[Opinion] Declining living standards: Pandemic or Policy?

Gerbrandt van Heerden | 06 Feb, 2022
Covid-19 may have had a considerable impact on livelihoods and income levels in South Africa, but it is not the sole culprit for the decline in living standards.

South Africa’s response to the first three waves of the pandemic has been one of the harshest in the world. And despite the government keeping the country at Level 1 restrictions during the Omicron wave, livelihoods continue to be lost due to the lockdowns. According to Stats SA, the official unemployment rate soared to 34.9% in the third quarter of 2021 while nearly half (46.6%) of all people are unemployed, based on the expanded definition.

The pandemic’s effects on South Africans’ lives and livelihoods are also clear when we look at the CRA’s newly updated Quality of Life Index (QOLI). First developed by the Centre for Risk Analysis (CRA) in 2017, the Index enables users to benchmark South Africa’s progress in improving the quality of life of its residents.

Ten weighted factors

The Index is based on ten weighted indicators that are indicative of the quality of life of a person or household. Each indicator has been calibrated as a score of between 0 and 10, with scores closer to 0 indicating poor performance and those closer to 10 showing better performance.

The indicators used in the Index are the matric pass rate, the expanded unemployment rate, monthly expenditure of R10 000 or more, household tenure status, household access to piped water, electricity for cooking, access to a basic sanitation facility, refuse removal on a weekly basis, medical aid coverage, and the murder rate.

By comparing the QOLI of 2022 with the QOLI of 2021, we can see the impact that extended lockdowns have had on South Africans. South Africa’s average score for the matric pass rate has declined by 6.2%, owing to Covid-19’s constant disruptions of learning during the school year. The country’s overall score for unemployment worsened by 3.4%, while the score for monthly expenditure of R10 000 + fell by 11.1%. 

This is of course due to the closure of many industries at the height of the pandemic. Non-essential sectors, such as the travel and leisure sectors and those unable to adopt the working-from-home approach, were the hardest hit.

Overall, South Africa performed poorly on the 2022 QOLI, with an average score of 5.5 out of 10.

Decline evident from before Covid-19

However, the decline in living standards in South Africa is a trend that preceded the pandemic. This is evident when we compare the latest QOLI with the first QOLI of 2017. Since 2017, South Africa’s score for unemployment worsened by 12.5%, while the country’s score for refuse removal declined by 4.5%. Access to piped water did not change, with the score remaining at 8.9 in the indexes of 2017 and 2022. 

The long-term declines can be attributed to the fact that South Africa has been in an economic ‘lockdown’ for more than a decade. In other words, poor economic policy has translated into a decline in GDP, with major repercussions for the quality of life in South Africa.

To understand this, we need to look at how closely living standards are tied to a healthy economy and high GDP growth. When we compare GDP growth, unemployment rates, and violent protests between 1994 and 2021, two stories start to emerge. 

The first story takes place in the mid-2000s. During this time, GDP growth averaged about 5% per year. As GDP growth started to accelerate, unemployment declined on a consistent basis. At the same time, violent protests as a share of all protests remained at relatively low levels. The second story takes place after Jacob Zuma’s election as president. During this time, GDP growth started to taper off, growing barely by 1% even before the arrival of the pandemic. During the same time, South Africa’s unemployment rate was steadily increasing while violent protests escalated. 

It is therefore clear that social stability and the improvement in living standards depends on sound economic policy that encourages economic growth. This is not what has taken place in South Africa in the last few years, however. Since former President Zuma’s tenure, hostile policies to business and investment have either been proposed or have been implemented. 

Hostile policies

These include the strengthening of B-BBEE laws, more regulation of the private sector, the push for populist policies such as EWC and the NHI, and of course, state capture which has brought important state entities, such as Eskom, to a halt.

Despite this, it will be difficult for the ANC to distance itself from these harmful policies, even under President Cyril Ramaphosa’s tenure. This is for two major reasons. 

First, many if not the majority of ANC members have been implicated in corruption. If the ANC was serious about combating corruption, it would lead to the total collapse of the party. Second, the ANC is still married to the National Democratic Revolution (NDR) which encourages statist policies and government intervention into the market economy. As long as the ANC commits itself to the NDR, no significant policy reforms will take place in the near future.

The consequences of these policies are many, including a weakened local government hampered by corruption and a decline in revenue. Only 27 municipalities out of 257 received clean audits from the Auditor General. 

This means that most municipalities in South Africa are struggling to deliver even basic services, especially in rural areas. A third of households in the Eastern Cape and Limpopo do not have access to clean, safe drinking water. Four out of ten households in Limpopo do not have access to electricity for cooking. More than a third of households in Mpumalanga and Limpopo do not have access to a functioning basic sanitation facility. And just a fifth of households in Limpopo, and only around 40% of households in the Eastern Cape and Mpumalanga, have their refuse removed at least once a week.

Hampered by corruption, mismanagement and poor ideology, the government is weakened and the State is receding. It is unlikely that the state will implement economic reforms to turn the dire situation around. As a result, South Africans will have to wait for a coalition government with sound economic policies to come to the fore. 

In the meantime, businesses and citizens will have to fill in the gaps, deliver basic services, and try to maintain a reasonable standard of living for their communities.

Article originally posted here.

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