South Africa’s economy has always been linked to the separate development agenda, which has resulted in fragmented spatial development planning along historical lines and patterns poor / no economic, social and cultural linkages to areas of economic activity, and relatively prosperous commercial and urban centres enduring underdevelopment with its social, economic, and cultural manifestations: poverty, gross income inequality, and chronic unemployment.
 
The major share of GDP contribution in former Homeland areas is represented by higher government salary payments, rather than increased production of goods and marketable services
 
The impact of separate development segregated South Africa into three kinds of social, economic and politico‐administrative spaces:

• The major urban areas, which were a preserve of white people;
• Fertile commercial farming regions and associated small rural towns (also a preserve for whites) and
• Barren ‘homelands’ reserved for black people:
  • Under utilisation and/or unsustainable use of Natural Resources
  • Poor access to socio‐economic infrastructure and government services

The South African Rural Areas can be best described from the apartheid categories the Bantustans – in the rest of the country, areas containing smaller towns and commercial farms as well as most mines. By extension, the definition of rural used here includes a number of small towns and relatively dense settlements.

In 2009, 30% of the South African population lived in municipalities located mostly in the former Bantustans, 17% each in the commercial farming areas and secondary cities, and 35% in the metros. The share of the population living in the former Bantustans and commercial farming areas had dropped from 53% in 1995 to 48% in 2009, while the share of the metros climbed from 31% to 35%.
 
The apartheid system ensured that Africans – who made up three quarters of the South African populations – were far more likely to live in rural regions than other groups (whites, Coloureds and Asians). By 2009, the former Bantustan areas housed only 38% of Africans, with 16% in the commercial farming regions. In sum, over half of Africans lived in the rural areas, compared to around a quarter of other groups.
 
Two factors make it difficult to analyse developments in South Africa’s rural regions since the transition to democracy in 1994. 
First, from 1994 the administrative units of the state the local, district and provincial governments – were systematically re-drawn to integrate areas that apartheid had separated. The country was divided into nine provinces, six metropolitan municipalities (Cape Town, Durban and Port Elizabeth along the coast and Johannesburg, Pretoria and Ekurhuleni in Gauteng), plus 46 district municipalities comprising 231 local municipalities. The boundaries of the Eastern Cape, Limpopo, KwaZulu Natal, Mpumalanga and the North West provinces were drawn around most of the former Bantustans. In contrast, the Western and Northern Cape and the Free State contained extensive commercial farming regions but almost no Bantustan areas, while Gauteng, which covered the country’s industrial heartland, was dominated by metropoles.
 
Secondly, because of the new boundaries, after 1994 the official data did not distinguish the former Bantustans from other rural areas. Towns in the former Bantustans were virtually all relatively small.  A further problem is that most official annual statistics did not provide detailed information on conditions at municipal level or even district municipality level. The data used here come in part from Quantec EasyData, which developed annual projections by municipality derived from the official surveys and the Census.

Poverty in the rural areas

At the end of the ‘00s, the core challenge in the former Bantustans and commercial farming regions remained extraordinarily high levels of poverty. In 2007 half of all households in the former Bantustans survived on around R1400 a month. In secondary cities and commercial farming areas, the median income was around R2000 a month. In the metropoles, it was over R3000 a month.
 
Comparing household incomes by region must take into account the fact that households in the former Bantustan regions were generally larger than in the rest of the country. By extension, they needed higher incomes to emerge out of poverty. In 2009, the average household in the former Bantustan areas had 4,4 people, down from 5,2 in 1995. The average household in the commercial farming areas and secondary cities had around 3,8 people, and in the metros the number was 3,4.
 
South Africa does not have a national poverty line. We therefore here use the higher international norm of USD2 a day per person. High levels of poverty in the rural areas were associated with significant food insecurity, despite major improvements in the ‘00s. In the 2007 General Household Survey, 14% of households in district municipalities located mostly in the former Bantustans said some people in the household went hungry at least sometimes. In the rest of the country, the figure was 9%. (Calculated from Statistics South Africa 2007) These figures had declined rapidly from 23% for the former Bantustans and 13% for the rest of the country in 2005. (Calculated from Statistics South Africa 2005) Earlier data were not published by district municipality, but the overall share of households saying they went hungry at least sometimes was 35% in 2002. (Calculated from Statistics South Africa 2002a)
 
In addition to economic poverty, the rural areas were still characterised by persistent economic, social and political inequality, despite the transition to democracy.
Differences in economic opportunities for women reflected these inequalities. Rural women were least likely to have income-generating employment.
 
In addition, the 660 000 formally employed farmworkers, most of whom worked on commercial farms, were far more likely than other formal employees to face violation of their civil and labour rights. Thus, a significant share of farmworkers lacked a written contract, membership in the unemployment insurance fund and paid leave – even though the labour laws made all these conditions of employment mandatory.

Joblessness and low incomes

The immediate causes of rural poverty were extraordinarily low levels of employment and incomes in the former Bantustans combined with low pay for farmworkers. These factors were partially offset by remittances from family members and, increasingly after 1994, by government grants.

Less than one in three working-age adults in the former Bantustan regions had income-generating employment (including self employment) in 2007, compared to just under half of those in the rest of the country. That compares almost two thirds of adults having paid employment internationally. The ILO ranked South Africa amongst the ten countries in the world with the lowest employment ratio, defined as the share of working-age adults with income-generating employment. (ILO 2009).

Low incomes and high joblessness left rural households heavily dependent on transfers from others, in the form of government grants and remittances by family members, apparently mostly circular migrant workers in the urban areas. In 2007 over half of households in the former Bantustans said they relied primarily on government grants or remittances to survive. That compares with under a fifth of households in the rest of the country.

The reproduction of rural poverty after 1994

Considerable improvements in living standards and production occurred in the former Bantustan regions after 1994. Farmworkers, too, enjoyed greater rights as both workers and tenants, as well as improved pay. Nonetheless, as discussed above, rural areas continued to show greater poverty and insecurity than the rest of the country.
 
The question is why poverty was reproduced in the rural areas after the end of apartheid laws. Ultimately, the answer lies in the systemic marginalisation of Bantustan residents and farmworkers, which ensured they entered the democratic era without economic assets, including land, water and finance, while market institutions and government services established under apartheid were not designed to serve them.

Between 1995 and 2008, economic growth was slower in the secondary cities and commercial farming regions than in the former Bantustans and metros, as the following table shows. In effect, the rural areas outside the former Bantustans saw a relative decline, apparently as a result of the maturing of gold mining which was historically a major economic driver in many secondary cities and smaller towns combined with reduced subsidies to commercial agriculture and rural manufacturing. Population growth was far faster in the metros than in the rest of the country, especially the former Bantustan areas. As a result, production rose fastest per person in the former Bantustans.
 
Similarly, while household incomes increased relatively rapidly in the former Bantustan areas between 1995 and 2008, they continued to lag far behind the rest of the country. About half the increase occurred in unearned income apparently meaning government social grants and remittances from family members. Research suggest that virtually the entire increase in income in the metropolitan areas occurred in unearned income.

Poverty traps in the former Bantustan regions

The continued relative poverty of the former Bantustan regions can be understood as the result of concurrent vicious cycles established under apartheid. As a consequence, despite the elimination of overtly racial laws after 1994, most people remained in a poverty trap unless the state intervened to change the allocation of resources and transform core economic institutions.

• To start with, the former Bantustans had generally been delineated to exclude resources for agriculture and an industrial base. With few exceptions, most of which were in the Eastern Cape, they did not have underutilised land and water that might enable them to support more of their populations through agriculture. Moreover, comparatively few mining areas were located in the former Bantustans.
• A second vicious cycle emerged because, as noted above, educational levels tended to be significantly lower for people in the former Bantustans. That in itself made it more difficult for them to engage with the modern economy and to hold government accountable.
• Third, the former Bantustan regions generally suffered from “thin” markets, while the formal market structures at the national level tended to shut new and small producers out of urban markets. Within the former Bantustans, low incomes limited local demand, making it difficult for new producers there to achieve the scale needed to compete with manufactures from established formal producers. Moreover, to access inputs, capital and skills as well as sales outlets, they had to forge new relationships and deal with inadequate and expensive transport and communications systems.

The small-scale producers of the former Bantustans faced particular difficulties in breaking into national retail and processing systems. A handful of large formal companies dominated these sectors, with high levels of concentration by international standards. Generally, they favoured established commercial farms, which could produce more reliably and on a larger scale. That effectively shut out smaller farmers and processors unless they could collectively establish quality controls and supply goods on a larger scale. Even then, smaller producers often found it difficult to meet the quality standards and delivery times set by formal retail chains at home and abroad.

• Fourth, the poverty of the former Bantustans meant that they lacked the resources needed to overcome the backlogs in infrastructure and government services left from apartheid. That, in turn, constrained economic opportunities.

The lack of resources for infrastructure was easiest to document at municipal level. Poor households could not pay for municipal services, which in turn meant local governments did not have the resources to expand infrastructure significantly. As the following table shows, transfers from the national state did not come close to covering the shortfall in revenue compared to municipalities in more prosperous regions. Budgeted revenue per person in the metros was around R4300 in 2008, compared to R2300 in the secondary cities, R1700 in the commercial farming regions, and just R400 in the former Bantustans.

• Education also saw a shortfall in local funding in the rural areas. In contrast to most urban schools, rural schools could not count on significant fees from learners to supplement government funding. In 2007, a quarter of children in the former Bantustans paid fees of over R100 a year, compared to over half of those in the rest of the country. (Calculated from Statistics South Africa 2007a) As a result, most schools in the rural areas could not maintain services or staffing at the level of schools in richer communities. This discrepancy appeared at the provincial level. Thus, in the Western Cape and Gauteng, which housed almost no former Bantustan areas, some 15% of educators at state schools were employed privately in 2007. In contrast, in Limpopo, the Eastern Cape, Mpumalanga and North West, where former Bantustan areas predominated, the figure was just 4%. (Calculated from Department of Education 2007, p 4)
• The political-economy of the former Bantustans generated a final vicious cycle. On the one hand, the state in these regions had historically been understaffed, under resourced, deeply corrupt and largely dysfunctional. On the other, in many of the former Bantustans people lived in fairly scattered settlements, while levels of education were significantly lower than in the rest of the country. These factors made it difficult for many rural people to organise and hold their elected representatives and government officials to account.

The comprehensive nature of the poverty traps in the former Bantustans meant that only well financed and staffed, coherent and multi-faceted development strategies could significantly enhance economic activity, employment levels and living standards. Before discussing government’s response, the next section first reviews developments in commercial agriculture. 

Developments in commercial agriculture

After 1994, commercial agriculture continued to provide the bulk of food and agricultural exports, with rapid growth particularly in wine and forestry products, as well as continued strength in fruit, especially citrus. But concentration and cyclical fluctuations in output and price increased as the state reduced support for white farmers. In addition, the government faced the challenge of trying to normalize labour relations in the sector and support more equitable land ownership while maintaining the economic contribution of the industry.
 
Despite reasonable growth, commercial farming faced an array of constraints after 1994.

1. The state deregulated marketing and prices, and directed the state-owned Land Bank to eliminate its historic bias toward white farmers. The Organisation for Economic Cooperation and Development (OECD) estimated producer support to farmers in 2000-’03 was equal to 5% of gross farm receipts, compared to an average of 31% for the OECD as a whole. (OECD 2006, p. 4) Deregulation resulted in a shake out of marginal commercial farmers. The number of commercial estates dropped from 60 000 in 1993 to 40 000 in 2007. (Statistics South Africa 2009, p 10)
2. Transnet, the state-owned rail company, closed down many of its rural spurs, which in the past had been cross-subsidised from lines that served the mines. That, in turn, significantly raised the cost of transport for farmers. It also impoverished some important rural towns, particularly Beaufort West in the Northern Cape.
3. The state permitted significant short-term capital inflows through the ‘00s. That, in turn, strengthened the rand, causing problems for most exporters, including commercial agriculture. At the same time, continued subsidies by countries in the global North combined with the robust currency to increase competition for the domestic market, notably for chicken, lamb and dairy products.
4. Climate change seemed likely to reduce rainfall in the West of the country, which housed most of the wine and fruit producers. In contrast, the East expected improved but more erratic rainfall. That would make intensive farming easier around Gauteng and Mpumalanga, opening opportunities for smallholders, but only if ownership and marketing systems adapted. More broadly, South Africa was one of the most carbon-intensive economies in the world. If taxes were imposed on its exports, or if consumers in the global North turned decisively to local produce, agricultural exports could suffer.

A broader problem for the commercial farming areas was that the small towns in the commercial farming areas were often fragile in economic, fiscal and political terms, although they were generally better off than those in the former Bantustans. Many of these towns did not have the expertise to maintain or extend municipal infrastructure in line with their mandates. In some cases, their economies were weakened by the restructuring of commercial agriculture and the loss of rail transport. At the same time, the displacement of farmworkers and in-migration from parts of the former Bantustans led to increased demand for municipal services.
 
Commercial agriculture continued to reproduce dualism in three main ways: through the tendency to shed labour and maintain poor conditions for farmworkers; through deep inequalities in land ownership; and through periodic spikes in food prices, especially for maize.
 
Between 1993 and 2007, despite the growth in agricultural output, the number of formal farm workers in commercial agriculture dropped from 1,1 million to 800 000. The average number of workers per commercial farm remained virtually unchanged at around 20, but the number of farms dropped by a third. (Statistics South Africa 2009, p. 10) Farmworkers’ pay improved somewhat, rising by over a third in real terms. Still, as noted above, both pay and conditions for farmworkers remained considerably worse than for other formal employees.
 
The decline in farm employment reflected a combination of social and economic factors. To start with, the shake out that followed deregulation focused farm owners’ minds on cutting costs – and often employment. In addition, the democratic dispensation in itself reduced the power of farmers over the farmworkers living on their land. In particular, they could no longer rely on the police to support them unquestioningly in disputes with workers. Moreover, the democratic government extended the protection of the general labour laws to farmworkers for the first time in South African history. In response to this shift in power, many farm owners evicted tenants whose labour they did not need.
 
The inequitable structure of land ownership also helped reproduce dualism in the rural areas. The 40 000 commercial farms dominated arable land, which in turn accounted for less than 20% of the national territory. The average commercial estate came to almost 1500 hectares. (Calculated from Statistics South Africa 2002b, p. 17) Given apartheid history, the concentration of land in the commercial farms was widely perceived as a direct cause of landlessness and joblessness in the former Bantustans.
 
Finally, following the deregulation of food prices in the mid-1990s, food prices began to fluctuate strongly on a fairly regular cycle. This pattern aggravated food insecurity. It also fuelled inflation, leading to higher interest rates and probably slower growth rates.
 
SOURCES:
 
Dr Neva Seidman Makgetla; Lead Economics, Develop Planning Division, Development Bank of Southern Africa
 
Tsakani Ngomane, PhD