The purpose of this report, is to present a technical review of existing policies in regards to poverty and inequality. “the context that form the basis of my analysis or review is derived from the narrative that suggests “South Africa has arguably the worst income inequality in the world. While the factual situation is generally accepted, the reasons for this are not. As a consequence of the absence of any technical consensus, together with related political consequences of inequality, the Executive of Government has decided to fully investigate the root causes of poverty and inequality with to revising exiting policy.” From this narrative and as a preliminary starting point, two major theories have been put forward for consideration. i.e
• Inequality arises from the structurally high unemployment rates caused by the unequal distribution of capabilities in the South African population – in particular arising from the quality of education. The unequal distribution of education harms industrial development due to the absence of skills and a lowered general capacity for entrepreneurship and innovation.
• The high structural levels of unemployment are attributed to the unequal distribution of income, which skews domestic consumption towards imported commodities, thereby structurally interrupting the development of domestic manufacturing capacity due to the absence of demand at scale. The distribution of income is skewed due to a failure of markets to naturally achieve a fair distribution of income.
I therefore for the purpose of this assignment review the contrasting diagnostic assertions of the two positions. I will also provide an indication of the contrasting policy directions, if any, that flow from the two diagnostic assertions and identify economic risks associated with contrasting policy configurations.
In as far as the first theory is concerned, a narrative implying that inequality arises from structurally high unemployment rates caused by the unequal distribution of capabilities in the South African population – in particular arising from the quality of education. The unequal distribution of education harms industrial development due to the absence of skills and a lowered general capacity for entrepreneurship and innovation, draws a relationship between inequality, unemployment and quality of education.
South Africa is still largely confronted by a daunting challenge of lack of active participation of black or previously disadvantaged individuals in the economy. This challenge imposes a burden on the state to provide social relief. With South Africa’s population estimated at 50 million people, about 5.9 million are unemployed. (Labor Force Survey, September 2011)
Indeed, linked to the unemployment predicament, is the lack of skills for young, black and previously marginalized people thus rendering unskilled people precluded from economic opportunities or employment. Amongst poverty stricken communities, there also appear to be a lack entrepreneurial skills. The high levels of unemployment, poverty and to an extent illiteracy, are as a result of the poor quality of education.