The transition from apartheid: Social spending shifts preceded political reform

ABSTRACT

Given the nature of apartheid, social spending incidence figures were collected by race for many decades. An analysis of these figures shows an important structural break in racial patterns of social spending in the mid-1970s, with a major shift towards the black population. This left the post-apartheid government with much of the social spending shifts already accomplished, and relatively limited fiscal leeway. Nevertheless, it continued these shifts, with the result that South African social spending is now extremely well targeted.

Keywords:

• apartheid
• discrimination
• fiscal incidence
• social spending
• South Africa

JEL Codes:

• H00
• I00
• N37
• O23

Notes

2 A World Bank study currently underway (August 2014) also follows the same pattern.

3 Observations with asterisks were based on survey data, whereas earlier data were obtained from apartheid-era budgets. As the two 1993 observations using alternative methods show, the methodology employed does not alter the fundamental picture to any significant degree.

4 The economic literature of that time bears witness to the debates regarding social spending and the transition from apartheid. See for example Simkins et al. (1985), Van der Berg (1991, 1992a, 1992b), Donaldson (1992, 1993) and Lundahl & Moritz (1994).

5 Concentration coefficients are calculated as for the Gini coefficient and can be derived from a concentration curve that is similar to the Lorenz curve. Unlike the Lorenz curve, however, the concentration curve can lie above the diagonal. For example, if the population is arranged from poorest to richest, the bottom 40% cannot earn more than 40% of all income, but they can obtain more than 40% of social grant spending. A concentration curve above the diagonal would have a negative coefficient. Thus the concentration coefficient would approach +1 if the richest households get all the social spending, it would be zero if all households get the same benefits from such spending, and it would approach −1 if all spending goes to the poorest households.

6 A new incidence study currently underway under the auspices of the World Bank indeed finds extremely well-targeted social spending in an international comparative perspective.