South Africa; Severe Imbalances in Wealth Continue in One of World's Most Unequal Societies
/- Originally published in Africa News February 8, 2005
South Africa has the dubious honour of being one of the most unequal societies in the world. Income distribution is heavily skewed, with a concentration of wealth in a small number of hands.
But is inequality worsening - or have policy changes adopted over the past decade improved wealth distribution?
This question is highly political, as reflected by government's emotive reaction to last year's United Nations human development report, which suggested a worsening in inequality over the past decade.
A new study by the University of SA's Bureau for Market Research suggests some improvement, but still a very skewed wealth distribution. It supports the findings of a number of studies done in recent years, which show a decline in inequality between racial groups, mainly because of increased social grant spending, and better job prospects for blacks, resulting in them earning a larger slice of the income pie.
However, inequality within race groups has increased, indicating that the rich have become richer through upward mobility, while the poor continue to struggle to improve their circumstances.
According to the Bureau for Market Research, the number of black households that moved into the high income group, earning R153000 a year or more, jumped to 440000 - a massive 368% growth between 1998 and last year.
White households still dominate the high-income category, and during the same six-year period their numbers increased 16% to 642000.
Prof Helgard van Wyk, author of the report, says that over the same period the number of black households in the low-income category, earning less than R9600 a year, dropped sharply, with households moving up into the low middle-income group, earning between R9600 and R38400 a year.
"The main reason seems to be the increase in the child grants and more efficient payment of old age pensions," says Van Wyk.
"In many black households, an old age pension is the only form of income. So if someone else in the household becomes employed, then that household immediately moves up the income bracket."
The study also shows a dramatic change in the share of total income earned by the various population groups. In 1960, 69,4% of total personal disposable income (adjusting for tax) in the economy accrued to whites, while blacks earned 23,2%.
In 2000, the picture changed with whites accruing 43,9%, slightly more than the 43,5% accrued to blacks. By 2007, the bureau estimates that the tables will be turned and blacks will earn 46,5% of total personal disposable income, a far greater proportion than white South Africans' share of 40,4%.
However, despite enjoying more of the share of income on a per capita or household basis, blacks remain poor income earners, simply because of their huge population size compared to other race groups.
Van Wyk estimates that the after-tax income of an average white household will increase from R190563 a year last year to R236435 in 2007. Black households can expect average incomes to increase from R43533 a year in 2004 to R54424 in 2007.
Given the size of the black population in SA, and its low average income earnings, inequality is a stark feature of the economy.
In 2001, black households made up almost 90% of the country's lowest income category, says Van Wyk. They accounted for only 29,5% of the highest income group, while white households made up 61,6%.
Figures for 2003 show that 20% of households earned 65% of the country's total income.
Van Wyk says it is unlikely that the distribution of income will change dramatically for the better. There could be a gradual improvement, but he admits to "just not knowing what will happen".
He says government's increased transfer payments and job-creation schemes could go a long way to balancing the income disparities.
"Higher economic growth can improve the situation. But with our current growth rates, we won't really see much change. If we had growth rates like China at 9%, then there could be some real improvement."
Reducing inequality will be possible only by reducing unemployment. "Unemployment can only be tackled by job-creation schemes. This alone won't solve the unemployment problem, but through the multiplier effect, there should be some improvement in inequality."
Income, however, is only one measure of poverty. A recent study, comparing data between the 1996 and 2001 censuses, shows that while income measures show an increase in inequality, access to basic services - especially housing and electricity - has improved all South Africans' wellbeing.
A study, published by the University of Cape Town's Centre for Social Science Research, shows that the lowest income groups - although having the poorest access to basic services - had the biggest gains in access to services over the five-year period.
The research paper states: "The proportion of the ultra-poor living in formal dwellings increased from 49% to 57% from 1996 to 2001. Access to piped water for this group rose from 65% to 72%, and even though electricity was used for cooking by a mere 27% of households in 2001 (up from 19% in 1996), electricity used for lighting rose 35% to 57% of households, a greater than 20-percentage-point increase over the period."
