Child poverty is not just a moral issue; it bears a steep economic cost for South Africa, amounting to nearly R700 billion each year.
This staggering figure emerges from the latest findings of the Economic Impact of Child Poverty Study conducted by Deloitte and released by the Nelson Mandela Children’s Fund, coinciding with National Children’s Day.
According to the study, the implications of child poverty extend beyond the immediate ramifications for the affected individuals, impacting the broader economy and the country’s future development.
This comprehensive study dissects child poverty’s financial footprint from two perspectives: direct costs and indirect costs. Direct costs comprise government, private sector, and NGOs spending aimed at alleviating child poverty, which totals approximately R660bn to R700bn.
This expenditure comprises a significant 9.8% of South Africa's GDP, with the state alone contributing around R656bn. Additionally, private sector spending through corporate social investment (CSI) hovers around R831 million, amounting to a mere 0.01% of the GDP, while NGOs contribute an estimated R2bn to R21bn, or 0.03% to 0.3% of the GDP, through various initiatives.
However, the evaluation of child poverty extends beyond the immediate fiscal implications.
The indirect cost reveals an even graver concern: an estimated loss of R1.3 trillion, or 18% of South Africa’s GDP, resulting from foregone earnings due to the prolonged impact of poverty on children.
Dr Linda Ncube-Nkomo, CEO of the Nelson Mandela Children’s Fund, said the cost of child poverty was possibly much higher that what is contained in the report.
“Government, the private sector and NGOs are investing an estimated R700bn per annum in the social wage and other interventions to alleviate child poverty, but we are not getting the results of those investments. As a result, the state is losing R1.3trln in potential income that could be earned by getting the right returns on the social investment,” she said.
“We need to relook how we are investing in children so that we can change the results reflected in this report. It has been said that we can’t keep doing the same thing, hoping for a different result.”
Education plays a crucial role in breaking the cycle of poverty. The study underscores that while education alone may not close the income gap, it is pivotal in uplifting individuals out of poverty.
Furthermore, it reinforces the notion that quality education does not merely stem from a robust curriculum or qualified educators but requires basic needs such as health, nutrition, and safety to be met first.
The findings call for urgent reform in how resources are allocated towards child poverty alleviation. The existing programmes, which consume about 48% of the total government budget of R2.3trln, must be scrutinised for efficiency and effectiveness.
Despite the financial commitment, progress remains sluggish, indicating potential inefficiencies in funding allocation and execution.
The report outlines key recommendations for action, including understanding the primary drivers of child poverty and accurately quantifying their costs, evaluating the effectiveness of current child poverty alleviation programmes, enhancing collaboration among the government, private sector, NGOs, and civil society, and adequately addressing the economic burden posed by child poverty can strengthen advocacy for additional resources and inform policy development.
Ultimately, a clearer understanding of these costs fosters informed decision-making, potentially closing the gap between impoverished children and their more fortunate peers.
Gauteng MEC for Agriculture Vuyiswa Ramokgopa said child poverty was not only a devastating social crisis but an economic emergency, costing the nation 28% of its GDP—a staggering R1.9trln each year.
“Behind these figures are real children suffering without basic necessities, robbed of opportunities to grow, learn, and thrive. If we truly believe children are our future, we must act,” Ramokgopa said.
“Government, business, and civil society need to unite and mobilize to create meaningful, scalable interventions that ensure every child has a chance at a life of dignity and hope.”