SAIRR Today: Income track record shows roadmap for the future - 30th July 2010

The Institute’s South Africa Survey for 2009/10 is in the final stages of editing and will be published over coming weeks. In the run-up to its publication, this column is going to review a number of highlights from the forthcoming Survey. This week we focus on a fifty year review of per capita disposable income levels for South Africa.
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SAIRR Today: Income track record shows roadmap for the future - 30th July 2010

The Institute’s South Africa Survey for 2009/10 is in the final stages of editing and will be published over coming weeks. In the run-up to its publication, this column is going to review a number of highlights from the forthcoming Survey. This week we focus on a fifty year review of per capita disposable income levels for South Africa.

The Survey’s review of average disposable income stretches from 1961 to 2009. It shows that in 1961 South Africans averaged a per capita and after tax income level of R12 713. That level increased steadily through the 1960s, reaching growth as high as 5.8% in 1968. (All figures are in constant 2005 prices).

By 1970 South Africans were averaging disposable income of R15 519. This level of income again grew, to R18 672 by 1980 – a year in which income levels grew by 6.3%. This was the fastest rate of income growth in a single year that South Africa experienced in 20 years.

But 1980 was important for another reason. Per capita income was about to begin falling and it would be another 21 years before South Africans would again be as wealthy as they had been in 1980. For the remainder of the 1980s, disposable per capita income averaged under R18 000 and reached a low of R17 296 in 1986. This was on a par with levels averaged in the 1970s.

By 1990 disposable per capita income had recovered somewhat to R18 048. But it would again decline into the early 1990s, reaching a level of R17 289 in 1993 before beginning a pattern of recovery that extended all the way to 2008.

In 2000 the average had reached R18 511. The next year it reached R18 674, beating the previous income peak year of 1980 by just R2. This was the first time South Africans were on average wealthier than they had been 21 years previously. There can be no better indicator of the price the country paid for the racial ideology its Government had adopted 52 years previously.

Average income levels continued to grow through the early, mid, and late 2000s. Between 2004 and 2006, income increased by between 4.4% and 6% per annum. By 2008 South Africans were earning an average, after tax, per capita income of R23 433.

However in 2009 this positive trend was broken as the average declined to R22 560. This was admittedly a year that saw a global financial crisis and a recession in South Africa. However, over the past 18 months the economy has also shed in the region of 1 million jobs and has continued to shed jobs even as economic growth has begun to recover. The implications are that per capita income may not recover as robustly as may be required to secure social and political stability in the country. The Institute has previously published information on why a GDP growth rate of over 5% is necessary to secure such stability.

It took twenty years of falling average per capita income through the 1980s to help the apartheid Government to realise that the policy trajectory that it had placed the country on was not sustainable. The ANC does not have to repeat that mistake. Even though per capita income may stabilize over the short term and perhaps even show some limited growth, this growth is unlikely to be fast enough to secure a middle class future for more South Africans.

The South Africa Survey has been published annually by the Institute since 1946. This year’s edition will run to over 700 pages and will cover in great detail trends in the economic, social, and political environment. The Survey is consulted as an important strategy, planning, and forecasting tool in business and government. It is available exclusively to subscribers, who also benefit from substantial other research, policy, and briefing services offered by the Institute and its Unit for Risk Analysis. Click here and our customer service staff will contact you to arrange a meeting to explain how your company or organisation can also benefit from access to the reports and services of South Africa’s leading research and policy organization.

- Frans Cronje.

IRR TV

The Survey’s review of average disposable income stretches from 1961 to 2009. It shows that in 1961 South Africans averaged a per capita and after tax income level of R12 713. That level increased steadily through the 1960s, reaching growth as high as 5.8% in 1968. (All figures are in constant 2005 prices).

By 1970 South Africans were averaging disposable income of R15 519. This level of income again grew, to R18 672 by 1980 – a year in which income levels grew by 6.3%. This was the fastest rate of income growth in a single year that South Africa experienced in 20 years.

But 1980 was important for another reason. Per capita income was about to begin falling and it would be another 21 years before South Africans would again be as wealthy as they had been in 1980. For the remainder of the 1980s, disposable per capita income averaged under R18 000 and reached a low of R17 296 in 1986. This was on a par with levels averaged in the 1970s.

By 1990 disposable per capita income had recovered somewhat to R18 048. But it would again decline into the early 1990s, reaching a level of R17 289 in 1993 before beginning a pattern of recovery that extended all the way to 2008.

In 2000 the average had reached R18 511. The next year it reached R18 674, beating the previous income peak year of 1980 by just R2. This was the first time South Africans were on average wealthier than they had been 21 years previously. There can be no better indicator of the price the country paid for the racial ideology its Government had adopted 52 years previously.

Average income levels continued to grow through the early, mid, and late 2000s. Between 2004 and 2006, income increased by between 4.4% and 6% per annum. By 2008 South Africans were earning an average, after tax, per capita income of R23 433.

However in 2009 this positive trend was broken as the average declined to R22 560. This was admittedly a year that saw a global financial crisis and a recession in South Africa. However, over the past 18 months the economy has also shed in the region of 1 million jobs and has continued to shed jobs even as economic growth has begun to recover. The implications are that per capita income may not recover as robustly as may be required to secure social and political stability in the country. The Institute has previously published information on why a GDP growth rate of over 5% is necessary to secure such stability.

It took twenty years of falling average per capita income through the 1980s to help the apartheid Government to realise that the policy trajectory that it had placed the country on was not sustainable. The ANC does not have to repeat that mistake. Even though per capita income may stabilize over the short term and perhaps even show some limited growth, this growth is unlikely to be fast enough to secure a middle class future for more South Africans.

The South Africa Survey has been published annually by the Institute since 1946. This year’s edition will run to over 700 pages and will cover in great detail trends in the economic, social, and political environment. The Survey is consulted as an important strategy, planning, and forecasting tool in business and government. It is available exclusively to subscribers, who also benefit from substantial other research, policy, and briefing services offered by the Institute and its Unit for Risk Analysis. Click here and our customer service staff will contact you to arrange a meeting to explain how your company or organisation can also benefit from access to the reports and services of South Africa’s leading research and policy organization.

- Frans Cronje.

Free Society Project