South Africa's Poverty Decline Under Threat as U.S. Tensions Rise

South Africa has made notable progress in reducing absolute poverty over the past 17 years, according to the latest data from Statistics South Africa. Expanded welfare programs and better access to education have helped lift millions of citizens above basic living-standard thresholds. The share of people living below the lower-bound poverty line fell to 38% in 2023 from 58% in 2006. The country's social wage, including expanded grant programs during the pandemic, has played a key role in the decline. Despite this progress, challenges remain with an unemployment rate exceeding 30% and a goal to eliminate poverty by 2030 still out of reach.

The government has continued to prioritize social protection, with over 28 million people benefiting from its welfare programs. A key initiative, the pandemic distress grant, introduced at 350 rand a month, has been extended several times and will now run until March 2027. These programs aim to shield the most vulnerable from economic shocks.

However, the government's poverty alleviation efforts are now under increased international scrutiny as the U.S. has taken a firm stance against South Africa's policies. The U.S. is hosting a meeting of G20 officials starting this week without South Africa's participation, a move that marks a continuation of the diplomatic rift between the two countries. The meeting involves deputy sherpas from the G20 and is part of the U.S. preparation for its G20 presidency in 2026. South Africa has rejected U.S. President Donald Trump's allegations that its government persecutes the white minority.

Why the Standoff Happened

The U.S. has accused South Africa of using its G20 leadership to advance policies that it deems "anti-woke," including land reform and affirmative action initiatives aimed at redressing historical inequalities. Trump has repeatedly claimed, without evidence, that South Africa's government is seizing land and encouraging violence against white farmers. In response, South Africa's President Cyril Ramaphosa has condemned what he describes as white supremacist notions and false claims that threaten the country's sovereignty. He emphasized that these narratives have implications for national security and international relations.

The U.S. has taken concrete actions against South Africa, including imposing 30 percent tariffs on imports and halting refugee admissions, with most of the 7,500 available slots reserved for white South Africans. Afrikaner leaders have found an unexpected ally in the Trump administration, with increased access to U.S. officials both in Washington and Pretoria. These developments suggest the U.S. is shifting its policy focus to align with the interests of South Africa's white minority.

Risks to the Outlook

The diplomatic tensions between the U.S. and South Africa are not the only factors shaping the economic landscape. A recent study by the Institute for Justice found that over half of South Africans support the removal of the Broad-Based Black Economic Empowerment policy. The policy, introduced after the end of apartheid, aims to address racial inequality by requiring companies to sell stakes to Black South Africans. The study highlighted growing public dissatisfaction with the policy, with two-thirds of South Africans believing that the use of racial categories in policy does more harm than good.

While the government maintains that these policies are necessary for redressing historical imbalances, private sector leaders and some political parties argue that they have entrenched a new form of economic privilege among politically connected elites. The Democratic Alliance, a key opposition party, has criticized the empowerment laws for concentrating wealth among a small group of individuals while failing to address widespread poverty.

As South Africa navigates these complex political and economic dynamics, its ability to maintain a stable and inclusive growth trajectory remains under scrutiny. The next few months will be critical as the country faces both domestic and international challenges in its pursuit of poverty reduction and economic transformation.