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Citizenship and Welfare in South Africa: Deracialisation and Inequality in a Labour-Surplus

Economy
Author(s): Nicoli Nattrass and Jeremy Seekings
Source: Canadian Journal of African Studies / Revue Canadienne des Études Africaines, Vol.
31, No. 3 (1997), pp. 452-481
Published by: Taylor & Francis, Ltd. on behalf of the Canadian Association of African Studies
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Citizenship and Welfare in South Africa:
Deracialisation and Inequality in a Labour-
Surplus Economy

Nicoli Nattrass and JeremySeekings

Resumze
Dans l'Arique du Sud d'apres-apartheid,l'dgalitepolitique formelle coex-
iste avec un haut niveau d'inegalite economique. La dkracialisation du
marche du travail et les politiques d'aide sociale qui favorisaient les
blancs sous le regime de 1'apartheidn'ont mend" aucune diminution de
l'inegalit" en general. Ceci est dtAen partie au fait que ces politiques
Ctaient fondces sur l'exclusion de portions de la population pour des
raisons non seulement de classification raciale individuelle mais de
'
marginalit c"iconomique. La race ne suffit plus A qualifier ou disquali-
fier les citoyens permettant ou interdisant l'acces aux bendfices accordcs
aux blancs sous le regime de l'apartheid. Cependant, le ch6mage
chronique continue de disqualifiergrand nombre de pauvres. Tandis que
les politiques de l'Ptat servaient A protager les interAts de la classe
ouvriere blanche sous l'apartheid,elle servaient aujourd'huia protegerles
intarets de la classe ouvriere industrielle et urbaine dans son ensemble, A
l'exclusion des pauvres ch6meurs des compagnes.

Introduction
The elections of April 1994 marked the achievement in South
Africa of full and equal political citizenship. This formal political
equality coexists with a very high level of economic inequality,
despite the deracialisation of the labour market and welfare poli-
cies that buttressed white privilege under apartheid. This article
examines why the deracialisation of state policies has not resulted
in any diminution of overall inequalities and why the reduction of
inequality in post-apartheid South Africa requires more profound
changes to the welfare and labour market policies than are
entailed in deracialisation alone.
In South Africa under apartheid, as in other capitalist soci-
eties, the state adopted labour market and welfare policies that
452

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Nattrass & Seekings: Citizenship & Welfare in South Africa 453

benefited disadvantagedvoters, mitigating poverty and inequality.


But the restricted franchise meant that the beneficiaries of such
state policies were not, of course, the poorest members of society.
Indeed, the apartheidsystem of labour market and welfare policies
was premised on privilege in that a minimum standard of living
for white South Africans was secured through limiting the claims
of poorer, black South Africans. The possibility of near exclusion
on racial grounds allowed for the development in South Africa of
a welfare system that was a grotesque caricature of its counter-
parts in the advanced capitalist countries.
While access to privilege under apartheidwas defined in racial
terms, formal deracialisation in the last years of apartheid did not
transform an essentially inegalitarian system into an egalitarian
one. The deracialised mix of labour market and welfare policies
inherited by the newly elected democratic government offers
significant benefits to many poor households but also continues to
provide privileges to a deracialised section of the population at the
expense of the very poor. Deracialisation has meant, in effect, that
a system designed to protect the white industrial working class
has been extended to protect, most of all, the now predominantly
black industrial working class - but in a context where the
industrial working class is far from being the poorest section of
society. Amidst very high unemployment, those with jobs have
come to be a relatively privileged group. A system of labour
market and welfare policies that assumes full or almost full
employment serves to reinforce such relative privilege rather than
provide for the very poor.

Citizenship and Welfare in Capitalist Society


An inherent tension in capitalist societies exists between the
market-baseddistribution of resources and the egalitarian claims
of citizenship. Liberaldemocratic states attempted to address this
tension through state policies in two major areas. They inter-
vened, first, in labour markets - the immediate source of income
inequality in most capitalist societies. States sought to establish
frameworks for collective bargainingbetween labour and capital,
employing "active" labour market policies and expansionary
macroeconomic policies to promote high levels of employment.
Second, states provided a welfare safety net for those outside of

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454 CJAS/ RCEA31:3 1997

formal capitalist relations of production and boosted the "social


wage" through public education, health, and housing
programmes. The distribution of incomes in such societies was
thus shaped by labour market and welfare policies.
Such policies characterised the Keynesian welfare states of
postwar Europeand Australasia, as well as liberal social policy in
post-depression North America. They gave expression to the
dimension of citizenship that the English sociologist, T.H.
Marshall, termed "social citizenship" ([1949] 1963, 74). Social citi-
zenship is in stark contrast to the capitalist class structure
because it vests citizens with rights that are independent of their
class position or labour market status (Barbalet 1988; Esping-
Andersen 1990; Roche 1992). At the same time, the welfare
system served to stabilise the capitalist economy in macroeco-
nomic as well as in political terms.
Social citizenship was ensured in a variety of ways. G. Esping-
Andersen (1990) identifies three types of "welfare state regime,"
differing according to the relationships among the state, the
market, and the family. In the United States, Canada, and
Australia,1 individuals rely primarily on market-based, private,
contributory schemes for the provision of retirement, health, and
other benefits. The public provision of welfare is largely confined
to modest benefits to the very poor; only the most limited of
social rights are recognised. In the Scandinavian social democra-
cies, by contrast, the public provision of welfare was based on the
principle of universalism, promoting "an equality of the highest
standards, not an equality of minimal needs" (Esping-Andersen
1990, 27). In the third type of welfare state regime, welfare was
primarilyprovided by the state, but this "universalism" was qual-
ified by the linkage of payments to previous earnings, such that
class and status differentials in the labour market were replicated
and reinforced in the public welfare system. Non-working wives
were also excluded from social insurance. People had social rights,
but as employees (or former employees) rather than simply as citi-
zens. In this category were Germany, France,Austria, and Italy.
These different welfare state regimes were linked to different
sets of labour market policies (or "labour market regimes" in
Esping-Andersen's terminology). Every welfare state regime
depended on full employment, but they differed in how they
achieved it. The Scandinavian social democracies, for example,

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Nattrass & Seekings: Citizenship & Welfare in South Africa 45 5

pushed women into the labour force through high rates of


personal taxation and then employed most of them within the
public sector, whereas Germany curtailed the labour force
through encouraging wives to stay at home (Esping-Andersen
1990, 141-90; 1994, 169-71). Likewise, the practice of "industrial
citizenship" - and its effect on the economic growth path -
differed dramatically. The United States represents one extreme,
where industrial citizenship was institutionalised in the form of
predominantly enterprise level bargaining. This system did not
encourage any narrowing of wage differentials, and those workers
who failed to find work were accorded minimal benefits. The so-
called "Swedish model" represents the other extreme, where
industrial citizenship was institutionalised in the form of
centralised bargaining which operated explicitly to reduce wage
differentials (Standing 1988). In Sweden, social citizenship and
industrial citizenship operated in accordance with an explicit goal
to reduce inequality.
This class compromise was sustained through the so-called
"Golden Age" of postwar capitalism, but it was based on highly
contingent combinations of welfare, labour, and macroeconomic
policies (Marglinand Schor 1990; Armstrong, Glyn and Harrison
1991). This balance was torn asunder from the early 1970s by the
slowdown in productivity growth and accelerating economic glob-
alisation. Governments could no longer maintain full employ-
ment through fiscal policy, in part because "the stimulation of
domestic purchasing power would mainly generate jobs in Osaka
and Seoul rather than in Dusseldorf or Manchester" (Esping-
Andersen 1994, 172; 1996). Across Western Europe and North
America there arose the spectre of a so-called "underclass"of long
term unemployed, as well as a growing number of workers in low
wage, low security, post-industrial occupations.
The Scandinavian welfare state regimes responded by
expanding public sector employment, Germany by reducing the
labour force through early retirement (Esping-Andersen 1990,
1994). Both strategies put further pressure on public finances. The
economic pressures on Europeanwelfare state regimes led to, or at
least exacerbated, growing political opposition to redistributive
state policies. The fragmentation of the labour market under-
mined working class solidarity. Economic and political pressures
combined to roll back the "welfare state" (Pierson 1991). In

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456 CJAS/ RCEA 31:3 1997

America, by contrast, unemployment has been contained by


market-led job growth - but one fuelled in part by public expen-
diture (including on defence), and where the new jobs were mostly
at low wages and had limited impact on poverty or inequality.
The problems faced by the advanced capitalist countries,
however, pale in comparison with those facing many middle-
income economies with much higher levels of inequality, poverty,
and unemployment. In most of ex-Communist Eastern and
Central Europe, rapidly rising unemployment rates led to the
virtual collapse of formerly universalistic welfare systems
premised on full employment. Most countries have followed the
"liberal"strategy of privatisation of social insurance, reducing the
public social safety net, adopting more means-testing, and dereg-
ulating labour markets (Standing 1996). Similar reforms have been
adopted in many Latin American countries, where welfare
systems were much less comprehensive to begin with (in most
cases resembling the continental Europeansystem of social insur-
ance) (Huber 1996). Only in East Asia has the absence of high
unemployment allowed a recent extension of the scope of public
welfare provision, albeit from a starting point of modest coverage
(with the extended family providing the primarysource of welfare)
(Goodman and Peng 1996).
The achievement of the full political dimension of democratic
citizenship in South Africa occurred at a time when conditions
globally were not conducive to the achievement of social citizen-
ship. Within South Africa, unemployment had risen to especially
high levels. Yet both the pre-1994 National Party (NP) govern-
ment and the post-1994 government, dominated by the African
National Congress (ANC), have been under considerable pressure
to extend social citizenship, primarily through the extension to
black South Africans of the labour market and welfare systems
that provided previously for white South Africans. Indeed, the
ANC inherited in 1994 a set of labour market and welfare institu-
tions and policies that had been largely deracialised. The new
government completed this process of formal deracialisation and
has extended the coverage of some existing provisions to include
hitherto excluded categories of predominantly black workers (the
1996 Labour Relations Act, for example, extends the industrial
relations machinery to cover farmworkers).Race no longer quali-
fies or disqualifies citizens from access to the benefits enjoyed by

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Nattrass & Seekings: Citizenship & Welfare in South Africa 457

white people under apartheid. But this process of deracialisation


has left unchanged the underlying structure of South Africa's
labour market and welfare regimes.

Apartheid's Legacy: The Development of South


Africa's Labour Market and Welfare Regimes
By adopting a strategy based on formal deracialisation, the pre-
1994 NP and post-1994 ANC-led governments have tackled the
most striking feature of the apartheid labour market and welfare
regimes: the use of racial classifications as criteria determining
access to privileges. Under apartheid, full employment at rela-
tively high wages was provided for white South Africans (the only
people eligible to vote), while the labour supply and wage were
manipulated to the disadvantage of African people. An extensive
public welfare system was provided for whites, but not (for the
most part)for black South Africans (where "black"refers to those
categorised as African, coloured, or Indian).
State policies with regard to full employment and the provi-
sion of welfare have been largely neglected in the growing histori-
ography of twentieth century South Africa. The state's
interventions in labour markets through the colour bar and influx
control have been studied in considerable detail (Wolpe 1972;
Davies 1979; Hindson 1987; Posel 1991), but most scholars seem
to have been more concerned with the relationships among
capital, labour, and the state around production rather than with
the overall politics of distribution. The state's employment and
welfare policies were in fact central to segregation and apartheid
in that they ensured a minimum standard of living for white citi-
zens and thereby underpinned generalised white prosperity.
Labourmarket and welfare policies combined to form a distri-
butional system premised on exclusion. The benefits to a privi-
leged group were premised on the exclusion (and, in many
instances, exploitation) of a poorer and much larger group. Under
apartheid,these groups were defined in racial terms, with a privi-
leged white minority (with, perhaps, some semi-privileged groups
of black South Africans) distinguished from the poorer black
majority. But deracialisation in the 1980s and 1990s would not
address the exclusionary premises and inegalitarian consequences
of the system.
As in many capitalist societies, South Africa's first formal

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458 CJAS/ RCEA31:3 1997

welfare schemes were established in response to the industrial and


political power of the organised working class in the early twen-
tieth century. Various industrial unemployment and disability
insurance schemes were set up on an initially piecemeal basis by
and for organised, white workers. A more comprehensive public
welfare system was put in place in the late 1920s and early 1930s
in order to address the "poor white problem." In 1930, one-sixth
of the white population was estimated to be "living in great
poverty" (most of whom had once been small farmers and share-
croppers)(Iliffe 1987, 117). Public welfare assistance was provided
for those white people who could not work. A Department of
Social Welfare was established. Old age pensions were introduced
for white (and coloured) people, and state run child maintenance
and unemployment insurance schemes were introduced (Iliffe
1987, 116-23).
This emerging welfare system was premised on low rates of
unemployment among white South Africans. Public works
programmes played a key short-term role during exceptional
periods of economic depression (Wilson and Ramphele 1989, 317-
18). In the long-term, however, white employment was buttressed
by racially discriminatory labour market policies. As shown
below, racially exclusive social and industrial citizenship were
bound together.
South Africa's racialised labour market and welfare regime
was expanded and institutionalised by the Pact Government,
which came to power in 1924 on the basis of an alliance between
the (socialist) Labour Party and the (Afrikaner)National Party.
One of the important events responsible for this electoral victory
was the 1922 Rand Revolt in which striking white miners,
protesting against attempts by mine managers to replace white
workers with cheaper African workers, were repressedbloodily by
the army (Davies 1979, 145-75). White workers got their revenge
through the ballot box by voting in a new government committed
to a "civilised labour policy" designed to protect them.
According to the Pact government's Department of Labour,
wages for white South Africans had to be set at a level "generally
recognised as tolerable from the usual European standpoint,"
whereas those for black people should be set at a level appropriate
for "persons whose aim is restricted to the bare requirements of

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Nattrass & Seekings: Citizenship & Welfare in South Africa 459

the necessities of life as understood among barbarousand unde-


veloped peoples" (quoted in Davenport 1977, 362). African
workers were also excluded from the first collective bargaining
procedureslaid down in the Industrial Conciliation Act. This Act
excluded African workers from the definition of "employee" for
conciliation purposes. The job colour bar was entrenched in
mining and manufacturing, reserving specified occupations for
white workers. These policies were given additional force by legis-
lation in 1925 that provided for tariff protection on condition that
a reasonable proportion of "civilised workers" were employed.
White South Africans were given protected employment in the
public sector, especially on the railways.
Jobreservation through the colour bar, combined with public
works programmesand resurgent economic growth after devalua-
tion in 1932, ensured that unemployment declined to low levels
among white workers. Provision for the temporarily unemployed
was introduced through a contributory Unemployment Insurance
Fund (UIF) in 1937. The UIF excluded "native labourers" by
setting the minimum income restriction for participation suffi-
ciently high to exclude African workers.
By regardingwhite people as "civilised" and African people as
"barbarousand undeveloped," the state was able to restrict polit-
ical, industrial, and social citizenship to a tiny minority of the
population. This allowed white people in South Africa's devel-
oping economy to enjoy a living standard comparable to that in
the advanced capitalist countries at the time. By contrast, poverty
amongst the African population - due for the most part to
growing landlessness and insufficient employment - was allevi-
ated mainly through kinship networks (Iliffe 1987, 123-40). The
white working class had a share of political power and could
promote their interests under the umbrella of a growing pan-class
Afrikaner nationalism. The black poor, by contrast, were politi-
cally, geographically, and economically marginalised.
The racial demarcation of labour markets and welfare provi-
sion came under challenge, however, in the 1940s. Sustained
economic growth generated social change, prompting new debates
over the boundaries of South Africa's labour market and welfare
state regimes. Between 1936 and 1951, the African population in
metropolitan areas almost doubled, and the proportion of African

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460 CJAS / RCEA 31:3 1997

people living in urban areas rose to one-quarter (Simkins 1983a).


This rising urban population was the result, primarily, of the rapid
expansion of manufacturing employment during these years.
The colour bar,having been increasingly circumvented amidst
the growth of the 1930s, was widely ignored during the war years.
The wartime administration authorised African people to work in
skilled positions, and the number of pass law prosecutions
declined dramatically (Siebert 1975, 56). The wages of African
workers rose faster than white workers' throughout the war years.
The state also pumped more money into African education,
freeing expenditure from its earlier restriction to the level of taxa-
tion of African people.
At the same time, rapid urbanisation led to rising concern
about African poverty, which had hitherto been largely hidden in
rural areas. The government respondedwith proposals to establish
a non-racial means-tested welfare system influenced by Britain's
BeveridgeReport. Old-age pensions were extended to African (and
Indian) people in 1944. In 1946, the minimum income restriction
on access to the UIF was removed, with the result that African
workers received as much as three-quartersof the total benefits
paid out (Iliffe 1987, 120-23, 140-42).
This embryonic deracialised welfare system was based on two
related assumptions. The first was the rationale underlying
existing welfare provisions for white people, namely that income
support was needed only by the incapacitated and the temporarily
unemployed. No provision was made for poverty due to chronic
unemployment, or to low wages. Second, the rural poor were
deemed to be able to depend on kin and neighbours for support;
public provision was required only by the urban poor (Iliffe 1987,
125). Even in the mid-1940s, African farmworkers and (migrant)
mineworkers were excluded from the UIF, while rural African
pensioners received lower old-age pensions than their urban coun-
terparts.
Moves toward a less racialised public welfare system in the
mid-1940s provoked strong opposition among white voters (Iliffe
1987, 141) and no doubt contributed to the National Party's elec-
toral victory in 1948 on an apartheid ticket. The National Party
implemented an alternative approach to welfare and the labour
market - one which was closely akin to the early racial version.
The most visible aspects of this were the widening gap between

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Nattrass & Seekings: Citizenship & Welfare in South Africa 461

old-age pensions paid to the different race groups and the imme-
diate reform of the unemployment insurance system to exclude
almost all African workers. The 1949 Unemployment Insurance
Act reintroduced a minimum income restriction for Africans
which resulted in a ninety-nine percent decline in UIF benefits
paid out to African men (Standing, Sender and Weeks 1996, 434).
Average wages for African workers only rose above the minimum
limit for inclusion in the UIF in 1967 (Meth and Piper 1984).
Although the state channelled resources into African educa-
tion, this was pegged back to the level of African taxes by the 1953
Bantu Education Act. Under apartheid, therefore, social citizen-
ship was distorted by a racist logic: the standards appropriatefor
black people were very different from those for white people.
Social citizenship reflected race and class inequalities rather than
compensated for them.
Calculations done by M. McGrath (1979) suggest that there
was a very small net redistribution from white to black South
Africans through government taxation and expenditure during the
apartheid period. Using data on direct and indirect taxation, as
well as government expenditure that could be categorised
accordingto the race of the recipients (including, primarily health,
education, and welfare payments), McGrath tentatively concluded
that white South Africans' per capita net incomes were reduced
through the fiscus, while black South Africans' per capita net
incomes were increased. These increases and decreases were
minor, however, except under the most generous assumptions of
the benefits to black South Africans (and it is unclear how bene-
fits were distributed among black people). The apartheid welfare
system was designed primarily to provide for white citizens who
were unable to provide for themselves and only secondly to make
any provision at all for (some) black South Africans. Insofaras any
provision was made for any groups of black South Africans, it was
to facilitate economic growth or social peace, and not out of any
recognition of social rights.
Social citizenship for white South Africans was underpinned
by, and, in turn, informed racially exclusive industrial citizenship.
The 1953 Industrial Conciliation Act made provision for
extending the job colour bar in industry and banned African
workers from registered trade unions (providing instead for a
system of emasculated plant level "works committees"). While

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462 CJAS / RCEA 31:3 1997

collective bargaining was limited to the plant level for Africans,


white workers were able to negotiate wages at industry level
through industrial councils.
This form of racial differentiation in collective bargainingled
to a twisted and less efficient form of the Swedish model being
practised for white South Africans only. Industrial councils were
registered by the Department of Manpower (now Labour).Wages
and working conditions agreed to in these councils could be
extended to non-party firms by the Minister. White workers had a
strong hand in negotiations on industrial councils. Not only did
they dominate skilled occupations, but white unions could always
threaten to apply to the government for job reservation determi-
nations if threatened by black employment. In many instances,
however, white unions agreed to limited black encroachment in
industries where skill bottlenecks were severe - in return for
higher wages (Nattrass 1990, 165-67).
As in the Swedish model, wage bargaining boosted (white)
wages, put pressure on profitability, and facilitated structural
adjustment. Those few white workers who lost their jobs were
protected by a welfare system which included provision for
protected public sector employment (such as on the railways) and
retraining opportunities. However, unlike the Swedish model,
this form of racial social and industrial citizenship entrenched
inefficiency and low productivity. Instead of exposing firms to
international competition (as in Sweden), the South African state
subsidised industry and allowed inefficient firms to languish
behind tariff barriers. Despite discrimination against black
workers, profitability was steadily eroded under apartheid as
productivity growth lagged behind that of total wages for most of
the postwar period (Nattrass 1990).
The combination of racially exclusive social and industrial
citizenship accentuated the vulnerability of black people in the
face of capitalist development. Inequality and poverty in South
Africa were the products of processes of dispossession and prole-
tarianisation that were unmatched in extent anywhere else in
Africa. In precolonial Africa and in much of the rest of Africa
through the colonial era as well, poverty was largely the result of
a lack of inadequate access to labour power; in'a land-rich envi-
ronment, it was the elderly, the sick, and the disabled who were
poor (Iliffe 1987). In South Africa, by contrast, state policies

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Nattrass & Seekings: Citizenship & Welfare in South Africa 463

limited African land ownership to "reserves" which comprised a


mere thirteen percent of the country, sought to confine the
growing African population to these reserves, and systematically
discriminated against African farming (Bundy 1979). In contrast to
other parts of Africa, smallholder or peasant agriculture provided
a way of alleviating poverty to only a few South Africans.
Independent agricultural production by African farmers
collapsed altogether in the 1950s and 1960s. The rising population
of the reserves, resulting from both the in-migration of families
evicted from white-owned farms and controls on out-migration to
the cities, led to dramatic declines in per capita production
(Simkins 1981, 263). The proportion of the African population in
the reserves rose sharply, while the proportion on white-owned
farms dropped(Simkins 1983a).
African households on white-owned farms were steadily
subordinated to capitalist relations of production and then
evicted, once their labour became surplus to requirements. The
proletarianisation of these households is indicated in further
calculations by Simkins. The total value of direct agricultural
production by African households - namely, separate from
payments in cash or kind from the white landowners - fell
steadily from the late 1950s. Whereas the value of production
accounted for about one-fifth of the average household's total
income around 1950, by the end of the 1960s, it had fallen below
one-tenth (Simkins 1983b, 16).
African households lost their access to the land as white
farmerssought to farm ever largerportions of their land, while the
demand for their labour declined in the face of mechanisation.
These changes are reflected in accounts of individual African
farmers. One successful sharecropper in the South-western
Transvaal owned eight horses, twelve donkeys, sixty cattle, and
220 sheep in 1950. Six years later, he owned fewer than forty
animals in total; in 1967, just nine, as he moved to a parched and
overcrowded corner of the Bophuthatswana reserve or "home-
land" (Van Onselen 1995).
The result of declining production among African households
on white-owned farms, removals, growing population density,
landlessness, and then declining production in the reserves was
unprecedented poverty. By the 1980s, subsistence agriculture was
significant in only a few areas (May 1990; Wilson and Ramphele

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464 CJAS/ RCEA 31:3 1997

1989, 69-73; RSA 1995, 15). The poor comprised landless families
that had been confined to rural areas and whose able-bodied
members were unable to find paid employment (Iliffe 1987, 260-
69). South Africa's black population had become almost entirely
dependent on income earned in the capitalist economy.
In the late 1960s, the apartheid labour dispensation started
fraying at the edges. Skilled labour bottlenecks led to the job
colour bar disintegrating or "floating upwards."The extent of job
reservation declined steadily through the 1970s, and its last
vestiges in the mining industry were ended in 1986. The emer-
gence and rapidgrowth of a trade union movement among African
workers eventually forced the state to deracialise the industrial
relations system entirely.
The deracialisation of social citizenship lagged behind that of
industrial citizenship. Urban/rural differences in pensions were
abolished, primarily to discourageurbanisation (Pollak 1981, 155).
From the early 1970s, the racial gap in old-age pensions was
slowly narrowed and then eventually eliminated in 1993. In 1979,
the UIF's lower income limit was abolished, thus making unem-
ployment insurance available to poorer workers. The UIF was
extended in 1981 to include gold and coal miners and, in 1993, to
include farm workers.
The slow deracialisation of the welfare system has come at a
time of stagnant economic growth and rising unemployment.
Industrial and social citizenship have been extended to embrace
many black South Africans. But the system remains one of exclu-
sion. The excluded are no longer defined in racial terms, although
almost all are black. Now, the excluded are the unemployed. The
new fault-line in the labour markets and in the provision of
welfare is between those citizens with employment and the many
without.

Poverty and Inequality after Apartheid


Capitalism and apartheid combined to produce extraordinary
inequality in South Africa. The extent to which the apartheid
state impeded rather than supported capitalist development is a
matter of much debate in South African historiography (see Moll
1991; Nattrass 1991). But it is clear that state policies profoundly
shaped the path of capitalist development. Apartheid legislation
not only allocated positions in the capitalist class structure on

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Nattrass & Seekings: Citizenship & Welfare in South Africa 465

racial grounds, but also structured labour markets and the welfare
system in ways which exacerbated racial and class inequalities.
The result was that South Africa experienced a degree of
inequality unmatched in any other country for which reliable data
exist. The top decile of South African households earns about fifty
percent of the national income, whereas the bottom five deciles
earn in total only about nine percent (Whiteford, Posel and
Kelatwang 1995, 13; World Bank 1995; Seekings 1997).
Inequalities are reflected in South Africa's poor comparative
performance against other middle income countries in terms of
key social indicators such as life expectancy, infant mortality,
illiteracy, fertility, and access to safe water (RSA 1995, 6).
Under apartheid, a highly inegalitarian labour market regime
combined with a discriminatory welfare system. Inequality corre-
sponded closely to the gap between the incomes of white and
black people respectively. Since the 1970s, however, inequality
has been driven increasingly by the gap between the employed and
unemployed, the result of poor growth and rising unemployment
rather than racial discrimination (Nattrass and Seekings 1996).
White South Africans' share of national income dropped from
seventy-two percent in 1960 to below sixty percent in 1993
(McGrathand Whiteford 1994, 4; Whiteford, Posel and Kelatwang
1995, 15). But overall, inequality has remained unchanged as
inequality has worsened within each racial group.
This is particularly dramatic in the case of the majority
African population. The top decile of African households now
earns a largershare of the total income of African households than
the bottom seven deciles combined (Whiteford, Posel and
Kelatwang 1995, 13). On the one hand, average African wages
have risen steadily (in real terms) over the past twenty years,
primarily because African workers have been upwardly mobile in
occupational terms, moving from unskilled to semi-skilled and
then to skilled work (Crankshaw 1994). On the other hand, a
growing proportion of African workers are unemployed, with no
wages at all.
Inequality is now generated not only within the relationship
between capitalist and worker (or between different groups of
workers),but also in the inability of many prospective workers to
sell their labour power. According to the expanded measure of
unemployment (which includes discouragedworkseekers), unem-

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466 CJAS/ RCEA31:3 1997

ployment amongst African people stands at about forty percent


(CSS 1995; SALDRU 1994). Work by Bhorat and Leibbrandt
suggests that thirty-five percent of total income inequality in
South Africa can be attributed to the gap between wage earners
and the unemployed.2
The concentration of unemployment in rural areas is one
reason why poverty in contemporary South Africa is above all a
rural phenomenon. Three-quarters of the households in the
bottom two income quintiles live in rural areas.
Disproportionately, many of these are female-headed households.
Income from regular employment is not insignificant, but
accounts for a smaller proportion of the total income of the house-
holds in the bottom income quintile than either pensions
(primarilyold-age pensions) or remittances (fromfamily or friends
working elsewhere) (SALDRU 1994, 333).
The urban, industrial working class does not represent the
poor in contemporary South Africa. Only a small proportion of
South Africa's poor sell their labour power at all (and many of
these are farmworkers). Nor does agricultural production
contribute significantly to their household income. This poses a
challenge to democrats concerned with the extension of social
citizenship.

South Africa's Current Welfare State Regime


With democratisation, social citizenship has been extended nomi-
nally to all South Africans, regardless of race. Yet key assump-
tions underlying the welfare system have not been changed. The
apartheidwelfare state regime was premised on full employment
among its major beneficiaries, white South Africans. This
presumption of low unemployment amongst welfare recipients
still underpins the design of the emerging "post-apartheid"labour
market and welfare regimes - despite the obvious absurdity of
the presumption. The result is that the post-apartheid welfare
state regime provides only selective support and does not ensure
anywhere near universal social citizenship.
The existing public welfare system provides significant assis-
tance to the elderly and (in principle) to single parents with chil-
drenunder the age of sixteen. Old-age pensions account for almost
two-thirds of welfare payments. They are means-tested and non-
contributory. In 1995, they cost 1.6 per cent of GDP.3 The future

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Nattrass & Seekings: Citizenship & Welfare in South Africa 467

cost as a percentage of GDP depends heavily on future rates of


GDP growth, but one study projects that the cost will rise to a
modest three percent of GDP over the next thirty years (IMF1995;
Smith et al. 1995, 37-52). Disability and child support grants are
similarly means-tested and non-contributory. Child support
grants, unlike old-age pensions, were not paid to African people at
all until recently, and take-up rates are still very low. The current
cost is negligible, but could rise to over one percent of GDP (IMF
1995; Lund 1996, 12).
The other major element in the public welfare system is the
UIF. Despite changes to make the system more inclusive, the UIF
only covers workers in formal employment and still excludes
domestic workers, as well as part-time and piece-rate workers.
Non-contributors cannot claim benefits, with the effect that only
a small proportion of the unemployed are covered by UIF -
perhapslittle more than ten percent. Historically, the system has
been subsidised by the state, as benefits have generally exceeded
contributions (Standing, Sender and Weeks 1996, 418-19). The
system may have effected very limited redistribution, benefiting
workers in high-risk, low income, formal employment. Growing
numbers of workers also contribute to private sector pension and
provident funds.
The public welfare system is rapidly being caught up by the
fast growing, contributory sector, comprising primarily private
sector retirement funds. Over half of the country's formal sector
employees contribute to retirement funds, with total contribu-
tions amounting to about six percent of GDP. In 1993, about
900 000 people received pensions from retirement funds - as
against 1.6 million receiving public old-age pensions (Mouton et
al. 1992; Smith et al. 1995). Of course, only the employed partici-
pate in contributory retirement funds.
South Africa's current welfare state regime is premised on the
belief that people need support through the state or market only
when too young or too old to work, or during brief periods of
unemployment (in between long periods of employment when
they are able to contribute to unemployment insurance). Similar
assumptions in the advanced capitalist economies prior to the
1970s were rooted in the fact that full employment could be main-
tained, and the life cycle therefore took people from dependence
as children to secure employment, to dependence again after

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468 CJAS/ RCEA 31:3 1997

retirement. Under apartheid, a similar situation was maintained


for white citizens through racial discrimination. In contemporary
South Africa, by contrast, many poor citizens spend much of their
adult lives outside of formal employment (or formal "self-employ-
ment").
Most South Africans of working age outside of formal employ-
ment have therefore not been supported by the state or market-
based welfare systems. Many have received limited earnings from
casual employment and informal sector activity. Subsistence agri-
culture played a part until the collapse of per capita agricultural
production in the mid-1950s (Simkins 1981). Very many have
relied, and continue to rely, on transfers within the extended
family. Migrant workers continue to remit a share of their wages
to dependents in rural areas, while employed workers and old-age
pensioners support dependents in their immediate and extended
households. Social citizenship, in short, exists in only a minimal
form in South Africa. Excepting the pension system, individuals'
claims to economic well-being are based not on their citizenship,
but on their position in the labour market, or on the position in
the labour market of kin to whom they can turn for support.
The public old-age pension system does provide an important
basis for a more substantive conception of social citizenship. Can
this be extended? One study calculates that the provision of
unemployment benefit at the same level as the old-age pension to
all (strictly defined) unemployed people not covered by UIF would
cost about 2.5 per cent of GDP. This estimate is based on there
being approximately three million non-UIF unemployed, and a
take-up rate of eighty percent (IMF 1995). South Africa's public
expenditure on welfare is currently lower, as a percentage of GDP,
than several other middle-income countries, most notably Chile
(where expenditure on pensions and welfare is very high) (Luiz
1995, 586; Bhorat 1995, 603; Mouton et al. 1992, 593). In principle,
the public welfare system could be extended to provide minimal
income across a far broadersweep of society.
The constraint is that public expenditure and the budget
deficit are already relatively high in South Africa. Government
spending accounted for thirty-one percent of GDP in 1995, signif-
icantly higher than in comparable middle-income countries. The
government is committed to sound fiscal policy, including a
gradualreduction in its budget deficit (from six percent in 1995 to

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Nattrass & Seekings: Citizenship & Welfare in South Africa 469

4.5 percent in 1999). Furthermore,the low rate of formal employ-


ment means that the direct tax base is much smaller than in other
middle-income economies. Lower taxation has been demanded
alongside higher wages in several recent industrial disputes.
Additional redistribution through the fiscus is thus likely to be
effected mainly through the restructuring of existing government
expenditure.
The lion's share of government spending in South Africa is
absorbed by public education. The South African government
spends significantly more on education than on welfare; in Chile,
by contrast, the government spends three times as much on
welfare as on education. The scale of public contributions to the
social wage inhibits increased public expenditure on welfare.
Indeed, the public provision of education and health are probably
the most important elements of South Africa's welfare system.
Health care and education are not provided by the state alone.
One in four South Africans is covered by a private medical aid
scheme, and even people not covered make use of private doctors
and hospitals (SAIRR1993, 273). Just over one percent of school
pupils attend private schools (SAIRR 1993, 599). Charges have
also been levied by government schools and, for some services, by
government hospitals (with means-tested exemptions). Such
market-based systems - like market-based retirement funds -
clearly provide for higher income groups primarily, and hence for
white, rather than black, South Africans. Nonetheless, by and
large, South African children have a claim to schooling and sick
people to medical care as citizens independent of their position in
the class structure. As with the other aspects of the South African
welfare state system, healthy but impoverished adults have no
claims as citizens.
The one way in which the South African welfare state regime
has provided for otherwise unemployed, healthy adults is through
public sector employment. From 1975 to 1992, the state's share of
non-agricultural, non-domestic employment rose from nineteen
percent to twenty-four percent (these exclude employment in the
parastatals). Whereas non-government employment rose by just
six percent over this period, government employment rose by
forty-five percent. By 1992, the different levels of government
employed over 1.2 million people (CSS 1995).
Unemployment is more explicitly addressed through public

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470 CJAS / RCEA 31:3 1997

works programmes, which have been used as relief measures in


South Africa since the 1920s. During the droughtyears of the mid-
1980s, the old regime introduced public works programmes on a
fairly large scale in selected rural areas to help alleviate black
poverty (Nattrass and Roux 1991). Similar programmes operated
in 1991-92. After the election, the ANC-led government expanded
public works programmes, although their success has been mixed
(Standing,Sender and Weeks 1996, 469-79).
The ANC's pre-election commitment to a public works
programmeformed part of a sweeping commitment to improving
the lives of the poor and most marginalised. The ANC's election
manifesto called for far-reaching initiatives in land reform and
housing, as well as for a "social safety net" to ensure income for
all. This latter should be achieved, the ANC implied, through
public works programmes for the able-bodied unemployed and
income support for the incapacitated; the ANC advised against
"handouts" for the unemployed (ANC 1994, 18, 55). More
recently, social and economic rights were enshrined in the Bill of
Rights that forms part of South Africa's new, negotiated constitu-
tion.
But how redistributive is the South African welfare state
regime? To what extent has the welfare state regime offset the
inequalities derived from the market? The level of welfare expen-
diture need not indicate its redistributive effect. In some of the
advanced capitalist economies, the middle-class have been major
beneficiaries of the welfare state regime, both as consumers of
state-subsidised services and as employees in an expanded public
sector. In Britain, government subsidies on transportand expendi-
ture on higher education benefited the top quintile of income
earners several times more than the bottom quintile. The bottom
quintile benefited marginally more than the top quintile from
expenditure on primary and secondary education (up to the
minimum school-leaving age of sixteen). The only markedly "pro-
poor" service was the provision of public housing (Pierson 1991,
133-34).
McGrath, Janisch and Horner (1997) repeated their earlier
study of the distribution of taxation and public expenditure in
South Africa, but this time they analysed the shares of taxation
and public expenditure of income quintiles rather than racial
groups. They found that the bottom and top income quintiles (and

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Nattrass & Seekings: Citizenship & Welfare in South Africa 471

perhaps the second poorest income quintile too) bore dispropor-


tionate shares of taxation (the poor paying indirect taxes). The
third and fourth quintiles - the urban working class - paid a
lower share of taxation than their share of income. When the esti-
mated distribution of public expenditures is included, the major
beneficiaries continue to be the middle quintiles, not the poorest.
Data on distribution and redistribution can easily overlook
the benefits of access to publicly funded infrastructural develop-
ment, including clean water, sewerage, and housing. The post-
1994 government's commitment to continued high levels of
expenditure on education and health care has allowed it relatively
little space for restructuringgovernment spending so as to provide
infrastructure for the poor. Soon after taking office, the new
government set up a Reconstruction and Development
Programme (RDP) Fund which was allocated R2.5 billion in the
1994/95 budget. This helped redirect some state expenditure
towards free health care to children and pregnant women, the
provision of clean water, and school feeding schemes. But the
RDP Fund budget accounted for less than 1.5 per cent of total
public expenditure, renderingany restructuring fairly marginal. In
1996, the RDP Office was closed, and the overall budget process
was reinstated as the only mechanism for restructuring spending.
Until recently, many people had looked to local government to
provide municipal services (such as sewerage and water) on an
egalitarian and redistributive basis. But at the local level, too, the
scope for redistributive public expenditure through newly non-
racial municipal government has been constrained by their
unwillingness to raise sharply local taxes and by their continua-
tion of rent and service charge boycotts. Most of the poorest half
of the population, in any case, do not live in urban areas, but
instead in rural areas with generally very limited resource bases.
Some services seem to be effectively targeted to the poor.
These include old-age pensions (Ardington and Lund 1995; Smith
et al. 1995), the provision of clean water in rural areas (we
imagine), and perhaps public works programmes. But there are a
number of services whose benefits seem to accrue disproportion-
ately to households in the top two or perhaps three income quin-
tiles, which include the urban,industrial African working class, as
well as black and white middle classes - for example, transport
subsidies, the de facto subsidies resulting from chronic boycotts of

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472 CJAS/ RCEA3I:3 1997

rents and service charges, and state funding of the senior years of
secondary education.
The deracialisation of the apartheidwelfare state regime may
have provided a more effective "social safety net" for many black
people, but it has addressed few of the welfare needs of the able-
bodied unemployed, especially in rural areas. In practice, the post-
apartheid welfare state regime falls far short of the ANC's earlier
universalistic vision (ANC 1994). South Africa's past, present, and
prospective welfare state regimes have all assumed that social citi-
zenship could be provided on the basis of full, or nearly full,
employment among the target citizenry. Indeed, the emphases on
health and education expenditure now impose severe fiscal
constraints on the state, rendering it incapable of directly
addressingthe failure of the labour market to provide employment
for everyone wanting it.
But the state can address labour market issues indirectly.
Although the state is limited in what it can achieve in terms of
directly providing social citizenship, it can help create conditions
conducive to expanding the access to paid employment of unem-
ployed people. Ironically, the state in a labour-surplus, middle-
income economy can ensure minimum incomes for all only
through ensuring that most of its citizens can sell their labour-
power.

Labour Markets and Social Citizenship


Unemployment comprises a major cause of poverty in contempo-
rary South Africa, but the welfare state regime provides negligible
redress for this particular facet of the inegalitarian class structure.
If social citizenship is to be extended to the unemployed, then
either the welfare state regime will need major reform or unem-
ployment will have to fall. Given the fiscal constraints on the
state and the political and economic costs of redirecting state
spending into transfers to the unemployed, the emphasis of an
egalitarian strategy must fall on employment growth.
Employment growth requires, first of all, overall economic
growth. Unfortunately, South Africa's recent growth performance
has been poor (South Africa 1996). Even during the boom of the
mid-1990s, economic growth only barely nudged ahead of popula-
tion growth. Moreover, South Africa's postwar economic growth
path has been chronically capital, rather than labour, intensive

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Nattrass & Seekings: Citizenship & Welfare in South Africa 473

(Kaplinsky 1995). Since the early 1970s, formal employment has


grown at only one third the rate of growth of output. Prospective
workers are either being forced into irregular, casual, part-time
employment, or are joining the ranks of the unemployed (Nattrass
and Seekings 1996). The continuing decline of the gold industry is
likely to raise unemployment rates still higher.
The post-1994 government's current approach to labour
market policy has, in some respects, served to reinforce this trend.
Just as the apartheid welfare system was extended through dera-
cialisation, so the industrial relations framework has been
extended with the objective of providing all workers with the
kinds of protection enjoyed by white workers under apartheid,but
with little thought for the underlying logic of the system. The
extension of industrial citizenship has focused more on devel-
oping the rights of employed workers, than on extending access to
employment for the unemployed. This boils down to a greater
concern with industrial citizenship for the employed than with an
extension of social citizenship and employment to the unem-
ployed.
The 1995 LabourRelations Act (LRA),for example, provides
for the extension of industrial citizenship at national, industrial,
and workplace levels. This builds on the earlier apartheid labour
market regime in which the extension of collectively bargained
white wages to all firms helped push up white wages. This did not
erode white employment as white workers had a monopoly on
skills and hence were able to negotiate a greater share of national
income without having to worry about the wage/employment
trade-off. The situation for unskilled African workers in today's
labour surplus and slow growing economy is altogether different.
The extension of unskilled wages to all firms carries with it the
very real possibility of inhibiting employment growth (Moll 1995).
In this sense, the institutionalisation of industrial citizenship can
act against the extension of social citizenship (Nattrass and
Seekings 1996). Just as apartheid involved racially exclusive citi-
zenship, citizenship in post-apartheid South Africa is becoming
dependent on class such that the unemployed poor are margin-
alised.
Many unemployed people are, of course, supported by
working family members, or by the remittance of a share of the

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474 CJAS / RCEA 31:3 1997

wages earned by relatives elsewhere. But such redistribution is


uneven and less desirable than expansion of employment directly.
Within the African population only, the unemployed live in
households spread across all but the top household income quin-
tile. Indeed, only one-third of the African unemployed live in the
bottom income quintile, and forty-seven percent of unemployed
people live in households with at least one wage earner. Such
financial flows are cited as evidence that the wages of employed
workers provide an adequate social safety net for the unemployed
(COSATU 1996).
But this supposed "safety net" is inadequate for at least three
reasons. First, the presence of a wage earner in a household says
nothing about the way in which that wage is distributed within
the household. For example, do female unemployed household
members get access to adequate support from employed male
wage earners?Questions about intra-household distribution need
to be explored before claims are made about the adequacy of
"average"household income as a social safety net for the unem-
ployed. Second, even if one assumes that household income is
shared equally, it is still the case that almost two-thirds of the
unemployed live below the poverty line (Bhorat and Leibbrandt
1996, 7). Third, over half of the unemployed live in households
without any wage earners. Regular wages are the main source of
income for less than one in five households in the bottom income
quintile (SALDRU 1994, 341).
In developed capitalist countries with high growth and low
unemployment, there is no necessary conflict between industrial
and social citizenship. In a labour-surplus middle income
economy such as South Africa, however, there is a tension
between the interests of the employed (wage growth) and the
unemployed (employment growth). Where industrial citizenship
promotes wage growth at the cost of job creation, the develop-
ment of industrial citizenship can have negative distributional
effects.4
A recent study by Charney provides some evidence that
employed and unemployed black workers see themselves as
having different interests. Charney reports that focus group
research in late 1994 showed that unemployed workers, non-
unionised workers, and some union members favoured employ-
ment creation over wage growth for the already employed. Most

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Nattrass & Seekings: Citizenship & Welfare in South Africa 475

trade union members, as well as better educated urban residents,


argued strongly for wage growth (Charney 1995, 8-9, 13). Most
opinion polls indicate that black South Africans consistently
name unemployment as the most important problem in South
Africa (see, for example, SALDRU 1994).

Citizenship and Corporatist Politics in a Labour-


Surplus Economy
The apartheid"welfare state regime" and "labourmarket regime"
served to privilege a minority of South Africans by excluding the
majority of the population from advantage. In the 1980s and
1990s, deracialisation extended this system to a larger number of
South Africans. The welfare transfers provided for poor white
South Africans were extended to all South Africans, and the rights
enjoyed by white workers were extended to all workers. Yet the
underlying design of the welfare and labour market systems
remains unchanged. Both assume that there is no employment
problem among the target population; industrial rights and
welfare transfers are provided with neither direct nor indirect
regardfor the long-term unemployed. The result is that the "post-
apartheid" labour market and welfare system make little provi-
sion for the poorest section of the population. Access to social and
industrial citizenship has certainly been extended, but this
continues to be access to privileges rather than to rights in a
meaningful sense.
The position of labour-surpluseconomies not only raises diffi-
cult dilemmas for a democratic regime committed to both indus-
trial citizenship and an egalitarian approach to welfare. It also
raises new questions about the nature of "social citizenship."
Esping-Anderson(1990) argues that the concept of social citizen-
ship should rest on a process of "decommodification," such that
citizens have claims to economic or social well-being, indepen-
dently of the value of their labour power. In this strong sense, the
state can extend social citizenship only if the gap between the
market position of the poor and the desired level of well-being can
be bridgedthrough public expenditure. In a highly labour-surplus
economy, where the state is committed to other areas of expendi-
ture, the gap might be just too large to bridge. A low level of
unemployment might be a prerequisite for the development of

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476 CJAS/ RCEA31:3 1997

social citizenship.
But the concept of social citizenship is also often used in a
looser way, referring simply to access to economic well-being,
whether through the market or not. In this sense, job creation
helps develop social citizenship, although in this case, social citi-
zenship implies commodification rather than decommodification
of people. Hypothetically, labour intensive growth could broaden
access to waged employment such that the state could deal with
residual poverty. The best that a labour-surpluseconomy such as
South Africa can aspire to is an American-style welfare state
regime with a very inegalitarian labour market, where the state
provides minimal and stringently means-tested public welfare.
Such a route is strewn with obstacles in a country with a
strong element of corporatist politics. The urban,African working
class played a leading role in the struggle for democracy in South
Africa. The ANC was elected in 1994 with the support of the
Congress of South African Trade Unions and with a commitment
to empowering corporatist institutions through which the trade
unions could exert a powerful influence on economic and social
policy making. Corporatist institutions may perform an egali-
tarian role when they allow representation of the interests of the
poor. But in labour-surplus societies, empowering the organised
working class need not lead to fully egalitarian outcomes. The
unemployed poor may not be allowed even a voice. Corporatist
institutions can become arenas in which capital and labour
bargain over the distribution of profits and wages, while the
broaderquestions of distribution and of trade-offsbetween wages
and jobs are ignored. Representative institutions of government
are more likely to ensure egalitarian outcomes than corporatist
institutions.

Notes
1 For a critique of Esping-Andersen's categorisation, focused on the
Australian case, see Castles (1996).
2According to Bhoratand Leibbrandt(1996, 154),wage income inequality
accounts for about three-quarters of total income inequality in South
Africa. Of this wage inequality, forty-six percent is because one in three
South African households have no wage income at all, while the
remaining fifty-four percent is a result of inequality within wage earning
households themselves.

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Nattrass & Seekings: Citizenship & Welfare in South Africa 477

3 In 1996, the old age pension was R 410 per month or R 4 920 per annum
or about US $1 000 a year.
4 For example, simulations using 1993 data indicate that a ten percent
increase in real household income that accrues entirely to currently poor
households via new formal, but low wage, employment results in over
one-third of poor households rising above the poverty line. The Gini coef-
ficient falls by twelve percentagepoints to 0.54 (Hertz 1995). Conversely,
a rise in wages that accrues only to people with jobs already actually
increases inequality, resulting in a higher Gini coefficient (Bhorat,
Leibbrandtand Woolard 1995, 6).

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