The urgency of socio-economic Development in the wake of rising costs of living in South Africa

By: Olusola Bodede

The cost of living in South Africa is on a steady increase. As South Africans grapple with the current reality, the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) announced an increment in the repo rate by 50 basis points. According to SARB Governor, Lesetja Kganyago, this increment will make the repo rate increase to 4.7% per year. The increase which the governor premised on higher food and fuel prices, took effect from 20 May 2022. Prior to the announcement, committee of ministers were already meeting to unravel the rising cost of living on South Africans in the wake of the Russia-Ukraine war. Many families within South Africa are already feeling the heat of rising prices of commodities. These have greatly affected the income of so many breadwinners who consistently worry about how they would be able to meet their family needs.

The Consumer Price Index report by Statistics South Africa published in January 2022 showed that there is rising cost of living resulting in people spending a high proportion of their income on transport, food and housing; with a simultaneous increase in the consumption of alcoholic beverages and tobacco. It is however very surprising that despite South Africa’s richness in minerals, there is not corresponding translation to socio-economic boom. There is still high rates of poverty, unemployment and social inequality. Many of these socio-economic challenges still subsists to date, thus affecting the quality of life of South African citizens. The South Africa’s president, Cyril Ramaphosa said in the wake of rising costs of living in South Africa that “As a government, we are deeply concerned about the continued rise in prices, particularly arising from the conflict that is ensuing between Russia and Ukraine and we are aware that food prices are going to go up but not only for us, but for many other countries around the world. Families across South Africa are already feeling the effects of rising prices in supermarkets and at the petrol pump, and many are worried about how they will continue to provide for their families and make ends meet. We are using all of the levers at our disposal as government to cushion South Africans from the effects of the rising cost of living”.

As at today, many citizens are still being socio-economically excluded as evidenced in the high levels of poverty, inequality in income and access to opportunities. All these have a negative influence both on human and economic development. Even though socio-economic development has been widely advocated as being a panacea for rising costs of living in South Africa, it must be noted that the quality of such development is sacrosanct; otherwise socio-economic development may be a mirage if not properly executed.

Areas that urgently need attention in the wake of rising costs of living in South Africa

• Education: Education is the bedrock of any nation. For a country such as South Africa, to improve her socio-economic development, there must be an improvement in the educational sector. This has to do with the quality of education which by extension, is expected to rub on the social status of her citizens, thereby helping to improve the country’s economy. It must be noted that education has its own challenges, but with great commitment from the government, they are not insurmountable. A rise in the level of education among the citizens, especially the low income earners, will help narrow the gap of income inequality that exist in the society. There has been strong evidences that associated high level of education to higher income with enhanced productivity.
• Employment: It is sad to note that despite South Africa’s richness in minerals, lots of her citizens are still facing high rate of unemployment which has negatively influenced their quality of life. According to Trading Economics, the unemployment rate in South Africa eased to 34.5% from a record high of 35.3% in the prior in the first quarter of 2022. This reality is the first decline occurrence in the last seven quarters. Although it appears South Africa is making progress but there are rooms for improvement.
• Income inequality: Reducing income inequality is one of the antidotes to rising costs of living in South Africa. Recent analysis by OECD suggest that countries with decreased income inequality grow faster economically than those with high inequality rate. For a country such as South Africa to be able to combat the rising costs of living, there is urgent need to close the gap that exist between lower income class and high income class. In order to accomplish this, investment in education is sacrosanct. This is because education is the limiting factor behind income inequality. Reports have shown that students from poorly educated parents suffer set back in their educational pursuit following increase in income inequality. “Countries that promote equal opportunity for all from an early age are those that will grow and prosper” Said OECD Secretary-General, Angel Gurría. Therefore a strong will towards addressing growing income inequality among the labour force will go a long way in promoting socio-economic development in South Africa.
• Security: Security is very paramount in a society. One of the major responsibilities of the government is to ensure there is adequate security of lives and property. In the wake of rising costs of living in South Africa, if the security of lives are left in the hands of individuals, low income earners may have to pay dearly with the meagre resources. Therefore, government should see security as a serious area of socio-economic development that must be given top priority in order to suppress high cost of living in South Africa.
• Empowerment: Citizens need to be empowered with skills in order to suppress the effect of high rate of unemployment within the society. The reality is that everybody may not get employed at the same time due to prevailing situations; it is however a relief for those who have been empowered with skill acquisition as they will be able to meet their immediate need and that of their families, thereby reducing the influence of high cost of living.
• Poverty: Poverty has been known to inhibit socio-economic development within the society. This is because poverty affects the purchasing power of an individual and also affects the investment capacity of the citizen concerned. Such citizen finds it difficult to cope with economic expenses. Analysis conducted revealed that citizens that are financially buoyant have nominal interest rates ranging from 30 percent to 50 percent. This will further put the high income earner in a better position. As at today, over 735 million people live in extreme poverty around the world, on less than $1.90 a day. Poverty eradication is the way to go in the wake of rising costs of living in South Africa.

In conclusion, the urgency for socio-economic development in the wake of rising costs of living in South Africa is inevitable due to the current realities. More attention should be placed on the recommended areas above, most especially on education which is the bedrock for national development as it improves development within the country and also close the gap of income inequality.

Dr. Olusola Bodede is a researcher. He writes in his personal capacity