Global financial organisation the World Bank’s ‘Inequality in Southern Africa: An assessment of the Southern African Customs Union’ report states that promoting equality of opportunity, improving education and agricultural productivity, supporting early childhood development (ECD) and improving public service delivery can help to reduce inequality in the region.
The Southern African Customs Union (Sacu), comprising Botswana, eSwatini, Lesotho, Namibia and South Africa, is the world’s most unequal region. Consumption inequality across the Sacu region is more than 40% higher than the averages for sub-Saharan Africa and other upper-middle-income countries.
The report posits four main policy areas that must be accelerated to reduce inequality.
The first is promoting equality of opportunity. Improving the efficiency and inclusivity of public service delivery can help equalise opportunities, the report notes.
This includes strengthening access to public services and ensuring that everyone, including rural and poor people, has equal access to these services.
“Although Sacu has made progress in increasing access to basic public services, the remaining gaps entrench inequality of opportunity. Broad infrastructure gaps mean that rural areas are disadvantaged in accessing electricity, the Internet, roads and other public goods and services.
“Improving public service delivery in a way that addresses the spatial gaps would help level the playing field and harness the potential of rural development to reduce inequality. One option might be using technology to improve service delivery and reach remote areas,” the World Bank says.
Further, strengthening the provision of ECD services is central to reducing inequality of opportunity. Improving access to and the quality of early childhood care and development, which are especially limited among poor and vulnerable people in Sacu, is a cost-effective strategy for reducing inequality and substantially improving long-term outcomes.
Additionally, regional development and agglomeration can also help reduce spatial inequality in access to opportunities. Many people in Sacu still live far from job opportunities and have limited access to basic services, because of the legacy of apartheid and poor spatial planning and development.
“Supporting urbanisation that increases productivity can contribute to sustainable growth, but only when planned and managed well. Building cities that are inclusive, safe, resilient and sustainable requires sound policy coordination and investment choices, as well as an approach that is coordinated across national and local governments.”
The second policy area is addressing the highly skewed distribution of productive assets. Generating jobs for the growing workforce and resolving the excessive segmentation of Sacu labour markets are key to reducing unemployment and inequality, the report highlights.
“This entails improving business environments through reducing business regulations that hamper domestic and foreign investment and through strengthening competition and productivity, for example by investing in the digital economy and building domestic technical skills.”
Further, addressing this entails boosting entrepreneurship, self-employment and small business development by removing regulatory bottlenecks, supporting business and socio-emotional skills development and expanding access to finance.
Addressing the skewed distribution of productive assets entails developing programmes to address youth unemployment along with a matching process to reduce the information gap between employers with job vacancies and potential workers with the appropriate skills for those jobs.
“Raising agricultural productivity will help close intersectoral productivity gaps and thereby reduce inequality. Agricultural productivity can be improved through transitioning from subsistence to commercial agriculture, increasing the use of productivity-enhancing agricultural inputs, strengthening linkages between farmers and buyers, and investing in climate-smart agriculture.
“Agricultural commercialisation involves enhancing linkages between farmers and buyers, while supporting local agrodealers and the expansion of services,” the World Bank says in the report.
Further, agricultural entrepreneurs should be trained in business skills, record keeping, marketing, the use of inputs and agronomic practices. Investments in climate-smart agriculture offer the potential to transform agriculture into a more productive, climate-resilient and low-emissions sector.
There is an urgent need to strengthen research and establish partnerships with international research institutes to develop high-yield, stress-tolerant and climate-ready crop varieties, it says.
The third suggested policy focus area is enhancing the impact of fiscal policy on inequality by improving the equity and efficiency of social spending. Improving the efficiency of social assistance is important for reducing inequality, especially in Botswana, eSwatini, Lesotho and Namibia.
This could be achieved by means of an integrated social registry with automated databases and better service delivery to address some implementation challenges, modernising social protection systems and improving policy coordination among government Ministries.
Further, better targeting of social protection programmes to ensure that benefits reach the intended beneficiaries will improve the impact of fiscal policy. That a significant share of benefits accrues to people who are not poor suggests weaknesses in the means tests used to identify beneficiaries, whether gaps in the tests or limited capacity for administering them.
“Additionally, some Sacu countries could reduce poverty and inequality in a budget-neutral way by allocating a greater share of social protection resources to children. Increasing the coverage and raising the value of child benefits could be achieved using resources saved by pension-testing the old-age grants. However, child grants should also be targeted better, which would need a social registry, for example.”
Improving the targeting and efficiency of public spending on education and health can enhance its redistributive impact. This strategy entails improving the quality of education and healthcare. The focus should remain on enhancing ECD and education programmes and improving basic education at all levels. ECD and basic education programmes should be redesigned to cater for the poorest sections of society.
Opportunities to develop skills should be substantially broadened to generate human capital for economic modernisation, while making investments to enhance the quality, relevance, and efficiency of skills training. Technical and vocational education and training and higher education systems also require reform.
“Ultimately, improving the efficiency of spending on education and health requires improving both quality and equity in education, skills development, and healthcare, as well as closing gaps in access to key infrastructure in rural areas,” the World Bank says.
The fourth policy area is strengthening resilience to climate change risks and economic shocks.
“Enacting measures to mitigate and adapt to water scarcity is vital for building people’s resilience against climate shocks. This could include investments in water conservation and storage interventions, groundwater preservation, and the development of new water resources, as well as cost-based pricing to encourage conservation and reallocation to more productive sectors.
“Water scarcity has an adverse impact on inequality because it disproportionally affects vulnerable and middle-class people. Droughts pose substantial risks to agriculture, the mainstay of the poor and vulnerable rural population.
“Considering the proven regressive impact of water shortages and pollution, investments in mitigation and adaptation may be of particular benefit to lower-income households and households in rural areas, helping to protect their livelihoods and well-being and so reduce inequality over time,” the World Bank says.
Further, adaptive social protection programmes are critical for protecting the well-being of vulnerable households, including poor households and the middle class. The region is bracing for shocks that might be increasing in frequency and intensity but remain highly uncertain in occurrence and distribution.
Although it is important to protect households at the lower end of the income distribution, which find it harder to protect themselves against and recover from shocks, countries need social protection programmes that can be adapted to the nature of the shocks and their distribution. Such programmes should be properly targeted and provide broad coverage.
Programmes will need to be nimble enough and fiscally sound enough to allow for both vertical expansion, namely higher benefits, and horizontal expansion, which includes more beneficiaries, to cover the people affected by the shock, as needed.
Adaptive social protection also means building resilience among poor and vulnerable households to help them withstand economic shocks and natural disasters, the World Bank says.