South Africa economic policy: Are we moving towards a welfare state?

Abstract

It has been 13 years since the dawn of democracy in South Africa. Though the country can boast progress on several fronts since 1994, including improved economic performance, a healthier fiscal position and improved delivery of houses, electricity, water and sanitation, it still faces significant discrepancies in the allocation of income, wealth and skills. In addition, poverty and unemployment levels among Blacks, females and those living in rural and ex-homeland areas are very high irrespective of the benchmark used. Service delivery by some local authorities also remains problematic. Since 1994 the government has implemented a wide range of policies to address these challenges. This paper shows that policy developments in South Africa since 1994 can be divided into two phases. The first is the period 1994- 99 that focused on the stabilisation of the economy and the eradication of the fiscal chaos that the new government inherited from its predecessor. The second phase is the still ongoing period that started in 2000. This period saw the significant expansion of the social welfare system. Comparing the two periods, the paper also shows that the economic views of government in the first phase was much more conservative and in line with what the IMF, foreign investors and rating agencies saw as prudent policy. The second phase sees a less conservative stance on issues such as privatisation, the role of human development in growth, as well as the provision of social welfare. The paper considers and contrasts these two phases to consider in what direction policy might be moving and might need to be moving in future.