Exploring Poverty Traps and Social Exclusion in South Africa Using Qualititative and Quantitive Data*

Recent theoretical work hypothesizes that a polarized society like South Africa will suffer a legacy of ineffective social capital and blocked pathways of upward mobility that leaves large numbers of people trapped in poverty. To explore these ideas, this paper employs a mix of quantitative and qualitative methods. Novel econometric analysis of asset dynamics over the 1993 to 1998 period identifies a dynamic asset poverty threshold that signals that large numbers of South African are indeed trapped without a pathway out of poverty. Qualitative analysis of the 1998 to 2001 confirms the continuation of this pattern of limited upward mobility and a low level poverty trap. In addition, the qualitative data permit a closer look at the specific role played by social capital and social relationships. While finding ample evidence of active social capital and networks, these are more helpful for non-poor households. For the poor, social capital at best help stabilize livelihoods at low levels and do little to promote upward mobility. While there is thus some economic sense to sociability in South Africa, elimination of the polarized economic legacy of apartheid will ultimately require more proactive efforts to assure that households have access to a minimum bundle of assets and to the markets needed to effectively build on those assets over time. __________ * We thank the MacArthur Foundation for financial support under a Collaborative Research Grant. We would also like to thank Phakama Mhlongo, Francie Lund, Sibongile Maimane, Mamazi Mkhize and Zweni Sibiya for their important contributions to the collection of the qualitative data, and Jaqui Goldin and Chantal Munthree for additional data assistance. EXPLORING POVERTY TRAPS AND PERSISTENT POVERTY IN SOUTH AFRICA USING QUALITITATIVE AND QUANTITIVE DATA I. Rethinking the Washington Consensus in Polarized Societies To no one’s surprise, South Africa in the immediate post-apartheid period was characterized by high economic inequality and levels of poverty not usually found in an upper middle income country. In the Poverty and Inequality Report (PIR) prepared for then DeputyPresident Thabo Mbeki, May et al (2001) capture this distributional reality most succinctly when they calculated that South Africa was economically two worlds: one, populated by black South Africans where the HDI was the equivalent to the HDI of Zimbabwe or Swaziland. The other, was the world of white South Africa in which the HDI rested comfortably between that of Israel and Italy. More surprising, however, has been the further deepening of inequality, and poverty, in the post-apartheid period. While it is always possible to argue that these trends are the temporary aberrations of structural adjustment, this paper explores the idea that they represent a deeper and more systemic component of the South African social and economic reality, arising from poverty traps such as those identified by Woolard and Klasen (2004). In particular, this paper explores the idea that the apartheid pattern of socio-economic polarization—in which class and color were almost perfectly correlated—created a world of inequality in which conventional avenues of upward mobility were cut short, and that highly segmented, and ultimately ineffective patterns of social capital accumulation play a role in the persistence of this constrained mobility. 1 See the studies of Hoogeven and Ozler (2004), van der Ruit and May (2003); Meth and Diaz (2004); Van den Berg and Louw (2003). In addition, using several national surveys undertaken subsequent to the 1993 survey, Leibbrandt and Woolard (1999) calculate a suite of consumption-based poverty measures that confirm this racial distribution of poverty. Although debate still persists concerning the notion of social capital, this paper accepts that social networks of trust, support, cooperation and information are a form of capital that mediate economic transactions.