A World Bank report last week on SA and its Southern African Customs Union (Sacu) neighbours paints a sobering picture of a region which has the world’s highest rate of inequality.
But it is by no means a simplistic picture that many might expect, of executives earning too much and workers earning too little, or of race and apartheid history being the key drivers.
Rather, it draws attention to the policy failures that continue to sustain high levels of inequality despite the progressive tax policies and pro-poor spending by governments. And its recommendations deserve to be carefully considered and heard.
With a Gini coefficient of 67, SA has the highest inequality of the 164 countries the World Bank measures. Its neighbours share a similar apartheid past and though their inequality is lower than SA’s, it is still high by global standards. Disturbingly, inequality has risen in SA and is one of the factors that contributes to low economic growth, as well as to high rates of crime and corruption.
Disturbingly, too, the region’s high levels of inequality go with highly redistributive fiscal policies. The World Bank finds that tax policies in all Sacu countries, but especially SA and Namibia, are “strongly progressive”, with the wealthiest bearing much of the burden of personal income tax payments, and governments spending much more on social grants than most other countries with similar income levels.
With its social grants for children, old age pensioners and disabled people, SA in particular stands out for the “progressivity of its transfers”. The region also has some of the most redistributive spending in the world, particularly on education and health, according to the World Bank. The trouble is that the quality and efficiency of that spending prevents it being effective in combating inequality.
That means that despite all the redistribution, inequality of opportunity is still high. In more equal societies, people might be born into disadvantage, whether because of race or poverty or geography, but they have a chance at doing better than their parents because of the social mobility that good education or good access to jobs and skills and other assets gives them.
The trouble in SA, and to an extent its neighbours, is that very little of that kind of social mobility happens because the policy environment sustains inequality of opportunity. The World Bank highlights not only the poor quality of education and health care but also the spatial divides that make for unequal access — divides that are a legacy of apartheid but continue into the present.
The bank highlights continued unequal access to land ownership, not just because of apartheid-era discrimination but because of issues such as the lack of title deeds as well as communal tenure, which prevents people, especially women, from owning land that they could use to raise finance, farm productively and use to build wealth.
Then there’s the labour market, whose “poor performance” underpins inequality in incomes and outcomes. “In a constrained labour market, differences in education levels account for most of the inequality in outcomes,” says the study, with differences in tertiary education levels accounting for almost half of overall income inequality.
Basically, skilled labour is in short supply, while at the top of the skills level, people get highly paid. At the bottom, people may not have jobs at all; those who do, earn way less than those at the top. Poor education for the poor and the lack of access to skills helps to keep inequality highly racialised in SA, with race affecting both access to education and labour market outcomes.
The World Bank proposes that equality of opportunity needs to be promoted through policies that improve the efficiency of public services, strengthen the provision of early childhood development, reduce spatial inequality and address unequal access to productive assets such as land. It calls for a series of measures to improve the quality of social spending as well as protecting the poor against climate and other shocks.
If SA and its neighbours don’t act to address these issues, inequality can only become more of a challenge and the region risks falling even further behind the rest of the world.
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