Extension of the Research Facility on Inequalities in South Africa

Despite considerable efforts to improve the welfare of its citizens since its transition to democracy in the mid-1990s, South Africa remains one of the most unequal countries in the world. With a Gini coefficient of 0.63 in 2015, South Africa has many structural challenges inherited from its segregated history. Yet, the fight against inequality is deeply embedded in South African policy, from the 1994 Reconstruction and Development Programme to the current National Development Plan, which makes reducing inequality one of its two core objectives, alongside poverty eradication. 

Research conducted under the first phase of the Facility has demonstrated the prevalence of spatial inequalities and the important role played by the labour market in perpetuating the polarization of society: low standards of living, youth unemployment, limited access to quality education, vocational training and employment, etc. These phenomena have also been greatly amplified by the Covid-19 pandemic and could be even further by the imperatives of a low-carbon economy.
 

In order to address these multidimensional issues, a program to support the development of public policies that can have an impact in terms of reducing inequalities is implemented as part of the Extension of the EU-AFD Research Facility on Inequalities (RFI). Two intervention priorities have been identified in partnership with local research centers and in close collaboration with the South African government. 

1. A first pillar is rooted in the need to advance the evidence base and understanding of the stimulus effects of income transfer programmes in the South African context, focusing on the impacts of social grants and of public employment programmes. Four research projects are being developed analyzing the externalities of Covid-19 recovery policy.
2. The second pillar consists in the development of an interactive, online Community Explorer that would allow researchers, policy-makers and civil society members to build a stronger understanding of well-being at the community (or main area) level in South Africa. This socio-economic observatory will be piloted at the level of a municipality in order to develop analyses of the local labor market and to support the municipality in its economic diversification strategy in response to the challenges of exiting coal. This type of observatory could be extended in the future and used as a tool for planning and analyzing the impacts of public policies on territories and populations.

In order to identify the externalities of the Covid-19 stimulus policy, the Extension of the EU-AFD Research Facility on Inequalities (RFI), in partnership with local research centers and the South African government, is conducting five research projects on:

• The local economic development effects of income transfers (University of Johannesburg - CSDA and WIEGO). This study qualitatively analyzes the interactions and impacts of the Social Relief of Distress (SRD), a social assistance grant directed to many informal workers in times of Covid-19, as well as the broader stimulus package, on local economies.
• Cash Transfers and Economic Recovery (University of Cape Town - DPRU). This study quantitatively investigates whether the Covid-19 grant directed to unemployed people acts as a source of labor market recovery by leading to increased investment in productive labor market activities. 
• Measuring stimulus effects on the South African economy (Infusion). The study aims to contribute to the body of knowledge on the impact of social protection and employment stimulus measures on the formal and informal economies, by .The purpose of the study is to explore exploring shifts in purchasing behaviour between 2019 and 2022 among informal and small traders
• Evaluation of local stimulus effects: Jobs and grants programmes (University of Cape Town - SALDRU). The objective of this study is to characterize the spending patterns of stimulus recipients and then to examine how this spending is likely to stimulate economic activity in industries further up the product supply chain.
• Redesigning the South African “Social Relief Distress” Grant Program for higher impact. The objective of this study is to produce motivated recommendations on how the SRD should be designed going forward into the longer term, in order to maximize the impact of the grant on employment outcomes and to ensure it effectively reduces poverty, while maintaining its cost to an acceptable level.

Besides the analysis of the recovery policy, the Extension of the RFI is focused on developping tools to better assess local socioeconomic contexts:

• A Community Explorer is being developed, expanding the current Youth Explorer and adding  labor market demand indicators. Its objective is to provide an understanding of the workings of geographic areas as economic and social systems, and to promote the construction of an integrated and effective approach to policy and planning that would ultimately contribute to social improvement for all.