Inequality in South Africa: Same Country, Different Worlds.
Part 1: What?
I find myself thinking a lot about inequality whilst living in South Africa. I can’t help it. It’s everywhere I look, and everywhere I don’t look. It makes me feel uncomfortable when I see beggars at almost every traffic light, or drive past a township (the poor residential areas to the right of the photo above). And at the same time, it’s so difficult to know what to do about it. Over time, as you do with most things that initially shock you, you normalise it and you begin to notice it less.
I’ve spent many years studying, and living in, developing economies so poverty is not particularly new to me. But what I find unique about South Africa, and from my experience living in Pretoria, is that you can quite easily drift through your day feeling as if you’re living in a high-income economy. Driving on good roads, going out to hip bars, drinking flat whites at fancy coffee shops. I’m in awe of how the avo on toast revolution has spread throughout the world. Johannesburg, Pretoria and Cape Town are no different in that respect.
Yet, if you are curious enough to dig into the statistics, to find out what life is really like for the average South African, what you find is quite shocking. The author Adam Hochschild puts it quite well in his book ‘The Mirror at Midnight’. There are two sides to South Africa, there’s sunny South Africa: that tourists see when they come and visit and that wealthy people are privileged enough to exist in full time, i.e. to the left of the photo above. And then there’s the other side to South Africa: the one where the majority of South Africans struggle to exist, and live in poverty. The townships, i.e. to the right of the photo above. It is a dual economy: Same Country, Different Worlds.
We all know Apartheid existed, one of the most systematic and discriminatory racial segregation system the world has seen. But 27 years on, what does inequality in South Africa look like today? My next series of blog posts will delve a little deeper into the complex, ugly face of South African inequality.
Why Inequality Matters
Before we delve in, a quick note to say why we should care about inequality in the first place. The short answer is, inequality is bad for long-term economic growth. It leads to lost talent, macroeconomic instability, less social mobility and in general a bunch of disgruntled people. If you can reduce inequality, the whole economy will benefit. An equal and wealthy economy is not an unachievable goal. Some of the most egalitarian societies in the world including Sweden, Slovenia, Norway, Denmark, Netherlands also have the highest standards of living.
What does Inequality in South Africa look like today?
A couple of weeks back I was lucky enough to have a coffee with an academic specialising in inequality from the University of Cape Town (UCT). He reminded me, “when we look at inequality, we need to be clear what type of inequality we are interested in, as there are many”. In this blog I’m going to look at different types of inequality, firstly income inequality- broken down by race and gender, as they are the biggest drivers of income inequality here. I will also look at wealth inequality and access to basic services and household assets.
As I touched upon in my last blog, when it comes to overall income inequality, South Africa comes out on top. We can compare income inequality using statistical measures such as the Gini Coefficient, which measures how income is shared amongst a population. The Gini Coefficient ranges from 0 — where income is shared perfectly equally among the entire population, to 1 (or 100%), where one person has all the income in the entire country. South Africa’s Gini Coefficient is ranked number one in the world, at 0.63 (or 63%), making it the world’s most unequal economy. You can see this in the graph below, the darker the red, the more unequal the society. And the following graph shows just how much of an outlier South Africa is. South African inequality has also remained particularly stubborn, decreasing only slightly since 2005.
Jobs and Earnings — Labour Market inequality (wage inequality)
Let’s start with wage inequality. What you earn in South Africa is the biggest driver of the overall rate of inequality in the country — meaning when we talk about inequality here, the labour market is super important. Here’s what the average wages look like (from 2011–2015) broken down by race. This shows on average, white South Africans earn three and a half times more than black South Africans.
The issue with the earnings data above, is that it only captures South Africans who have jobs. If we also captured the unemployed, which is made up largely of the non-white population, the average wage rate for black South Africans would look a lot worse.
The unemployment rate in South Africa is painfully high: 32.5% on average. If you include discouraged workers, those who have given up looking for jobs — the rate is even higher at 42.6%. Let’s pause on that for a second: 42.6% of your labour force (about 7.4 million people) want to be working and cannot find a job. In comparison, the unemployment rate in the UK and India is 4.9% and 8.7%, respectively.
The unemployed in South Africa, are made up predominantly of low-skilled people, with 90% having high school level qualifications or below. Black Africans have the highest unemployment rates, more or less four times higher than the white population.
Gender Inequality
Other than race, the second biggest characteristic that drives income inequality is gender. Female workers earn approximately 30% less, on average, than male workers. Males are also more likely to be employed and have relatively better paying jobs. In comparison the gender gap in the UK, was 7.4% in 2020 and 34.5% in India (2018).
Wealth Inequality
Though wage inequality is the most important driver of inequality in South Africa, wealth inequality (which relates to your assets) is playing an increasing role.
Academics from the World Inequality Lab show that wealth inequality in South Africa has remained largely the same since the end of Apartheid, and has even slightly increased in the top wealth groups.
Today the richest 1% of the South African adult population own 55% of total personal wealth. And the richest 10% own 86% of total personal wealth, 99.8% of bonds and stocks, 60% of the housing wealth and 64% of pension assets.
Access to Basic Services and Household Assets
We’ll end on one area of inequality that has seen some improvement over recent years: the access to basic services (mains electricity, sanitation, medical care) and household assets (for example TVs, fridges, radios etc.). Internet access saw a remarkable increase across all population groups since 2009 (due to the increase in use of mobile phones), with Black Africans seeing the biggest increase of all, with 46% more having access to the internet.
On the other hand, access to private health care is still very unequal. 72.4% of white South Africans have access to private medical care, compared to 48.9% of Indian/Asian, 20.2% of coloured and only 10.1% of Black Africans.
I’ll conclude by saying that, as you can see, inequality in South Africa is far from a pretty picture, and the evidence shows it remains largely racially driven. My next blog post will look more into why this inequality exists, and why it’s been so resilient.
To note: My blog posts are my own personal views, and do not represent the views of the UK government or any of my past employers.
