South Africa: Economist Warns On Poverty Bid

from All Africa

Business Day (Johannesburg)

Linda Ensor
Cape Town

One of India's leading economists has warned against the South African government's plan to formulate a poverty line -- an indicator defining indigent levels -- to help design well-targeted poverty reduction programmes.

Deputy chairman of the Indian government's planning commission Montek Singh Ahluwalia, who visited several cities in SA recently, said the wisdom of having an income or consumption-based poverty line was questionable because of its intrinsic limitations as a measure of the extent of poverty and its reduction.

Finance Minister Trevor Manuel, in his budget speech last month, said Statistics SA would pilot a national poverty line indicator to help government measure the progress made in its fight against poverty.

The budget review defined a poverty line as "the expenditure necessary to buy a minimum standard of nutrition and other necessities" -- that is the sum of money required for basic subsistence. It noted, however, that many countries used two or more poverty indices to measure progress in poverty reduction at several levels of wellbeing.

Ahluwalia expressed his views on the relationship between economic growth and poverty reduction in an address to the South African Institute of International Relations in Cape Town last week.

He said the prevailing view in India is that poverty could not be defined in terms of any fixed line. "As a society gets richer, its concept of what is poverty in terms of the minimum level is going to change over time. What you thought was a reasonable poverty line 30 years ago may not be relevant today.

"If the system is not evolving in a manner which provides public services such as health, sanitation, clean water and education, then the degree of deprivation can be much greater than the percentage of the population living below some fixed income level or consumption level.

"There are many essential requirements, particularly higher education, which for the masses will come only from public provisioning," he said.

Ahluwalia said most developing countries, and particularly India, believed that a sustained attack on poverty required not only growth but an improvement in the quality and spread of public services, particularly in the rural areas which sustain 70% of India's population.

"In India we use multiple indicators for poverty. The phrase we are using is that growth must be inclusive."

He said economic reforms in India had brought about higher growth and a reduction in poverty, though not to the extent desired. Poverty was declining at a rate of roughly 0,8 percentage points a year, which was slower than expected.

At this rate it would take India a long time to bring poverty to below 10% of the population.

Ahluwalia dismissed the suggestion that economic growth would not reduce poverty, though he stressed that growth alone was not sufficient.

"Scepticism about growth fighting poverty is not very well placed. The world does not have too many examples of countries which have achieved high growth and failed to reduce poverty."