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MDGs don’t stand in isolation

DESPITE the Southern Africa region sustaining an annual growth rate of 6%, the UN Summit on the Millennium Development Goals this week heard that the majority of Southern Africans remain among the poorest people in the world.

While economies in the region are growing, inequalities between citizens of the same countries have also increased.
“In South Africa, for instance, there is a growth in inequalities on the basis of provinces, gender, classes and races,” said Dr Agostinho Zacarias, the United Nations Development Programme resident representative in South Africa.
“However, the country is hiding [this behind] the national economic growth rate, which is not truly reflected in the rural areas where there is a glaring underdevelopment of infrastructure.”
The problem is a familiar one. According to Isobel Frye, director of the Studies in Poverty and Inequality Institute (SPII), robust economic growth will not be reflected in improvements in the lives of the majority, as long as the export of raw materials drives economies in the Southern African Development Community (Sadc).
“Exporting raw materials does not promote job creation because there is no stimulation of local demand for labour,” said Frye.
She said processing raw materials within the region would create many more jobs as well as contribute more to national revenue.
“When we do studies on what poor people would like government to do for them, the majority of respondents always state that they would like to get jobs,” said Frye.
A further obstacle to reducing poverty in the region, said South African MP Stone Sizani, is the power of transnational corporations, which do not invest in the countries they operate in or the local workforce. Instead, he said, they take their profits back to their home countries.
“You find most of these companies listed in the London Stock Exchange because they have no interests of investing in the country they work in,” said Sizani. “That’s why the growth in GDP will not reflect on the majority of the people in the region.”
Social protection programmes are seen as a crucial tool for better distributing wealth in the region.
According to Nicholas Freeland, the director of Regional Hunger and Vulnerability Programme, national non-contributory social pensions now exist in South Africa, Mauritius, Namibia, Botswana, Swaziland and Lesotho.
Mark Heywood, a South African human rights activist, said cash transfers have transformed lives of millions of South Africans in the past few years. He said although most of the country’s citizens are still poor, relatively few are still living in extreme poverty.
“Cash transfers, according to the South African constitution, are a human right,” said Heywood. He said the school of thought that says giving people social protection will make them dependent on the money they receive from government is prejudicial against the poor.
“It’s like saying they are responsible for the poverty they live in,” said Heywood.
“In the last 18 months, 1,5 million South Africans lost their jobs because of the recession. How are these people surviving?”
He said it makes more sense to give people cash as opposed to food aid because it enables individuals to make choices on what to do with the money.
“[Some] might want to use it for transport to go and look for jobs, or buy food or go to the hospital.” he said.
Heywood observed that while many countries are now using cash transfers to alleviate poverty, these programmes are not comprehensive.
As things stand, Heywood admitted, cash transfers are not sustainable in the long-term because governments might run out of money if too many people receive grants compared to those who are employed and contributing income tax.
Frye said in South Africa 14 million people are receiving social grants compared to 12 million people who are employed. This underscores the problem of an economy growing without a corresponding increase in the number of jobs.
“This imbalance creates problems because we need more people to pay tax so that government will be able to give social protection to those who can’t,” said Frye.
Despite the potential that social protection programmes offer, governments have to resolve the question of how to sustain them without donors. One answer may be right under their noses.
“African countries must create a highly qualified, well-paid, and honest tax administration elite to make sure that the state can collect the financial resources it needs to pay for development programmes,” Jean-Philippe Stijns told IPS earlier this year.
Stijns was the main author of the Organisation for Economic Cooperation and Development’s 2010 African Economic Outlook, which concluded that taxes on economic activity ranging from personal income to extractive industries must be strengthened –– which the OECD argued need not mean raising taxes.
Effective tax collection could be a key missing link between economic growth and poverty reduction. In April, economists Dev Kar and Devon Cartwright-Smith published a report titled “Illicit Financial Flows from Africa –– Hidden Resource for Development”.
They calculate that Africa as a whole lost US$854 billion to illicit financial outflows between 1970 and 2008. The economists believe this outflow, facilitated by tax havens, disguised corporations, trade mispricing and money laundering have accelerated in the past decade.
Economic growth due to robust oil prices or commodity prices raises income, says Kar. “But when income rises, it mostly goes into capital flight. Without proper economic governance, increased growth prospects merely fuel capital flight instead of stemming it.”
Stijns argues that more efficient tax collection not only increases revenue, it improves democracy and governance.
“Beyond tax collection efficiency issues lurks the much bigger issue of the political credibility of the state and the extent to which potential taxpayers feel there exists a valuable “social contract”, Stijns said.
“Helping African states to broaden their tax base gives them incentives to engage more directly with their citizens and better consider their needs,” said Stijns.
It’s a reminder that the Millennium Development Goals do not stand in isolation. Promoting good governance and an open, rule-based global trade and financial system –– goal number eight ––  is closely linked to reducing extreme poverty and hunger. –– IPS

 

By Mantoe Phakathi

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