by easy entry and exit, linked to both formal and rural sectors & driven by self employment activities & ingenuity of individuals. About a third of labour force are here. Communal sector:This is the original traditional or pre-capitalist sector with all the variations this entails in the African context. It is highly differentiated with a number of linkages to the formal and informal economy .

15. Leading to Distortions Where Africa’s continued underdevelopment is perpetuated by a number of factors including : External dependency (shown in trade, technology, information, human resource and capital flows), which maintains the enclave economy. Distributive inefficiencies resulting in the non-formal sectors having unequal access to productive assets and markets. Allocative inefficiencies which make the formal sector unnecessarily capital and technology intensive (thus reducing its requirements for labour) while the non-formal sectors tend to be without capital and technology, thus making productivity increases almost impossible. Technical inefficiencies result in low technological capabilities, thus limiting the adaptations that can be made to production techniques and the nature of products and services produced. This in turn prevents the establishment of value chains. Thus, levels of productivity of labour, capital and land tend to be low compared to optimal methods of production.

16. Natural resources extraction reinforces the problem. Extractive industry has fuelled the inequality and poverty: As the EI gains prominence as a basis for economic development so does the negative indicators of human development. EI takes place in the context of enclave developments where the extractive zones become enclaves, and become the centre of government and private sector attention and not the basis of diversification: So, while oil, copper, gold, diamonds, chrome, gas, bauxite, fisheries, platinum are in plentiful supply in the region, unemployment is increasing, poverty is deepening and inequality between and within countries is widening. Growth rates are often very high in Mozambique , in Angola, Malawi, they are particularly very high- but that has not translated into human development. IN FACT the opposite takes place---

17. Study reveals worsening social indicators...... More than 60% of the population in SADC lacks access to an adequate supply of safe water –which means they bare vulnerable to disease. About a third of the SADC population lives in abject poverty and about 40% of the labour force is unemployed or underemployed.Povertylevels have not only increased, but have also become more pronounced in urban areas and amongst female-headed households in particular. Levels of income inequality in the region are amongst the highestin the world, with most countries having a Gini co-efficient of more than 0,5. The distribution of resources and income is highly skewed and in some cases racially biased, for example in South Africa where white nationals constitute around 5% of the population and own over 80% of the land. When measured against the Human Development Index (HDI)---life expectancy, education and standards of living, seven SADC countries fall in the medium category while six are in the low HDI group.

18. Way Forward Fighting poverty , creating employment and reducing inequality require a development strategy that recognizes three factors: The “social factor”, meaning how people’s basic human rights are safeguarded and how vulnerable people are protected against poverty and exploitation by elites and other vampire elements of society. The “democratic factor”, meaning how the political system functions, how decisions are made and implemented, how resources and opportunities are distributed and how justice and fairness is achieved. The “global factor”, meaning how the system works at global level, how decisions are taken and implemented, how global resources are controlled and distributed and how this global system affects Africa.

19. Towards a Human Rights Approach to Development Development is not just about economics. It includes human rights, community rights and the right to national or regional self-determination. It also deals with issues of equity and fairness in the distribution of resources at local, national, regional and global levels. The provision of social services such as water, energy, health and education cannot be guaranteed for all if they are left to market forces. Social services are not matters to be privatised as they are part of basic human rights and states have the responsibility to secure them for all their people. The state must therefore be developmental as well as ethical, responsible and accountable to the people.

20. Developmental Consensus Needed • New developmental compact premised on a new developmental governance framework which sees development as a right for people • Rights based development fundamentals must be the anchor of social policy • Development must lead to a better life for ordinary people and eradicate poverty. This can only be achieved if development is based on the promotion and protection of human rights, which include: • Civil and political, socioeconomic and cultural rights

21. A new developmental paradigm is needed! Bold measures of transformation –not marginal programmes and social protection projects. The state must take the lead to transform the legacy of underdevelopment towards inclusive and equitable development. This calls for presence of democratic developmental states. Developmental states must be planning organisations that appreciate and encourage active stakeholder participation and growth that leads to human development . Areas to be addressed are: A developmental vision for a country with appropriate participation of people the economy and in its attainment. A comprehensive development strategy developed. Co-ordination of activities of various economic agents. Setting a legal and regulatory framework; and Promoting economic restructuring and upgrading as a public good. More importantly, developmental states are democratic and accountable- they are not attractive autocracies.