WHY DOES THE INEQUALITY GAP IN SOUTH AFRICA’S EARNINGS CONTINUE TO WIDEN?


As the year is winding down to an end, the reality of a wide range of issues is still facing us. Come 2020 no one will be safe from the pervasive grip of crime and South Africa will still have the highest wealth inequality rate in the world.

While South Africa boasts a relatively high GDP per capita compared with other countries in Sub-Saharan Africa, our country has extremes of wealth and poverty. Income inequality remains and it has a reputation for high crime, poor education and labour unrest.

The circumstances that exacerbate South Africa’s inequality are both historical and a result of years of policy uncertainty, making it harder for ordinary South Africans to claw their way out of poverty.

Post-apartheid economic policies have been unable to find a balance between job creation and economic growth. When identifying who is living in poverty, the profile has remained the same before and after apartheid.

Policies such as the Accelerated and Shared Growth Initiative for South Africa (ASGISA)  which aimed to halve unemployment in 10 years, failed dismally due to political power struggles. The same can be said about the New Growth Path and the current National Development Plan which languished under the same lack of political will.

The government’s Black Economic Empowerment policies have drawn criticism from politicians and economists alike, with some saying although it has resulted in some individuals becoming wealthy, it has not addressed economic inequality. Numbers collated by the Broad-Based Black Economic Empowerment Commission are not encouraging. They show that between 2015 and 2016 the number of black business owners had decreased from 33.5% to 27.8%.

Nevertheless, black empowerment remains the key government initiative to redress the past economic inequities.

More than a decade after enacting the BBBEE Act, government only set up the Black Economic Empowerment Commission only in 2016 – an agency that is supposed to enforce the act. In other words, until 2016 there was no agency responsible for monitoring companies.

Over the years researchers have been  warning us that high levels of inequality threaten the social fabric, increase the risks of political and economic upheaval and prevent the majority from living up to their full potential.

Leibbrandt and Researchers Vimal Ranchhod and Pippa Green who co-authored a SA-TIED working paper titled, “Taking Stock of SA Income Inequality”, studied inequality patterns in countries such as Brazil, India, China, Mexico and SA. “Such high levels of inequality threaten the social fabric, increase the risks of … upheaval and prevent the majority from living up to their full potential, ” the researchers explained.  They also found out that the level of inequality in South Africa is terribly high when compared to other countries

The recent Inequality Trends report

released on November 14 2019 by Statistics South Africa (Stats SA) has left many with questions than answers. The first question being why does the gap in South Africa’s earnings continue to widen? The answer is simple: The richer are getting richer while the poor continue to face poverty everyday.

To put it into perspective: Measuring wealth, rather than income,  the richest 1% of South Africans own 67% of the country’s wealth, with the top 10% owning 93% and the remaining 90% owning a mere 7%. Such are the numbers of world-beating inequality.

If the economy still continues to be so unequal, with blacks, coloured and Indian people outside the mainstream economy, then inequality will not go away.

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