South Africa’s Triple Threat
How can we combat it?
South Africa is currently going through a tough period in her history — seemingly trudging towards the precipice of a fiscal cliff that has been brewing for years; the country faces a complex and interlinked triple challenge of poverty, unemployment, and inequality which, with a healthy dose of government corruption, incompetence — and a global pandemic — has lead to the civil unrest we see today.
But the night is darkest right before the dawn, and this period also presents a significant opportunity for South Africa to pick herself up, dust herself off, and transition into a new and better era.
This article will unpack some of the issues the country currently faces — as well as attempt to provide a picture of how they may start to be addressed.
What to Expect in this Article
South African Inequality — in Data
South Africa is currently the most unequal nation on earth by Gini Coefficient. Let’s unpack this statement.
Gini Coefficient
The Gini coefficient is a widely used statistical metric for representing the inequality in a population. The coefficient is a number between zero and one (or 0 & 100%). The inequality is usually measured in terms of either wealth*, income, or expenditure.
Zero indicates a perfectly equal distribution within a population whereas 1 indicates ‘perfect inequality’ where a single person has everything and all other people have nothing. Looking at it mathematically, and using the below figure, the Gini coefficient can be determined as the area of B divided by the area of the entire triangle (the sum of areas A & B).
Economists often look at a Gini coefficient of around 0.4 as an important turning point — as inequality beyond this level is frequently associated with political instability and growing social tensions; South Africa’s Gini coefficient (as of 2015) is 0.65.
This number was based on per-capita expenditure (amount spent by each person). For per capita income, the number is even higher — around 0.67 in 2015. The US, for a comparison, is sitting at 0.48 in 2019, whilst Germany’s is 0.31.
One common criticism of the Gini coefficient is that it can ignore real levels of poverty and prosperity — it may measure strict inequality, but the measure may actually rise while everyone gets richer, and decline when the poorest get poorer—though South Africa is the most unequal in terms of Gini coefficient, there are other countries in which there are more people below the poverty line — and by a larger margin.
*It must also be noted that income or expenditure is usually preferred as (household) wealth is notoriously difficult to measure, thus another common criticism of the Gini coefficient is that it doesn’t consider wealth inequality.
Income & Wealth Inequality
Let’s take a look at South Africa’s inequality from two different angles — to the left we have a breakdown of the inequality based on the amounts that different individuals earn — the income inequality.
As stated above, in 2015 the per capita income inequality Gini coefficient for South Africa was 0.67.
Looking at the graph, we can see that the top 10% of earners take home over 65% — with the bottom 90% taking just under 35% of total income.
Below is a similar graph, but this time based on wealth inequality, this is a breakdown of the distribution of asset ownership.
The top 10% owns 85.6% of the country’s total wealth, with the top 1% owning almost 55%.
Inequality is Multi-Dimensional
What makes the South African inequality problem more complex is that there is high inequality across multiple dimensions — as shown in the charts below.
Inequality by Geography
Similar patterns can be seen regarding wealth inequality. When looking at inequality (wealth) within the provinces, Eastern Cape and Kwa-Zulu Natal were the most unequal provinces, while Limpopo was the least unequal between 2009 and 2015 (Statistics South Africa, 2019).
Inequality by Population Group
Inequality by Level of Education
Level of education is an incredibly significant contributor to levels of inequality, and the graphs above can to a large extent be seen as the symptoms of an unequal education system — which then gives rise to an unequal labour market, and high Gini coefficients. The relationship between the labour market and the education sector in South Africa is illustrated below (Moses, van der Berg, Rich, 2017)
Things Have Improved but the Improvement is Slowing Down
Note that most of this data comes either directly or indirectly from Statistics South Africa’s 2019 report (see here or in references).
As we can see above, the per capita Expenditure Gini coefficients have gotten slighly better in Urban settlements since 2006 — but this improvement is slowing. Also, if we look at the Gini coefficients based on income — things actually seem to have gotten worse since 2011.
Note that the Palma ratio is another measure of inequality, it is the ratio of the richest 10% of the population’s share of gross national income (GNI) divided by the poorest 40%’s share.
It is important to note that South Africa has made vast improvements in some, mainly infrastructural areas — great strides have been made in terms of access to services such as electricity, telecommunications, and water and sanitation. These serve as a good base from which to launch, but unfortunately the rocket is still on the ground.
Why Inequality Matters
First off, inequality and poverty are very different phenomena — and contain very different sets of problems, in this section we are concerned with the inequality specifically.
One of the most well-known philosophical works in this area is that of John Rawls — who published ‘A Theory of Justice’ in 1971. Rawl holds that inequalities can only be just if two criteria are met:
This brings us to a central distinction that must be made — that is, the difference between ‘equality of opportunity’ and ‘equality of outcome’.
Equality of opportunity provides that people are afforded the same opportunities in life (i.e. start the race at the same time, with the same tools) whilst equality of outcome provides that all people end up at the same place (i.e. finish the race at the same time).
The first is possible to achieve, the latter is not. The reasons are relatively simple: people have the freedom of choice and will use it to pursue different goals — just because people have the same opportunities does not mean they will have the same outcomes.
We will be focusing henceforth on equality of opportunity, which South Africa does not yet provide in the slightest; lack of inequality of opportunity is a problem for several reasons — some of which are shown below.
The Triple Challenge and a ‘Dual Economy’
South Africa’s ‘National Development Plan’ (NDP) — the country’s more recent action blueprint — aims to address what is referred to as the country’s ‘triple challenge’ — of poverty, inequality, and unemployment — by the year 2030.
These challenges are of course intricately linked with one another.
Former president Thabo Mbeki often used to talk about what he referred to as South Africa’s ‘dual economy’. This observation has been more recently highlighted in a 2018 report by the World Bank where it is stated that the South African labor market is effectively split into two extreme job types; at one extreme is a small number of people with highly paid jobs in largely formal sectors and larger enterprises, at the other extreme is most of the population, who work in informal jobs that pay less well. The duality has resulted in high wage inequalities — represented in the Gini coefficient — that have been steadily rising and are indicative of a polarised market.
The duality has resulted in high wage inequality that has been steadily rising — reflective of a polarized market.
The graph below shows how this gap is still widening — due to wages rising for highly skilled jobs, less so for low-skilled jobs, and completely stagnating for semi-skilled jobs.
This trend points to an increasingly absent ‘middle class’ in South Africa, a country where 76% of the population faces poverty as a constant threat in their daily lives.
Aids & TB
South Africa was suffering from its own epidemic long before COVID-19 froze the world in 2020—and the knock-on effects these diseases have on families, children, and the economy is widespread.
AIDS is a disease caused by the virus HIV, the disease breaks down the body’s immune system and therefore it’s ability to fight infections — this is why Tuburculosis (TB) is so lethal for people with AIDs, it is a bacterial infection that HIV-positive people cannot fight off. This means that, each year, tens of thousands of people die from AIDs and TB (usually a combination thereof) and the government spends billions of rands on prevention, care, and treatments.
This deadly combination of diseases leaves in its wake thousands of broken homes and families every year — giving rise to multiple knock-on effects. Many newly single parents may have to bring up their kids (who may also be HIV positive) without help, leading to them being unable to earn enough to stay near nor afford better quality schools, in many communities contracting the disease is seen as inevitable.
Long-Term Aftermath of COVID-19
COVID-19 (as of July 2021) has claimed the lives of over 65 000 South Africans — accounting for just over 0.1% of the population — but the long term effects of the pandemic are not limited to lives lost; the disease, as well as the attempts to quell it, will leave long-term scarring.
This section will draw from the results of several articles and studies in order to paint a picture of what to expect on the ground.
Effects on Unemployment & the Economy
The South African economy contracted by over 7% in 2020 as restrictions to curb the COVID-19 pandemic forced business’ doors shut and catalyzed increases in unemployment.
The South African Reserve Bank (SARB) projects that the South African economy will be back to pre-COVID levels by sometime in 2022 — but considering the effects of the third wave and the lootings in KZN & Gauteng, this may be overly optimistic (Kassim, 2021).
The already squeezed South African middle-class is in for the roughest ride as a collective; financial services company Transaction Capital — citing credit statistics, wage data and unemployment figures — has said that 34% of households in South Africa are forecast to fall out of the middle-class, and into the vulnerable group.
Unemployment levels — already hard hit over the past two years — are projected to increase to 36 percent in 2022 and 35 percent in 2023.
Unemployment figures are perhaps the most worrying, especially looking at the particularly high levels of youth unemployment (currently the highest recorded in the world)— which have undoubtedly contributed to the mass riots and looting of late (not to take away from the criminality and instigations from within the ranks of the corrupt arm of the ANC).
Effects on Inequality
The literature that I have sifted through seems somewhat divided on this issue. A 2020 study by the United Nations found that inequalities would rise due to the pandemic, whilst a more recent study — published in the South African Journal of Economics (SAJE) — found significant evidence that, though harsh declines in economic growth and employment seemed inevitable, inequality is projected to decline due to the disproportionate decline in the incomes of richer households while the poorest of the poor are kept above water by government social grants that have thus far been kept mostly intact during the pandemic.
The SAJE study predicted a GDP contraction of 10% in the mild scenario, and over 14% in the severe one — with the Gini index decreasing in both scenarios, albeit conservatively at 0.5 & 0.7% respectively (Chitiga‐Mabugu et al., 2020). This all being said, lower projected Gini coefficients mask the reality that in April & May 2021, an estimated ten million adults and three million children lived in households that had been affected by hunger in the previous seven days.
Effects on Sectors & Households
There is no doubt that there are “winners” and “losers” when it comes to sector resilience to COVID-19 — the table below attempts to categorize this somewhat (based on a table in the abovementioned SAJE study).
On a household level, risks are highest for female-headed households as current estimates put them as most likely to fall into poverty — this in conjunction with rising unemployment is very worrying for the country’s gender relations as cases of gender based violence — already a massive problem in South Africa — are also expected to increase.
What can be done?
It is at the point in this article where I will now veer away from the data — and segue into my own (and my close friends’) subjective views on this matter, so please take the following as such (with a little salt, that is).
We need to learn from Latin America & Singapore
Just over 20 years ago Latin American countries rivalled South Africa’s inequality and whilst it remains fairly high today it has narrowed across most of the region in the last decade or so.
The highest attributing factor to this?
Rising employment.
By contrast in South Africa, where social grants have increased dramatically and now reach over 16 million people, income inequality has hardly changed.
Moving over to Singapore, whose story is almost legendary; the country went from similar average incomes per capita as South Africa to one of the richest countries on the face of the planet; Singapoeran civil servant Kishore Mahbubani puts his country’s success down to three things, summarized with the acronym MPH:
M — Meritocracy (as opposed to the nepotism often seen in South Africa, from politics to business); Jobs, and perhaps most of all political power, should be given to the best people. As former leader of China Xiaoping once said; “It doesn’t matter whether a cat is black or a cat is white, if the cat catches mice it is a good cat”
P — Pragmatism; ‘it doesn’t matter what your idealogy is, if it works, use it’. Singapore was known for using a mixture of socialist and capitalist policies that were best suited to them.
H — Honesty; the hardest to achieve, and what brings many countries down, South Africa is certainly no exception, is corruption. Singapore had and has no tolerance for corruption. Mr Lee Kuan Yew, after he became prime minister of Singapore made it a point to punish not the junior people but the very senior people (one Deputy Minister was arrested for going on holiday with a businessman that paid all his expenses).
Singapore is of course a much smaller country than South Africa in terms of population size, and we also have our own very unique problems to deal with that must be considered too; all of this being said, though — there certainly seems to be lessons we can and should take from those that have achieved similar goals to our own.
We need to address what root causes we can, depending on our means
Root cause analysis is a problem solving approach used in science and engineering, in this section we will attempt this approach on South Africa’s Triple Challenge.
The hypothesis — some of challenges facing South Africa can be thought to be causally linked in a manner shown below.
What seem to be the main root causes are highlighted with a red border, obviously things are not this simple and in reality many of these nodes are connected to many others. I have left both “TB & AIDS” and “Poor family planning” as a root causes in themselves despite their strong links to lack of education; the reason is because education would otherwise simply constitute too-large-a-topic in the subsequent sections, and I feel that those two root causes have other mentionable solutions besides education.
But all of this is nothing new, and in fact the World Bank’s 2018 report states clearly that “good jobs are the key to future reductions in poverty and inequality” in South Africa — and that,
“future interventions that simultaneously stimulate growth and reduce inequalities are likely to be much more effective than interventions that only stimulate growth or reduce inequalities.” — Overcoming Poverty & Inequality in South Africa, World Bank, 2018, p113
I have tried to put together a bit of a mind map that aims to brainstorm how some of the above-mentioned ‘root cause’ problems may be addressed. This has been based on conversations with various friends and relatives, and on ideas found in several books (Bruce Whitfield, ‘The Upside of Down’) and YouTube videos (Vusi Thembekwayo).
I have left some root causes ‘on-ice’—government issues like corruption, and the well-known history of our country — these issues, though extremely significant, have been talked about and I wanted to focus more on things that ordinary citizens could more directly influence.
The map is, of course, by no means exhaustive.
*Note — better read on a larger screen due to the larger screen size.
Now let’s look at the entities we have available to solve this stuff, splitting people into different kinds of groups:
We can take a closer look at these root causes, and try to understand some of the modes in which they can be addressed—and muse on who may be best equipped to address them; the below is based mainly on my personal brainstorming, but the ambition is to turn this into an interactive and collaborative web app so that many people may add their views and ideas.
*Note — better read on a larger screen due to the larger screen size.
At a fiscal policy level, Colin Coleman — previously CEO for Goldman Sachs, Sub Saharan Africa — has recently outlined an action plan to pave the way for an ‘economy that works for all citizens.
The plan includes:
- Introducing a fiscally neutral basic income grant
- Introducing tax reforms to fund the basic income grant
- Waging war on the illegal economy
- Providing urgent relief to businesses
- An economic growth plan
- Assisting small, medium and micro enterprises (SMMEs)
- Unlocking infrastructure projects
- Creating an “E- Government” platform to modernise the public service
- Fixing Eskom
- Reviewing and redesigning South Africa’s industrialisation architecture
- Ending apartheid spatial planning by targeting densified, integrated urban settlements
I would highly recomend reading the article, and diving into what he has to say (Coleman, 2021).
The Silver-Splattered Road Ahead
Though we are in the middle of a gloomy time it is important to remember that South Africa has gone through worse; we are a resilient nation with a resilient people — and there have been several hopeful signs over the past year, some of which are highlighted below.
Corruption crackdown and Zuma’s reckoning
On the 29 June this year former president Jacob Zuma was sentenced to 15 months in prison for contempt of court. The news is a defining moment in our country’s democracy — sending out a clear message that even Zuma is not above the law, and South African’s constitution will be defended.
The suspension of Secretary-General Ace Magashule and the removal of Zweli Mkhize from his position as health minister are also major steps towards restoring integrity within the ANC (Buccus, 2021).
Though the guilty will not go down without a fight, the majority of the South African people are thoroughly disgusted by the scourge of corruption over the past decade; there are more of them — and they are willing to fight too.
To the left volunteers pose for a photo amidst an effort to clean up Alexandria, a township ravaged by the violence and looting that was seen across the provinces of KwaZulu-Natal and Gauteng in the June 2021.
Companies can produce up to 100MW of power now
“the government cannot have businesses disinvesting because they cannot access the power they need” — the threshold for companies to produce their own electricity without a license was recently increased one hundredfold — to 100MW.
This will decrease both pressure and reliance on the Eskom grid and hopefully have a significant positive impact on the economy long-term.
Privatization of South African Airways
Recently the state owned entity South African Airways — a major long-term drain on the country’s finances — has for a change been the subject of good news; a majority stake of 51% in the airline has been sold to a consortium of local, private firms, with the government retaining a minority.
This deal marks the first effective privatisation of a major South African entity since the sale of former phone monopoly Telkom well over two decades ago.
Education Forced Online
As is hopefully evident throughout this article, educating and upskilling South Africans is perhaps the most important action that can be taken to improve the country’s situation and fight the triple threat; a major part of this will be adopting new ways of learning through technology and online education.
The COVID-19 pandemic — though awful — has forced many institutions to accelerate the speed at which these new technologies and systems are adopted. Though we are only beginning, the foundations being built right now will have monumental impact on the country’s ability to educate more of its citizens and at a higher quality over the coming years — which will in turn catalyse job creation and cascade into positive reverberations throughout all echelons of society.
Concluding Remarks
South Africa faces a difficult road ahead, there is little doubt of that, but there are several lights that must be turned on in our minds — particularly those with the means to do something for others. We have to do more now, the private sector will need to step in swiftly, as they already are, and aid the government in retaining some measure of security and social control.
We then need to focus our efforts, particularly in providing the means for more South Africans to create businesses and gain access to the capital they need to expand them — we need people and entities that have the means to make it their personal responsibility to do this in whatever way they can, and more so than ever before.
The government, again with the help of the private sector, will need take a firm stand, as it has done of late, against corruption — all whilst beginning to piece together our education and health systems. Radical reforms will need to be made, and we will need leapfrog to and utilize any and all relevant modern technologies we can in order to enable the rapid education and upskilling of the majority of the population. The globe is on the cusp of an environmental revolution in which Africa has the potential to play a pivotal role, and South Africa is at its tipping point. But it is in this very circumstance we find our country today that there exists an enormous opportunity for renewal, growth and radical optimism.
Let’s make this a period we can all look back on with pride, and let’s turn this Rainbow Vision into a real Rainbow Nation.
“Dark and difficult times lie ahead. Soon we must all face the choice between what is right, and what is easy.” — Albus Dumbledore
References
Special thanks to friends and family including Ricky Klopper, Jacques Stander, James, Mallett, Anne Turner, Garth Turner, Petrus Swart, Ashleigh Cole, Sheldon Lansdell for their feedback and input into this article — and to Johnny Miller for the rights to use one of his shots for the cover image.
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