Year: 2004
Working paper number: 076
Author: Seekings, Jeremy
Unit: SSU

Public policies affect income inequality both directly and indirectly.  The direct effects are most obvious.  Redistribution through the budget, with tax revenues spent on public welfare schemes and other social policies (especially education), might serve to mitigate inequality.  But public policies also affect inequality through shaping the growth path of the economy and the labour market.  Together, these policies constitute what we call a 'distributional regime'.  In South Africa, the Post-Apartheid Distributional Regime includes some very pro-poor features.  Welfare expenditure is very redistributive, especially through the old-age pension, and education and other social spending is pro-poor in that a very high proportion is spent on the poor.  But the Post-Apartheid Distributional Regime includes other features, inherited from the apartheid period, that contribute to high or even rising inequality. Policies affecting the growth path and the labour market contribute to rising unemployment, which underpins poverty and inequality. Deracialisation, including 'black economic empowerment' and affirmative action, are largely irrelevant to overall levels of inequality.  There are weak pressures for more uniformly pro-poor policy because poor voters are deeply loyal to the governing African National Congress and anti-poor policies are often opaque.

Publication file: wp76.pdf