African Development Bank Working Paper No. 115, November, Jean-Yves Duclos and Audrey Verdier-Chouchane (2010).

This article compares and contrasts the growth trajectories of Mauritius and South Africa, two countries that have achieved impressive growth but which have achieved very different levels of success in poverty reduction. 

Mauritius and South Africa have experienced very different growth trajectories over the past twenty years, and are interesting examples as such.  In this paper, Duclos and Verdier-Chouchane study the micro-level evolution of inequality and poverty in these countries.  In particular, they examine movement around the chosen poverty threshold of US$3 per day (set relatively high since both are middle-income countries).  In Mauritius, the study period is 2001-2006, and in South Africa, 1995-2005.

At the outset, how should one define pro-poor growth?  In an absolute sense, it is that which reduces absolute poverty.  In the relative sense, it is that which proportionally benefits the poor more than the non-poor.  The choice of metric “can lead to very different descriptive and policy conclusions” (6).  For comprehensiveness, the authors assess both types of poverty reduction. 

The tiny island nation of Mauritius has only slightly more than one million inhabitants yet is the most densely populated African country.  Roughly half the population is located in urban areas, where inequality is more pronounced.  Mauritian Creoles tend to be the most disadvantaged socio-economic group.  Mauritius achieved independence in 1968, at which time it was primarily an agricultural economy.  It has experienced rapid economic development since then, with growth concentrated in the industrial, financial, and tourism sectors.  Today, Mauritius represents an “African success story,” and “the institutional source of Mauritius’ success has traditionally been attributed to the provision of a stable and competitive regulatory and fiscal (including relatively low income and corporate taxes) environment that favors labor-intensive activities in sectors such as sugar, textiles, and tourism.  Such politices have tended to reduce unemployment and increase labor force participation, in particular that of women” (9). 

While this growth has been progressing, the government of Mauritius has consistently focused on building a strong social safety net as well as health and educational infrastructure.  Health care is free.  Mauritius initiated some strong policy responses to the global financial crisis, including increased food and gas subsidies, welfare, the restoration of a universal old-age pension, support for entrepreneurs, and the Eradication of Absolute Poverty program providing public housing and education and health assistance to the extremely poor. 

South Africa has progressed along a very different growth trajectory.  Absolute growth has transpired at an impressive rate, especially in export, housing, services, and manufacturing sectors.  However, a large informal economy remains, especially in subsistence agriculture.  Apartheid also created large and persistent socio-economic inequalities.  The country still suffers from high unemployment, widespread poverty, and high crime rates.  In particular, unemployment stood around 30% for the 1995 to 2005 period, especially harming the prospects of the young, uneducated, and rural.  HIV/AIDS is also a significant problem, with approximately 17% of those between 15 and 49 infected as of 2009. 

In 1996, the government responded with a pro-market liberalization plan aiming to increase employment.  Policies have also aimed to improve healthcare and education.  Unfortunately, large gaps in school quality which tend to occur along geographic, socio-economic, and racial lines still hamper equality of opportunity.  The official target for white to black land transfer through mutual agreement and sale stands at 30% by 2014, yet as of 2008, only 5-7% of land had been transferred.

Over the study period, inequality has slightly increased in Mauritius and significantly increased in South Africa.  Poverty has fallen in Mauritius, due in large part to economic growth rather than redistribution.  Economic growth has reduced poverty in South Africa, but the large rise in inequality has cancelled “all of the positive poverty effects of growth,” the authors report (17).  Specifically, growth plus rising inequality resulted in a poverty increase of 9%, while inequality-neutral growth would have reduced poverty by 9% (22).

Overall, the authors conclude that while Mauritius represents a success story, South Africa has introduced serious policy measures only recently and has failed to achieve inclusive growth over the study period.