Employed but still poor: the state of low-wage working poverty in South Africa

Low-wage poverty is highly associated with unstable work such as in the informal sector.
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Paid employment is generally considered the predominant and most sustainable way of pulling people out of poverty. But the past two decades have seen a global rise in the complex phenomenon of the working poor. South Africa is no exception.

This delink between paid employment and poverty reduction is a major challenge for the government. It means that attention must be given to two things: rapid job creation, and also the creation of decent jobs.

While one may think that being employed suggests the person is immediately pulled out of poverty, this is not always the case. Finding a job does not guarantee someone will receive remuneration that is high enough to cover their basic needs and be relatively secure financially. In some cases, workers reluctantly only work part-time after failing to find full-time work.

Some workers are paid wages below the amount that’s necessary to maintain a decent living standard. They are also not entitled to health or retirement benefits. Low-wage work is also associated with poor working conditions and job insecurity. These include poor health and safety standards, discrimination and excessive work hours.

In other words, for some workers employment no longer guarantees significant poverty reduction. Some workers remain poor because wages are too low to lift them and their families out of poverty.

Main findings

Comprehensive information on the extent of low-wage working poverty in South Africa wasn’t available until our recently published study. We examined the data from the first four waves of the National Income Dynamics Study (NIDS), which took place between 2008 and 2015. NIDS is South Africa’s first national household panel study.

We found that while low-wage poverty probability declined during the 7-year period, in 2015 nearly 20% of workers were still identified as low-wage poor employed. This downward trend is similar to what was found by a 2015 study for the 1997-2012 period, though that piece of research focused on working poverty and didn’t take the low wage threshold into consideration.

When it comes to demographics, low-wage poor were identified as predominantly women (slightly above 50%), Africans (90%), 38 years old on average, without 12 years of education. On average there were five members per household, and two of them were working.

Most low-wage poor were involved in elementary occupations. They were street vendors, domestic helpers and cleaners, and garbage collectors. And nearly 75% of this group were in the informal sector, which is associated with a lack of job security and benefits. This finding is concerning, given the fact that the informal sector only contributes about 7% of the country’s GDP.

What should government do?

There are ways for the government to address these issues.

Policy is a key area where changes can be made. The government should focus on policy that provides affordable quality education and skills training to previously disadvantaged communities. Moreover, education and training programmes should focus on skills and competencies demanded by the labour market.

Low-wage poverty is highly associated with the unstable work environments and insecurity that are experienced by workers in the informal sector, and workers with low-skilled occupations like domestic workers and street vendors. Policy prescriptions should therefore aim to promote economic growth and infrastructure development within the informal sector. They should also focus on increasing awareness and enforcement of labour regulations that protect workers in low-skilled or elementary occupations.

Speedy infrastructure development also helps to pave the way for the creation of more and better jobs associated with higher wages and improved working conditions.

It’s also important that there’s a focus on creating quality jobs and transforming existing unstable, low-paying jobs to more stable work environments that pay workers higher earnings. This involves improving the transition of workers from the informal to the formal sectors.

Government and the private sector should also provide small and informal business owners with easy access to financial and organisational support. These business owners need skills and knowledge about everything from finances to supply chain processes and customer management to help them run and grow their businesses.

There should also be an increase in the awareness of minimum statutory employment conditions among elementary occupation workers and employers, together with the implementation of effective mechanisms to monitor and enforce compliance.

Last but not least, increasing the national minimum wage for all sectors may be a useful, if somewhat contentious approach. Using the currently proposed minimum wage of R3 500 per month, the low-wage poverty rate is somewhat higher (35% in 2008 and 24% in 2015, compared to 26% and 19% respectively using the original lower-amount threshold adopted in the study).

Some workers argue they cannot meet their basic needs with the currently proposed minimum wage (of R3 500 per month). But a higher minimum wage helps improving their productivity and turnover. On the other hand, some employers claim they cannot afford an increased minimum wage without running the risk of retrenching workers and replacing them with cheaper capital. In this case, the state may intervene by assisting firms with special taxation benefits, wage subsidies and training opportunities for workers.

This is an extract from the journal article titled “Employed yet poor: low-wage employment and working poverty in South Africa”, which the writer co-authored with Jade Feder, an Economics Masters graduate at the University of the Western Cape.

Derek Yu, Associate Professor, Economics, University of the Western Cape

This article is republished from The Conversation under a Creative Commons license.

Tired of waiting for water, Ebaleni residents say they won’t vote

“How can I cast my vote when I’m sharing stream water with dogs and cows?”

Mabongi Ngcobo and Zwelihle Zimu at the stream where they fetch water. Photo: Nompendulo Ngubane

“How can I cast my vote when I’m still sharing stream water with dogs and cows?” asks Zwelihle Zimu.

He is one of the residents of Sweetwaters in Ebaleni in Pietermaritzburg who fetch water from a nearby stream. There are no communal taps and the water tanker comes only once a week, says Zimu.

“We fetch water from a stream in the bushes. Some of the dogs swim in that stream. Cows and goats drink from the same stream. The water is dirty. We have no choice but to use the same water.”

In winter, he says, when darkness falls early, it is dangerous to walk to the stream.

When GroundUp visited the stream, which residents call “Emhosheni”, a dog was in the water, drinking.

The stream is shared with animals. Photo: Nompendulo Ngubane

Zimu says some residents buy water from a house in Zayeka, some distance away.
A 20 litre container costs R25, he says.

He takes his car and brings back eight containers which lasts him four days. But others do not have money or transport, he says.

Maboni Ngcobo says neighbours living higher up throw rubbish into the stream. “Sometimes we have to clean up that rubbish and wait hours for the water to clear before using it.”

“The one water tanker is not helping. Some of us are not always at home when it arrives. The only way we are able to get water is from the stream,” said Ngcobo.

She says she is not going to cast her vote.

“It has been over 20 years. We have raised the issue with the ward councillor. He is aware but nothing has been done. I’ve been voting all these years hoping for change. I’m not going to waste my time,” Ngcobo says.

Ward councillor Linda Madlala (ANC) said he had raised the matter with Msunduzi municipality. The municipality had been placed under administration, he said, but there was a plan to put in standpipes and rain tanks and eventually bring piped water to the area.

“No human being deserves to drink water with animals. We need access to clean water,” said resident Mandla Gumede.

 7 May 2019   By Nompendulo Ngubane
 © 2019 GroundUp.

Race still colours South Africa's politics 25 years after apartheid's end

African National Congress supporters at the party’s manifesto launch.
Epa/Kim Ludbrook

It would be surprising if race played no part in South African elections. The country’s colonial and apartheid past ranked alongside the America’s Deep South as among the most racist social orders in the world. If religious polarisation is also considered, South Africa often compared with Northern Ireland and the Israel-Palestine conflict.

The slogan “rainbow nation” seems to have retired along with Anglican archbishop emeritus Desmond Tutu. Personal racist incidents still make the headlines and class remains hued by colour at the structural level. Although slightly over half of the country’s middle class is now black, deep poverty is an almost exclusively a black experience.

Race continues to divide. Take just the best-known parties among the four dozen contesting the country’s general election this month. They all represent radically different perspectives on the race issue. And – at the extremes – there is no crossing the colour line.

For example, almost no black Africans will vote for the minority Freedom Front Plus. Almost no whites will vote for the Economic Freedom Fighters (EFF), the third-largest party. Strident racial rhetoric from some EFF leaders. And its election manifesto envisages for massive tax rises, a proviso that’s alienated white voters. For its part, the Freedom Front Plus’s campaign to defend minorities against affirmative action and black economic empowerment doesn’t attract many black voters.

But, when moving towards the leading parties of the centre, the governing African National Congress (ANC), and the official opposition, the Democratic Alliance (DA), are making serious efforts to reign in racial rhetoric among their leaders and members. They also have manifestos that promote non-racialism.

Non-racialism

The ANC and DA documents and speeches have repeated their long-held goals of non-racialism. Both try to ensure that people of all colours are represented in their executive structures.

Recently, ANC veterans condemned a statement by their powerful secretary-general urging a vote against “whites” and for “blacks”. And the party’s election campaign, particularly in Gauteng and the Western Cape, chooses issues and rhetoric which include white voters.

The DA too has more than once disciplined leaders, or got members to resign, because of racial comments on twitter or elsewhere

At a deeper level, the DA is attempting a strategy so difficult that it has only been accomplished twice before in South Africa’s history. The party seeks to change from an overwhelmingly white party to a predominantly black party. The South African Communist Party achieved this during the 1920s. The Liberal Party followed a similar path during the 1960s.

Historically, the ANC’s Freedom Charter affirmed that

South Africa belongs to all who live in it, black and white.

The ANC’s alliances from the 1950s included organisations centred on coloured – people of both European (white) and African (black) ancestry - , Indian, and white members. It incrementally opened its own membership to supporters of all colours before 1990.

At times, a few commentators have criticised the ANC as being dominated by either isiXhosa speakers or Nguni language speakers, but these complaints found little traction. The ANC’s membership embraced a nation-wide representivity among black Africans, and included activists from all of the race-based definitions entrenched during apartheid.

Strategically, the ANC is the only African nationalist party that has had to accommodate – in policy and rhetoric – a significant white minority.

More than nine-tenths of white settlers fled Algeria after independence in 1962; the same in Angola and Mozambique following independence in 1974. This also happened in Zimbabwe between the 1980s-1990s. White Algerians had the right to French citizenship; white Angolans and Mozambicans had the right to Portuguese citizenship. Over half White Zimbabweans had the right to either South African or British citizenship.

By contrast, the overwhelming majority of white South Africans have no rights to other citizenships.

The people

White South Africans are only make up 7,8% of the population. But they remain strategically important. They still own most capital and most companies. They constitute a significant proportion of management and in most of the professions.

The western powers, investors, and media remain sensitive to their concerns and anxieties.

Interestingly, statistics show that white living standards have risen higher than anyone else’s since 1994. That is not exactly the “genocide” proclaimed by the global alt-right.

There is a wide range of black views on colour and race relations. Some activists in the Rhodes-must-fall and Fees-must-fall movements expressed total alienation from whites and “whiteness”. Simultaneously, there are many interracial friendships and some interracial marriages.

Tensions bound to remain

The world’s oldest democracy, the US, and the world’s largest democracy, India, also have to grapple with the contradictions between nonracial or non-caste ideals in their constitutions, and affirmative action and preferential procurement laws and regulations.

In South Africa, similar issues continue to be addressed by a host of institutions. These range from the Human Rights Commission, to the Equality Court and similar quasi-judicial entities, in addition to test cases decided by the Constitutional Court..

Given that the country has the world’s largest white minority living under black rule, colour line tensions will remain a fairly permanent feature of the country’s political landscape. The same can be said of the US, where the world’s largest black minority lives under white rule.

Keith Gottschalk, Political Scientist, University of the Western Cape

This article is republished from The Conversation under a Creative Commons license.

Railway line occupied as rapid Philippi informal settlement grows

Over 1,000 new shacks in Eyadini spread over PRASA land

Backyarders from Samora Machel, Kosovo, Marikana, Philippi East and other areas have been flocking to Eyadini informal settlement at Philippi train station to establish themselves. All photos: Vincent Lali

The Eyadini informal settlement on the railway lines in Philippi has shot up as backyarders from Samora Machel, Kosovo, Marikana, Philippi East and other areas flock to the site. There are now 1,000 households.

When GroundUp visited, community leader Phakama Ngolo was spray-painting numbers on new shacks. “We as leaders want to know which shack belongs to whom … If the shack owners are still at work, we don’t put numbers on their shacks until the weekend,” said Ngolo.

Community leader Siya Boyisi said, “At weekends, this place becomes a hive of activity as former backyarders coming in bakkies offload their building materials and noisily put up their shacks.”

The newcomers buy building materials from roadside hardware stalls, many on credit. They first mark out their plots and put up their shacks before introducing themselves and getting registered on the list of Eyadini shack dwellers.

The shacks are now spreading along the railway lines towards Nyanga station.

Community leader Phakama Ngolo writes numbers on the shacks of newcomers.

“Some come here because their shacks get flooded … Others leave their family houses because they are too cramped,” said Boyisi. “We delight in staying here as we don’t pay rent. Crime is non-existent and no one has reported a shack burglary or robbery to us leaders.”

Boyisi said they want mobile toilets and water taps.

Ayanda Bodla stands next to the tap on the railway line which the community has installed.

The community put together money and set up one water tap two weeks ago according to shack dweller Ayanda Bodla. “After residents return from work, you can see a long queue,” he said.

He said people in nearby Kosovo and Samora Machel don’t want to share their taps as the queues become even longer for them.

There is no electricity, so people use candles and paraffin lamps at night. Bodla said fires have broken out twice since the newcomers occupied the land.

“We are scared to ask the City of Cape Town to help us with building materials to rebuild our shacks because we are staying here illegally,” he said.

PRASA spokesperson Riana Scott said, “The invasion of PRASA land is illegal and dangerous … The disposal of wet waste onto the tracks compromises the underlying rail infrastructure and poses a risk to safe train operations.”

Scott said, “The matter is being addressed by our principals as a matter of urgency in collaboration with various appropriate entities to find a sustainable solution.”

Mayco Member for Human Settlements Malusi Booi said PRASA had turned down the City’s offer to remove the residents earlier this year.

Thandeka Ngxoko lives in a small shack placed on railway lines. She has a fruit and vegetable stand and also sells socks to support her family. She was one of the first to move onto the land earlier this year.

Siphokazi Njemla used to rent a backyard shack for R450 a month in Samora Machel. She lost her job as a security guard in Killarney and had to relocate. “My contract expired and now I have no money for rent,” she said. “I used to walk past here when I go to the station to catch a train and envy the residents for staying here without paying rent.”

Thumeka Mdingiso and her son level ground for their shack. She said she used to rent a shack in Kosovo for R360 a month. She works as a char in Samora Machel and Kosovo informal settlement, earning R70 or R100 a day. She has to support three children, aged 18, seven and three.

 5 April 2019   By Vincent Lali

 © 2019 GroundUp.

Why restructuring South Africa's power utility won't end the blackouts

A barman using candle light as another rolling blackout affects large parts of South Africa’s biggest city, Johannesburg.
Epa/Kim Ludbrook

Recent power cuts and the announcement that South Africa’s power utility Eskom will be receiving R23billion (about USD$1.5billion) a year in government support for the foreseeable future are symptomatic of operational and financial crises at the utility.

The conventional wisdom is that a major restructuring will address the crisis. But this is misleading. Defensible justifications for the restructuring are mostly about Eskom’s future problems, not its current ones. And there’s a risk that restructuring could exacerbate some of the underlying causes of the crisis.

The crisis itself is a function of a complex set of factors. These include an inappropriate tariff regime in the 1980s and 1990s, policy indecision in the post-apartheid era, bad infrastructure planning and poor project and human resource management. There’s also been large-scale corruption and a failure in government’s implementation of the oversight model for state-owned entities – as well as problems with the model itself.

Two basic cases are being made for restructuring the 96-year old utility. The first is that, by formally splitting Eskom into managerially and financially autonomous components, it will be possible to improve management, better understand the source of existing problems, attract private investors and address corruption.

The second is that restructuring would facilitate a greater role for renewal energy generation driven by privately-funded generation projects. Eskom’s roles as generator, buyer and distributor of electricity would be separated to stop the utility’s generation interests from distorting its purchase and distribution decisions.

Both cases are flawed. Eskom’s management and financial problems won’t necessarily go away simply by splitting it into three components. Any managerial benefits of separation can be overshadowed by difficulties in getting autonomous components to interact in a way that promotes the public interest, while private investors will not take on the unattractively debt-ridden components.

And the case based on renewables has more to do with the need for South Africa to have a more appropriate energy mix that doesn’t rely so heavily on coal. It has little to do with Eskom’s underlying malaise. Renewables are on the table because of technological change and mass deployment of renewable energy internationally that has decreased costs, along with the need to meet climate change commitments.

The proposal and its risks

South Africa’s President Cyril Ramaphosa and the Finance Minister Tito Mboweni have set out two main proposals to fix the utility.

The first is a major injection of funds. Mboweni announced that the National Treasury will provide Eskom with R23billion in cash a year for between three and ten years. This is in addition to financial support in 2015 that exceeded R150billion in costs to the state. The financial support will largely be funded by reducing other government expenditure as well as an increase in borrowing.

The second major announcement was that the power utility will be split into three components: generation, transmission and distribution.

Financial support, although highly undesirable, has become unavoidable. The necessity of the restructuring, however, is questionable and it carries large risks.

Breaking Eskom up into three parts is touted as a way to improve information about operations and finances, and to reduce inefficiencies. In addition, some argue that it would help attract direct private sector financing.

These claims are dubious. For instance, the claim about private sector financing rests on the assumption that private investors will get a guarantee of future tariffs or revenues. But a guarantee would also facilitate Eskom borrowing from financial markets itself. And the obstacle to such a provision is partly regulatory and partly that it would create a large contingent liability for the state.

Similarly, private investors will only get involved where Eskom is expected to be profitable in the future. That means that the cost and debt overhangs from the country’s two biggest coal-powered fire stations, Medupi and Kusile, will remain the problem of government and citizens.

A great deal has been written about the restructuring of state-owned enterprises. There have been both successes and failures. International experience across many industries shows that while separation can have a positive effect, it can also lead to breakdown of communication and information flows, distortion of incentives relative to the public interest, decline in operational indicators and excessive profits for private participants.

A prominent example is the privatisation of passenger rail in the UK. What followed was a deterioration in services and subsequent, large government bailouts.

The nature and extent of the risks in the case of Eskom’s unbundling require a detailed analysis. The current narrative gives them too little attention.

Overselling renewables

Those pushing renewable energy as the panacea are, in my view, downplaying the downsides and playing up the benefits – suggesting, for example, that it’s a costless solution. But it’s not.

Decentralised renewable power generation by firms and households is rarely entirely “off grid”. When the sun doesn’t shine, electricity is drawn from the grid. But revenues from the sale of this electricity aren’t enough to fund the costs of the underlying generation and transmission infrastructure.

Other countries have got round the problem by introducing a high “grid connection fee”. This hasn’t been given much attention in South African commentary.

And while some have led the public to believe renewable energy will ameliorate Eskom’s operational crisis, they fail to mention that it could exacerbate the utility’s financial crisis. Adding renewable capacity does not remove the costs already incurred for new coal-fired power stations. And decentralised generation reduces Eskom’s revenues.

There are other reasons to gradually expand South Africa’s renewable energy capacity. That is certainly better than pursuing a nuclear power option. But obscuring its downsides will lead to dangerously inaccurate beliefs about what is actually a very limited role for renewables in addressing the current crisis.

It would have been preferable if the dangers of restructuring Eskom had been properly considered before the the president and finance minister made their statements. But given that the path appears to be set, it is paramount that policymakers and the public be awake to its complexities and risks.

Seán Mfundza Muller, Senior Lecturer in Economics and Research Associate at the Public and Environmental Economics Research Centre (PEERC), University of Johannesburg

This article is republished from The Conversation under a Creative Commons license.