South Africa – the African continent’s largest economy and its only G-20 member – continues to display strikingly high and persistent inequality which has led to high levels of marginalisation for an upper middle-income country.
The stark and at times obscene contradictions between rich and poor – a legacy of our country’s apartheid past – are on display mostly along racial lines and spatially demarcated boundaries.
Looking past the first-world living conditions of urban South Africa, it is not too hard to see the downcast situation of townships, informal settlements, and former homelands, a large minority of whose residents lack any form of employment or the means to even look for one, being so spatially disconnected from market access and employment opportunities.
At the heart of our country’s high inequality lies the inability to create employment opportunities on a large enough scale.
Unemployment stands at 25.2% (33.0%, including “discouraged” workers), which is among the world’s highest. Therefore, it is of no surprise that despite an almost 30% increase in per capita GDP since the late 1990s, reductions in poverty have been modest.
The high and possibly rising patterns of inequality predictably polarise the political and economic debate in our country.
While the perils of an unequal society are universally acknowledged, the notion of unfairness requiring policy intervention rarely finds consensus.
While GDP growth-if modest by global comparisons- has averaged a credible 3.2% a year since 1995, it has proven insufficient to absorb the wave of new entrants to the labor market from dismantling apartheid’s barriers. The potential for growth has been held back by industrial concentration, skill shortages, labor market rigidities, and chronically low savings and investment rates- the latter, despite the fairly high and improving rates of return to capital.
Growth has also been highly uneven in its distribution, perpetuating inequality and exclusion.
With an income Gini of around 0.70 in 2008 and consumption Gini of 0.63 in 2009, South Africa stands as one of the most unequal countries in the world. The top decile of the population accounts for 58% of the country’s income, while the bottom decile accounts for 0.5% and the bottom half less than 8%.
In large part, this is an enduring legacy of the apartheid system, which denied the non-whites (especially Africans) the chance to accumulate capital in any form-land, finance, skills, education, or social networks.
At the heart of high inequality lies the inability to create employment opportunities on a large enough scale. Unemployment stands at 25.2% (33.0%, including “discouraged” workers), among the world’s highest.
Social consensus and policy action can become more likely when the sources of inequality are decomposed and the issue is framed around the notion of equity rather than equality.
For example, a young girl born in the township of Tembisa, to a single, uneducated mother earning R2 000 a month and with four other siblings should have an equal shot at becoming a doctor or an engineer as a young girl with one sibling, born in a two-parent household in Sandton, Johannesburg.
What would it take to equalise these two young children’s chances of success in life?
Research shows that access to a basic set of goods and services during childhood can be an important predictor of future outcomes, including education achievements and earnings.
Access to quality basic services such as education, health care, essential infrastructure (like water, sanitation, and electricity), and early childhood development provides an individual, irrespective of background, the opportunity to advance and reach his or her human potential.
Analysing such opportunities for children in South Africa can help better understand the nature and causes of inequality of outcomes observed among adults. Opportunities among children can also be reliable predictors of economic mobility across generations and over time.
For instance, if access to economic opportunities, in the form of jobs (and earnings), credit, and ownership of land and financial assets is correlated with the circumstances of an individual (such as race and location of residence), it reinforces the link between children’s circumstances and their opportunities in life.