The London School of Economics and Political Science (LSE) has cast a harsh spotlight on the sluggish pace of wealth distribution in SA, saying the world’s most unequal society is yet to meaningfully move the needle on the racial wealth divide 30 years after the end of apartheid.
The working paper, “Inherited wealth in post-apartheid SA: new perspectives from probate records”, from the LSE’s International Inequalities Institute, lifts the lid on the scale of the racial divide.
The study, led by Rebecca Simson, a PhD graduate whose research explores social and economic processes of change in postcolonial Africa, examined probate records — or documents pertaining to the distribution of a deceased person’s estate — to assess the rate at which black South Africans have acquired white-owned housing.
The findings are stark: only 3% of black South African own inheritable wealth of at least R250,000, compared with 47% of white, 8% of coloured and 43% of Asian South Africans.
The disparity underscores the challenges in addressing the racial divide in post-apartheid SA, potentially calling into question some of the country’s wealth distribution policies that include broad-based BEE, affirmative action and land reform.
The study attributes this to the ANC’s cautious approach towards white-owned capital and steadfast respect for private property rights.
“SA’s negotiated political transition from apartheid to majority rule impressed the world with its peacefulness. Unlike the many violent regime changes in history, SA managed the transition to democracy without any economic contraction and the outflow of white-owned capital and skill remained manageable,” the paper reads.
“One tenet of this negotiated process was a cautious approach by the ANC towards white-owned capital and broad respect for private property rights. Without a forced transfer of wealth, it tacitly accepted a slow route to non-white wealth accumulation in the new SA.”
Asset transfers
Geographically, the paper shows that most black estate-holders are urban residents, with only 17% in former homelands and 42% in apartheid-era townships, indicating that the privatisation of township housing in the 1980s and 1990s has been the most meaningful asset transfers in post-apartheid SA.
“The rate at which black South Africans have bought into the historically white-owned housing stock still appears to be low indeed.”
The working paper says, based on how the transition discussions concluded, that the government had relatively fewer levers for realising a more equitable distribution of wealth.
“The most discussed policy tool of the post-apartheid era is arguably the BEE policies, focused on voluntary transfer or sales of shares to non-white owners (often facilitated with credit from state-owned institutions), sale of public companies to black companies and preferential treatment for black-owned companies in public procurement,” the working paper reads.
“Yet at least through the early 2000s, these policies had fairly modest success in increasing black economic control. In recent years, the country has also been locked in debate about a proposed constitutional amendment to section 25, which would allow expropriation of land without compensation, under certain conditions.
“Furthermore, though not always framed in this light, the Reconstruction & Development Programme housing construction programme presumably represents the biggest transfer of assets for the bottom half of the income distribution. Since 1994, the government estimates that 5-million subsidised low-cost homes have been built, mostly in urban areas, which residents can in time register under a formal, private title.”
Skewed racial distribution
According to the most recent data, SA has the highest income inequality in the world, with a Gini coefficient of about 0.67. The Gini coefficient is a widely used statistical measure of how income is distributed in the population of a country.
The working paper says less emphasis has been placed on diversifying the ownership of middle and upper-class housing stock, which constitutes a large share of total household wealth in SA.
“The very skewed racial distribution of inherited wealth and spatial separation of ‘middle-class’ wealth owners of different racial communities suggests limited success in wealth transfer in this key asset class.
“The predominance of township dwellers among the black estate holders suggests that one of the most broad-based asset transfers in the new SA has in fact been the relatively understudied process of township housing privatisation that began in the 1980s.
“In some regards, therefore, SA’s wealth transfer problem is analogous to that in Western countries, which face a marked generational wealth divide as a consequence of house prices outperforming wage growth over many decades. This gap has much greater political salience in SA, where the divide is predominantly racial rather than generational.”
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