Slower Growth Forecast Places Sharper Focus on Policy Challenges
Johannesburg, July 24, 2012 – A weakened global economy and dampening of consumer and business confidence are triggering a slowdown in South Africa’s growth momentum, and the forecast is a lowered growth rate of 2.5 percent for 2012 according to a new World Bank report, “South Africa Economic Update: Focus on Inequality of Opportunity” released today. The forecast is lower than the earlier, November 2011 estimate of 3.1 percent by the World Bank.
“South Africa is highly integrated with the global economy, and is therefore susceptible to the ongoing slowdown in the Euro zone countries and China, the two principal export destinations for its goods and services,” said Asad Alam, World Bank Country Director for South Africa speaking at the press launch. “The global headwinds have put into even sharper focus the demanding policy challenges of high inequality and unemployment in the country. We are confident that the report will spur debate and contribute to informed policymaking, especially the findings from the first-ever application of the Human Opportunity Index for South Africa.”
The Inequality of Opportunity and Human Opportunity Index
Using the innovative methodology of the “Human Opportunity Index” for the first time for South Africa, the report analyzes the inequality of opportunities for South African children compared to their peers in other middle-income countries. It also looks at the circumstances at birth that lead to the unequal opportunities in childhood and later reemerge to contribute to unequal access to jobs.
Every society has some inequality of outcomes that reflects differences in individual efforts and choices, and innate human talent, on which consensus is difficult to reach in terms of policy intervention. However, a universally recognized societal goal is to ensure equality of opportunity, which entails leveling the playing field for an individual’s success in life irrespective of circumstances such as race, gender, place of birth and family background.
The report looks at opportunities in two stages of a South African person’s life: at childhood in terms of access to basic human development and infrastructural services, which research has found to fundamentally affect a child’s chances later in life; and at adulthood in terms of employment opportunities.
- The report finds that South Africa’s progress toward universal access to basic opportunities has been mixed. Impressive gains have been seen in universalizing access to primary education and enhancing access to electricity and telecommunications. Progress has been much more mixed and unequal in provision of water, sanitation and health insurance, completion of primary school on time, and addressing overcrowded living conditions. Progress on providing early childhood development programs and safe neighborhoods has been inadequate across all circumstance groups.
- South Africa’s weak performance on providing employment opportunities is hampered not only by slow job creation but also by a highly unequal access to the limited number of opportunities. Global comparisons show South Africa to be an outlier in terms of both the level and inequality of employment opportunities. The employment situation is especially challenging for the younger labor force, residents of townships/informal settlements and rural areas, and the non-white segments of the population.
- A key message of this report is that not only is it important from policy perspective to know how many people are being excluded from basic service provision but also who is being and excluded and whether that systematically reflects a particular set of circumstances (such as ethnicity, gender, location of birth and family background) that are beyond an individual’s control.
“The Human Opportunity Index is a powerful tool to track a society’s progress on equitable distribution of basic opportunities,” said Ambar Narayan, World Bank Lead Economist and guest co-author of the report. “Making use of it, a number of countries in Latin America have begun addressing their inequality with better monitored and better targeted social policy. South Africa, with its entrenched inequality of opportunity, can consider forging a similar path of evidence-based policy development.”
The report cautions that in the quest to attain equity there are no simple, elegant policy solutions. However, it points to one important lesson emerging from international experiences, noting the need for a dynamic system involving policy experimentation (from incentives for training and hiring of young workers to monitor-able and incentive-based delivery of public services), backed by rigorous impact evaluation and greater participation of communities in the actual delivery of basic public services, and creating the feedback loops for policymakers.
“Our results show that a South African child not only has to work harder to overcome the disadvantages at birth due to circumstances, but having done so, finds that these reemerge when seeking employment as an adult,” said Sandeep Mahajan, World Bank Task Team Leader for the South Africa Economic Update series. “Moreover, the disadvantages do not stop with that one person—they get transmitted across generations. The policy challenge is to find a way to break this vicious, self-perpetuating cycle of inequality in South Africa.”
Note to Editors: The report measures opportunities among children by the Human Opportunity Index (HOI), which is the coverage rate of a particular basic service adjusted by how equitably the service is distributed among groups differentiated by circumstances. More details on the HOI is available at http://go.worldbank.org/24Q7UL13T0
The report defines basic opportunities as a subset of goods and services for children, such as access to education, safe water on site, or electricity, that are critical in economic advancement in life. These either are already affordable by society at large, or could be in the near future, given the available technology. The report argues that universal provision of basic opportunities is a valid and realistic social goal.