Neva Makgetla

"As a first step, based on Statistics South Africa surveys, the review argues that inequality in terms of earned incomes dropped sharply between 1997 and 2000. But Statistics South Africa itself found that income distribution worsened slightly between 1995 and 2000. The review says that more people lived in poverty and, distressingly, more children suffered malnutrition in the late 1990s than five years previously. A key problem is that the review relies on the 1997 October household survey and the 2000 labour force survey instead of looking at the full trend from 1995 to 2002. In addition, the 1997 figures are out of line with the years before and after because income inequalities appeared to be much worse in 1997. As a result, the data suggests an unbelievable decline in income inequalities. It suggests that the Gini coefficient, which seeks to measure inequality, dropped from 0.68 to 0.59. In contrast, Statistics South Africa says the Gini worsened from 0.56 in 1995 to 0.57 in 2000."

"If the 10-year review wanted to rely only on the 1997-2000 period, it should have explained the reported worsening in income distribution between 1995 and 1997. In any case, the 2000 figure still represents a high level of inequality by world standards. The World Banks World Development Indicators for 2003 report only about five countries with equal or higher inequality, most of them in southern Africa (Swaziland and Namibia) and Latin America."

"As a second step, the review does not explain its methodology clearly. It seems this finding derives from a projection from 1997 spending patterns, without actual study of 2000 figures. As a result, the finding of better income distribution between 1997 and 2000 really seems to follow solely from the purported improvement in income equality in this period - which, as noted above, is highly dubious. More fundamentally, we have to ask ourselves whether this is a useful way to understand the redistributive function of the state. After all, in most countries, government plays a significant redistributive function. But that is not all the same, in social or economic terms as improving income distribution."

"For instance, suppose a households monthly income is R1 000, or R12 000 for the year. If the family has four children in school they are getting an extra R12 000 from the state, doubling their income. But does that help us understand the economic difficulties they face in the short run? After all, it wont put food on the table. It is important to assess the redistributive role of the state - but we shouldnt act as if that in itself is enough to justify or redress high levels of income inequality. The income distribution figures in the review appear to underplay the extent of inequality and overplay improvements. Most studies show that income distribution has probably worsened, as unemployment has risen and wages have fallen."

"Rather than picking out particular bits of interesting information from the review - which is packed with fascinating data - it would make more sense to engage with its overall argument. The call for a sustainable, equitable development strategy should not be lost in debates over the data or efforts to highlight the good news while ignoring the bad."

"The governments 10-year review argues that, in economic terms, household equality has greatly improved, especially as a results of government programmes. This conclusion has received considerable publicity, although it is not particularly important for the reviews overall integrity and findings. It would be a great pity if the reviews brief and not very sound note on income distribution overshadowed its deeper analysis and broader policy implications."

"The 10-yar review analyses an array of more reliable and important information to reach telling conclusions. Above all, it finds that, although improved social protection and democracy for the majority, it must do more to ensure greater economic inclusion and preparation for most. The review identifies soaring unemployment as the key factor behind growing economic disparities and exclusion. The unemployment rate has risen from 16 percent in 1995 to 31 percent today. In contrast to these arguments, the statistical basis of the reviews conclusion on income distribution is extraordinarily weak. It has two stages: defining the trend in income distribution, and then examining the impact of government spending."