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