More than half of South Africa’s 20.9 million children live in poverty, costing the country around 10% of GDP. A new report by the Nelson Mandela Children’s Fund estimates that the indirect cost of the loss of economic potential due to child poverty is around R1.3 trillion or 18% of South Africa’s GDP.

“Child poverty has far-reaching consequences on government, business and non-profit organisations. This study delves into the economic impact of children growing up in poverty and why there’s a call for action to immediately address it to avoid additional economic decline and change the narrative of poor children in South Africa,” says Ashleigh Theophanides, Chief Sustainability Officer at Deloitte Africa which conducted the study. 

Titled ‘The economic impact of child poverty in South Africa’, the study set out to quantify these costs.   

“The study looks at the impact of child poverty on the South African economy from two perspectives, namely direct cost and indirect cost,” she explains. 

Direct costs look at the money spent by the government, private sector, and non-governmental organisations on programmes like child grants, school feeding programmes, skills development, and health services. 

The indirect cost estimates the opportunity cost of child poverty for children born into low-income households or loss of economic potential. 

Costs of poverty alleviation 

“Our study estimates that the total spend by government, private sector, and NGO is estimated at R700bn per annum to alleviate child poverty,” says Theophanides. “These numbers are estimates based on publicly available information.”

“But the true cost of child poverty is probably much higher than what is contained in the report. The earning potential of a child who grew up in poverty is compared with a child who grew up in a more affluent household,” she says.

Using data from the National Income Dynamics Study, Theophanides and her colleagues estimate that children from low-income homes grow up to earn 27% less than those from higher-income homes. 

Indirect impacts

A major consequence of child poverty highlighted in the report is the causal link between poverty and child abuse. According to UNICEF, extreme inequality compounded by high poverty and unemployment creates an environment where child violence persists in South Africa. 

The country is one of the most unequal countries in the world, with an unemployment rate of 33.5%.  

“When families are in situations of economic stress, hardship and dependency on others, family functioning is often at risk; when poor parents are put under immense stress to provide for the families and cannot do so, child abuse may occur,” the report reads. 

For Donald Mkhwanazi from Heidelburg, these numbers represent a very grim reality. 

“They say the stars are the limit but I see poverty as the limit. Where I come from there are so many young people who had the potential to be great. But they had to leave school at Grade 7 to work on the nearest farms. Young kids become providers for their families because their parents are also struggling,” he says. 

Government failure

Dr TK Pooe from the Wits School of Governance says the report highlights the state of poor data around poverty. While the report shows that something is being done, it also shows the gaps in policy. 

“It’s often said that South Africa has the best policies, it’s the implementation that we get wrong. That is poor logic. Implementation is part of policy, if the policy is not implementable then we got it wrong from the first step,” he argues. 

Pooe says government needs to be structured in a way that allows policies to be created and implemented across various departments and spheres of government. 

“We currently don’t have an integrated public policy institutional understanding of how you eradicate poverty,” he points out.

“The government is front and centre in eradicating poverty. The private sector follows what the government does. But it’s had to follow a government that doesn’t have a policy on poverty.” – Health-e News.