Poverty Reduction Under Structural Constraints: Growth, Inequality and Policy Trade-Offs in South Africa

Policy Paper 48 South Africa faces the intertwined challenges of weak economic growth, persistently high poverty and extreme income inequality. This paper assesses what levels of poverty reduction and distributional change are realistically achievable over the next fifteen years under plausible growth scenarios, given binding structural and fiscal constraints. Using a stylised log-normal income distribution calibrated to 2023 data, the analysis simulates poverty outcomes under sustained per capita growth rates of 1–2 per cent (consistent with GDP growth of 2–3 per cent) and cumulative Gini reductions of 0, 2, 4 and 6 points. The results reveal a clear asymmetry. Moderate growth generates substantial reductions in poverty at both lower- and upper-bound poverty lines, while plausible medium-term reductions in inequality make a smaller incremental contribution. Keywords: Poverty reduction, Income inequality, Economic growth, Policy instruments, Labour market structure, Fiscal sustainability, South Africa