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SA is the most unequal country in the world – World Bank report

SA is the most unequal country in the world – World Bank report

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Recently, the South African government expressed its disappointment with its track record of transforming the country after a World Bank report showed that inequality has deepened since the dawn of democracy, with the country being the most unequal society in the world.

The report entitled Overcoming poverty and inequality in South Africa” assessed poverty and inequality from 1994 to 2015. It revealed that only one in four South Africans could currently be stably considered as either middle class or above in terms of means. The report found the top 1% of South Africans own 70.9% of the country’s wealth, while the bottom 60% only control 7% of the country’s assets. Neighbours Namibia and Botswana were in second and third place, while Zambia‚ Central African Republic‚ Lesotho‚ Swaziland‚ Brazil‚ Colombia and Panama completed the top 10 positions.

More than half of South Africans (55.5%), or 30 million people, live below the national poverty line of R992 per month. This number has increased since 2011. The groups worst affected by poverty are black South Africans‚ the unemployed‚ the less-educated‚ female-headed households‚ large families and children. The official unemployment rate was 27.7% in the third quarter of 2017 while youth unemployment was 38.6%. The report found that poverty had a “strong spatial dimension”, which demonstrated the enduring legacy of apartheid.

Dr Sam Koma, Milpark Education’s head of the Department of Research, studied the report and observed that the report depicted some disturbing facts about the growing levels of inequality among South Africans across race, gender, age, education, and geographic locations between 2006 to 2015.

“The last assessment was completed in 1998. However, the report shows that, overall, poverty levels are lower today compared to 1994. This, in part, is attributed to relatively high and consistent economic growth rates following the end of apartheid in 1994 up to around 2011. The glaring picture presented in the report is that sadly, “South Africa is one of the unequal countries of the world and inequality has increased since the end of apartheid in 1994,” he states.

Dr Koma believes that poverty remains highly concentrated in the rural areas and that the Eastern Cape, Kwa-Zulu Natal and Limpopo provinces were consistently the three poorest provinces between 2006 and 2015, while Gauteng invariably had the lowest poverty rate. More significantly, he says, “the report notes that in 2015, 55% of individuals with no formal education were poor compared to 2.6% of those who went beyond upper secondary school. This implies that education serves as one of the crucial determinants of upward mobility.”

The report further notes, Koma says, that the South African labour force is characterised by high levels of unemployment, low participation and many unemployed and discouraged work-seekers. “The low number of economically active population and limited tax base is not tenable and this situation clearly attests to the fact that the policy choices decided upon over the past two decades have not yielded the desired outcomes in terms of building an economy that generates the much-needed growth levels, employment creation, increased investment and reduction of poverty levels and inequalities.”

In addition, he notes that “The introduction of the Employment Tax Incentive Act in 2013 aimed at encouraging employers to absorb young people has not substantially contributed to ameliorating the high unemployment levels in the country.”  

Dr Koma says that admittedly, while economic growth rates have relatively improved between 1994–2011, this did not result in sustained job creation. “One of the policy interventions is the New Growth Path that set a target of creating five million jobs by 2020 in key sectors including mining, agriculture, tourism and business services. It’s increasingly becoming evident that this target may not be achieved by 2020 owing to an array of factors; among others, these involve the disappointingly low growth rates experienced since 2011, policy uncertainty, political risk as well as low inflows of foreign investment.”

Dr Koma continues: “The report suggests that enterprise development spearheaded by small, micro and medium enterprises has the potential to absorb a substantial number of low-skilled labour into the labour market.  Furthermore, acquisition of post-secondary education to a greater extent enables individuals to increase their probability of participating in high-skilled occupations that provide the wherewithal for a drastic reduction of wage inequalities.”

“In the main, the report gives us a detailed overview of the structural flaws of South Africa’s economy, labour market, skewed spatial realities and socio-economic conditions that warrant policymakers to rethink growth and economic development policies and strategies.” Part of unravelling these issues, he states, “would require the devising of feasible strategies that enable the economically marginalised sectors including the unemployed youth, rural and urban poor to find meaningful opportunities to access education, skills development and employment.”

He adds that the role of social partners involving government, business, labour and community is critical in finding sustainable ways and means of addressing the triple challenges facing South Africa, namely unemployment, inequality and poverty in the short, medium and long-term. 

25 Apr 2018