The widening gap between rich and poor

Andile Mngxitama; Ann Eveleth
National Land Committee (NLC)

The democratic gains of South Africa's 1994 transition rapidly came under pressure as the new leaders adopted neo-liberal policies in the face of demands of the poor majority for rapid socio-economic transformation. At the time,“12 million South Africans did not have access to clean drinking water, 21 million did not have access to adequate sanitation … and more than 20 million had no access to electricity,”[1] while 87% of the land was in the hands of about 60,000 white farmers.

Thegovernment adopted the Growth, Employment and Redistribution (GEAR) Strategy in1996 to transform the economy. GEAR's main premise was that strong fiscaldiscipline, labour flexibility and privatisation would develop the economy byattracting foreign investments. Privatisation in its various forms, ranging fromsale to “equity partnerships,” has been implemented in sectors ranging fromtourism, to telecom, to airlines and railroads. Each of these privatisations hasresulted in job losses and rising service costs. But privatisation has beenjustified on the grounds that these services fall outside the scope of stateresponsibility, and that it promotes efficiency and revenue generation for statedevelopment projects.

Morepervasive than these highly publicised large privatisations has been the gradualexpansion of a concept marketed as “public-private partnerships” (PPPs)between municipalities and (mainly) multinational capital. Since PPPs do notinvolve the sale of state assets, such deals are often hatched far from publicscrutiny. While local states retain nominal ownership, corporations take chargeof infrastructure development, delivery, pricing and collection. It is at thislevel that neo-liberalism has taken its heaviest toll on the poorest sector ofthe population, as principles of “cost recovery” take precedence over basichuman rights, leading to widespread service disconnections. “Cost recovery”mechanisms are also increasingly applied by local governments even where thereare no private partners.


Inkeeping with “cost recovery” principles, basic services have been turnedinto commodities, eroding poor people's access to water provision, a localservice in which PPPs have spread rapidly. The introduction of exorbitant userfees to communities that once received it for free represent the neo-liberalrejection of cross-subsidisation solutions offered by civil society, throughwhich the rich could pay a higher portion of total service costs.

Instead,the involvement of multinationals and the over-riding profit motive in waterdelivery has led to the poorest consumers (especially in rural areas) payinghigher fees to subsidise rich, mainly white, suburban and corporate users. Forinstance, 25% of the total water supply is consumed by industry and mining, 53%by commercial agriculture and 12% is used in domestic consumption, much of whichis used up on items such as gardens and swimming pools, by the (mainly white)middle classes. Poor rural South Africans (about half the population), onlyconsume 1%-2% of the national water supply.[1]

Themain strategy for water is Build, Operate, Train and Transfer (BOTT), adopted in1997, which privatises the provision of services, rather than the asset itself.After a long period of investing its own capital and “delivering” theservice, the private company is supposed to hand over service delivery back tothe government. During that period the private sector provides services on apure profit basis in which “cost recovery” is the operating principle.

Morethan eight years after the end of apartheid, the fallacy of this policy isclear. About 12 million people lacked access to clean drinking water in 1994.Although the government reported that it had provided water access to sevenmillion new consumers by February 2002, a damning report published by thestatutory Human Sciences Research Council revealed that nearly 10 million peoplesuffered water service disconnections in the same period. The true number ofpeople now denied access to this basic life source may actually have grown sincethe end of apartheid.

Waterdisconnections are the main “credit control” mechanism employed by themultinational service providers, who are freed of the social obligation toprovide water to the poor. For the poorest people, particularly those living inrural areas or dense urban informal settlements lacking adequate sanitation,these disconnections have resulted in cholera outbreaks and hundreds of deathsas people resort to using infected water sources. A system of pre-paid cards isused to compel payment. The cards are recharged at a fee and when the amount inthe card is used up access is automatically terminated.


Thesame phenomenon of widespread disconnections overshadowing the delivery of newservices has occurred in the electricity sector[2]—inadvance of the planned listing of the state-owned electric company, Eskom, forprivate share options. In 1994, more than 20 million South Africans did not haveaccess to electricity, and Eskom set targets to roll out more than 350,000 newconnections annually in a major expansion drive. At the same time, however,Eskom began a process of “commercialisation” (the typical precursor tofull-scale privatisation in South Africa), including stringent “creditcontrol” and “cost recovery” measures.

Accordingto a recent study by the Alternative Information and Development Centre (AIDC),the government's claims that Eskom's electrification programme has deliveredfour million new connections since 1994 are curiously offset by the fact thatelectricity consumption has declined over the same period. The explanationclearly lies in the growing number of disconnections and self-imposed lowconsumption by the poor as a result of inability to pay for electricity. TheAIDC report found that monthly disconnections mushroomed from 22,320 in 1996 to98,775 by 2001. The latest figure clearly shows the gains of the 29,167 newconnections Eskom targets to make each month, with three times as many peoplelosing access each month as gaining it, in a best-case scenario.[3]


Thecommercialisation of essential services like water and electricity has notstopped the State from linking its "cost-recovery" efforts to poorpeople's access to low-income or state housing. A recent study by the RuralServices Development Network found that more than two million people had beenevicted from their homes since 1994 for failing to pay their water bills.[4]The principle by which poor people, dependent on State support, lose access toall services because of their inability to pay for one service is a source ofwidespread social discontent.

Inaddition to urban housing evictions directly related to non-payment for otherservices, municipal privatisation efforts targeting the sale of publiclow-income housing units has forced millions more out of their homes, the valueof which they have already paid many times in rent, because they cannot pay thepurchase price. Despite government claims to have delivered more than a millionnew houses since 1994, these evictions and forced removals of entire informalsettlements—to make way for private “development” plans, includingshopping malls and leisure parks—have obscured any gains.

Thehomeless are now required to make an "own contribution" before thestate can provide housing grants. This policy allows those with funds to jumpthe queue. Both cost recovery and "own contribution" requirements inthe context of widespread poverty are tantamount to the denial of citizenshiprights. The real citizens are those with cash.

Joblessnessand poverty

Fairlyconservative estimates place the unemployment figure between 30% and 40% of theeconomically active population. Privatisation is a leading contributor to thegrowing unemployment rate. Unemployment has risen largely because, over the past15 years, both the public sector and private firms shed lower-level permanentposts on a large scale. According to recent figures released by the Statestatistical institute (StatsSA), the average African household lost 19% of itsreal income since 1995, while average white household income grew by 15%. Instark contrast to the State's claims that it is “deracialising” the economy,the average white household earned six times as much as the average blackhousehold in 2000, while the racial income gap stood at 400% in 1995.Furthermore, the poorest 40% of households saw a 16% drop in their share oftotal income during the same period, with the richest 20% earning 65% of allhousehold income.[5] StatsSA reports that the unemployment rate has soaredfrom 16% in 1995 to almost 30% today. However, other estimates using differentdefinitions of the “economically active” population put the unemploymentrate between 40% and 43%.

Landlessnessand food insecurity

Theracially skewed legacy of land distribution in the country has not changed. Lessthan 2% of the country’s 122 million hectares of land has changed handsthrough this programme since 1994, while 19 million poor and landless ruralpeople and seven million poor and landless urban people need land.

Unemployedurban workers have returned to rural areas seeking land to grow food. Risingfood costs have exacerbated the land crisis; the latest Household SubsistenceLevel Survey revealed that the poorest South Africans suffered in 2002 thehighest annual rise (17.1%) in their basic living costs, about 60% of which isfood, in 30 years. Rising food prices sparked such growing outrage in 2001 thatthe government has been forced to respond, albeit with minimal increases insocial grants, or face the possibility of the food riots.[6]

Whileaccess to land for home food production represents a key mechanism through whichthe poor can avoid starvation, the government has overlooked this possibility infavour of its mantra of cost recovery. In 1999 it shifted the main land reformprogramme, land redistribution, from one targeting the poor to one targeting thecreation of a black commercial farming class. The key mechanism through whichthis shift occurred is the imposition of an “own contribution” requirementfor those seeking access to land through the Land Redistribution forAgricultural Development Programme (LRAD). This requirement discourages poorpeople, who are unlikely to afford their own capital inputs, from entering theagricultural economy.

Resistanceand repression

Socialmovements have grown from strength to strength over the past few years.[7]The movements have engaged in a range of local and national actions, includingland occupations, electricity re-connections, and reclaiming of homes for thoseforcibly removed or evicted, as well as marches and demonstrations. Thesemovements joined forces—together with an array of international movements—tolead a 30,000-strong protest march during the World Summit on SustainableDevelopment in Johannesburg in August-September 2002 to highlight the gapbetween the government's stated commitment to sustainable development and thereality of declining levels of development in the wake of neo-liberalism.[8]Hundreds of activists were arrested and detained, particularly in the first weekof the summit, and many were subjected to beatings and humiliation. Most caseswere dropped by the time the protestors appeared in court. The gloves ofdemocracy had clearly begun to wear thin.


Inall sectors of the South African economy socio-economic policies grounded in theinterests of domestic and foreign capital instead of predicated on economicgrowth have resulted in the growing accumulation of wealth in the hands of asmall elite and the increasing impoverishment and exclusion of the majority. Thedesperation of the majority cannot continue without a major social disruption aspeople lose patience with the promises of “trickle-down” economics. The gapbetween rich and poor has already begun to transfer the centre of socio-economicdebate from the halls of parliament to the streets, and this looks set tocontinue.


[1] E. Cottle and H. Deedat, “The cholera outbreak: A 2000-2002 case study of the source of the outbreak in the Madlebe Tribal Authority areas, Uthungulu Region, KwaZulu-Natal.” RDSN, ILRIG, 2002

[2] “The Cost of Living: How Selling Basic Services Excludes the Poor”, South African People and Environments in the Global Market, Booklet 3, Groundwork, 2002.

[3] Alternative Information and Development Centre, in “Back to candles and lamps”, Daily Dispatch, 24 August 2002.

[4] Cottle and Deedat, op. cit.

[5] The percentage of households earning less than USD 73 a month grew from 20% in 1995 to 28% in 2000. During that period, the poorest 80% of households spent a larger proportion on food. “StatsSA income figures make gloomy reading”, Business Day, 22 November 2002.

[6] StatsSA, Household Subsistence Level Survey, October 2002. In the past year, according to the survey, the cost of the staple mealiemeal (cornmeal) rose by 110%, potatoes by 82%, cabbage by 60% and milk powder by 38.5%. According to a University of Cape Town Department of Medicine study, about 43% of South African households are unable to afford an adequate diet, cf. Andrew Trench, “Food prices break 30-year record”, Sunday Times, 5 October 2002. There are also reports that children are dying of malnutrition, cf. Thabo Mkhize, “166 SA children die from starvation”, Sunday Times, 21 July 2002.

[7] Including the national Landless People's Movement, the Cape Town-based Anti-Eviction Campaign, the Durban-based Concerned Citizens Forum, and the Anti-Privatisation Forum.

[8] Independent Media Centre, South Africa, at