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[QUOTE]Originally posted by Firewall: [QB] BRICS Nations Agree To Set Up Development Bank (rival To World Bank And IMF) The BRICS grouping of emerging economies agreed Tuesday to set up a development bank that would rival Western-backed institutions, South Africa's finance minister told AFP. BRICS consists of Fast Emerging Economics like Brazil, Russia, India, China and South Africa. "It's done," minister Pravin Gordhan said after meeting with his counterparts from Brazil, Russia, India and China. "The leaders will announce the details," he added. ____________ Nostra- Inequality in SA: Another View For a long time I have maintained that inequality and poverty in SA is exxagarated because of populist politics, i.e. the ANC uses the redistribution bogeyman as a threat against business to keep them in line (If you don't toe the line the masses are on the verge of revolution because of inequality). My argument has been that the gini-coefficient for SA does not adequately capture the 'social wage', i.e. free schooling, income grants, free healthcare, housing etc, that are given to the poor. I think the author below sets out the argument far more eloquently and convincingly. What are your opinions? Opinion: The truth about SA's social issues Only 2.7% live in real poverty, and social grants aren’t the badie they seem. In this the second part of ‘Prospects for 2013’ I deal with the troika of social challenges that are trotted out with so much monotony that it would seem that no dent has been made on any of them. But as the saying goes, “Be careful of change…. it can happen behind your back, right in front of your eyes.” This could not be more true of SA’s social challenges. Poverty The SA Institute of Race Relations (SAIRR) in the November Fast Facts 2012 reported: “Nearly 16m people are already on social grants and the number will rise to 17m in 2014/15 (substantially up from 12m in 2007/08). According to Carol Paton, writer at large on Business Day, the average amount the government transfers to the average four-person, poor household every month is: R1 369 for education, R1 031 on social grants and social insurance funds, R798 for healthcare, and R740 for housing, free basic services, and other community amenities TOTAL R3 938 per month Cash grants and other transfers, along with rising real wages for those with jobs, have helped reduce the number of people living in poverty (on less than $2 a day) from 8.4m (19% of the population) in 1999 to 1.4m (2.7%) in 2011. They have also helped raise living standards as measured by the South African Advertising Research Foundation. People on the lowest living standard measure (LSM1) have only a radio and minimal access to services, but those in LSM6 also have stoves, water, electricity, TVs, DVDs, flush toilets, fridges, and cell phones. The proportion of adults in LSM1 has dropped from 10.5% in 2001 to 1% in 2011, while the proportion of people in LSM6 has almost doubled from 12.6% in 2001 to 22.4% in 2011.” There are two issues here: First, commentators are nervous to define poverty. Maybe it would help to break ‘poverty’ into lower income/poor/poverty/abject poverty. If abject poverty is considered to be less than $2 a day, then we have made massive inroads with only 2.7% of the population situated there. There is no doubt that there has been a significant migration out of abject poverty, or, put differently, up the 10 LSM scales. We must stop claiming that 40% of our population lives in poverty, its 2.7%. It is acknowledged that 40% of our population may be poor, but they are not living in poverty. The two are very different. Secondly, it is acknowledged that social grants are largely the cause of this. Significantly though, more and more research suggests that the grants are not just being spent, they are giving rise to entrepreneurial endeavour at the bottom of the pyramid. Travel through the Transkei on any given week day and see for yourself. Inequality The basis for describing SA as the most unequal country in the world is determined by the Gini Coefficient. Information on the Gini Coefficient can be found on the website [URL=http://www.data.worldbank.org.]www.data.worldbank.org.[/URL] The Gini Coefficient measures the distribution of income on a country-by-country basis. Using a simple example: If there are ten people earning R20, if all R20 is earned by one person the Gini Coefficient will be 1.0. If the R20 is earned equally amongst the ten people i.e R2 each, the Gini Coefficient will be 0.0. The World Bank has a schedule whereby it publishes the Gini Coefficient of all countries for which it receives the information. South Africa has a Gini Coefficient of 0.65. But look at the website carefully. The last figure for South Africa is for 2009. Count the number of countries that show their highest figures for 2009. You will see there are 34 countries. We could conclude then that in 2009 out of the 34 countries for which the World Bank has figures, South Africa has the highest Gini Coefficient out of the 34. There are about 232 countries in the world, 193 of which are members of the U.N. In 2009 only ± 11 million South Africans received government grants for education, social grants, social insurance funds, healthcare, housing, free basic services, and other community amenities. In 2012 this had increased to 16 million. Here are the formulae for calculating the Gini Coefficient. The formulae are quite difficult to understand and to apply. And Like any mathematical equation - if any of the input figures are wrong, the answer will be wrong. Important factors in the calculation: 1. In 2011 the South African Revenue Service announced an amnesty for businesses that were not registered as tax payers. According to the Adcorp website (www.adcop.co.za) 385 000 businesses voluntarily came forward and registered. This means that 385 000 individuals were operating businesses and earning money that the state did not know about. Even if one additional person worked in that business our unemployment figures would be wrong by 385 000 x 2 people = 700 000. This implies that 700 000 people were reflected in the Gini Coefficient calculations as earning no income. 2. Taxation rates. Someone earning R1m per annum pays 40% income tax. The true earnings are R600 000, not R1m. A person earning R60 000 per annum pays no tax and still earns R60 000. 3. Stats. SA does not consider government grants for education, social grants, social insurance funds, healthcare, housing, free basic services, and other community amenities as income and as part of the Gini Coefficient calculation (Bosch, Roussouw et al 2010), so 16 million recipients of these grants are not factored into the ‘input’ figures of the calculation. These are important considerations: were they to be included we believe our Gini Coefficient would be between 0.38 and 0.45 - a very different picture, and very much average in global terms. Furthermore why does Credit Suisse in its Global Household Wealth Report of 2012 claim that SA is one of only five countries in the world where household wealth has increased fourfold over the last ten years, putting us in the third quartile of household wealth globally? So, when commentators claim we are the most unequal society in the world, it’s not true. Unemployment The official figures from Stats South Africa for 2011 show that the informal sector employs 1 613 078 people, the formal sector some 11 million people with some 8 million people ‘officially’ unemployed. Based on this figure we are told our unemployment is about 25%. Adcorp’s figures for the same period claim that in the unmeasured informal sector some 6 374 130 people who are designated as ‘officially unemployed’ are ‘economically engaged’. Were this to be the ‘truth’ our true ‘absolutely no work’ unemployment level would be no higher than 12.5%. Some examples: The SA Taxi Industry with 300 000 taxis use a “conductor” whose job it is to entice passengers, collect fares, clean the vehicle. They earn between R50.00 and R100.00 per day. As far as the State and World Bank is concerned they are unemployed and earn nothing. Consider Car Guards at our shopping centres, Caddies at our 400 Golf Courses, waitrons at our restaurants, the ‘below-the-radar’ township entrepreneurs and even the estimated 100 000 illegal miners. All are ‘statistically’ unemployed in terms of census data. So the question can be legitimately asked – is our real unemployment as high as 25%? Comment I am not suggesting for one moment that poverty, inequality and unemployment are not major social challenges in SA, and I’m not trying to be glib with the above comments. What I am saying is that we don’t know the facts, we generalise, and we don’t acknowledge the progress in this regard. For many, it doesn’t suit. But, this is a double edged sword, so beware. Frans Cronje of SAIRR warns: “However, if we are right and the ANC has delivered as well as it realistically could then it has no delivery ace up its sleeve to curb the protests and instability that South Africa confronts. It has therefore come under much pressure to change policy away from redress and redistribution towards growth and employment if it wishes to remain in power. If you increase people’s living standards, as the ANC has done, it is a politically dangerous thing to do. The reason for this is that it raises expectations about future improvements. These cannot be met through further delivery but only through job creation and income growth. South Africa’s fundamental problem is that its government has done a great deal to increase the living standards of poor people but has no means, whether through education or labour market access, to allow those same people to continue climbing the living standards ladder. The ANC and the government it leads are therefore in a wholly unsustainable position if they wish to retain their political dominance in South Africa. Significantly there are now many leaders in government, the media, and civil society who will admit to this fact. The list of problems South Africa confronts, which depresses so many people, has therefore become the very thing that will drive policy change in the country. It is for this reason that we are able to be cautiously optimistic about future prospects for the country.” Conclusion This is profound, we do not have a situation where populist policies and more delivery are going to ‘fix’ our social challenges. We have to be able to provide an environment in which job opportunities will provide many South Africans with an opportunity to climb the economic ladder. And we don’t have to look far for models where this has been achieved, but it requires a radical change in our thinking, and in particular our labour practices. http://www.moneyweb.co.za/moneyweb-s...etail+no+image [/QB][/QUOTE]
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