Two recent reports have highlighted the scale of income disparity in South Africa and its relationship to ethnicity.
Most visitors to South Africa will be aware of the stark contrast between huge mansions with well-tended gardens adjacent to informal settlements where people live in ramshackle homes. The former are mainly lived in by white people and the latter overwhelmingly by their black counterparts.
On 16 January, Oxfam published its An Economy for the 99 percent report, in which it provided the staggering statistic that the wealth of South Africa’s three richest men is greater than that of the poorest 50% of the entire population. In addition, it calculated that the richest 1% of the population holds 42% of total wealth and that 60% of South Africans in employment earn less than R5,000 a month after tax.
Oxfam SA executive director Sipho Mthathi said: “Such inequality is the sign of a broken economy, from global to local, and the lack of will from the government to change the status quo…They can build an economy where businesses pay their taxes and contribute to the wider good, where everyone is able to be healthy and educated and where poverty wages are a thing of the past.”
More recently, figures published by Statistics South Africa revealed that while the national average household income in 2015 was R138,168, this masked huge variations based on ethnicity. Most strikingly, black South Africans earned an average of just R92,893 ($6,875) over the year, in comparison with R444,446 ($32,895) for their white counterparts.
White people account for just over 8% of the population and black people 80%. Ethnic Indian South Africans earned an average of R271,621 and mixed race people – known as coloured in South Africa – R172,765 in 2015. There is also a huge disparity in income according to gender: men earn almost twice as much as women.
Sizwe Pamla, the spokesperson for the Congress of South African Trade Unions (Cosatu), said that current wages are the result of “an Apartheid-inherited labour market system deliberately designed to exploit black people, and structured to ensure low wages for blacks”.
Since the end of Apartheid in 1994, the government has attempted to address some of the social and economic imbalances that divide the nation. Black economic empowerment policies require companies to employ a minimum proportion of non-white South Africans in particular positions, as well as ensuring that procurement strategies incorporate suppliers that are mainly owned by black South Africans.
However, Pretoria has also been concerned about ‘white flight’, provoking the emigration of the richer, better educated part of the population, which is mainly white. It has therefore not pushed particularly hard to erode income disparity, annoying many on the left wing of the African National Congress (ANC).
At the same time, many white people continue to complain about positive discrimination, criticising efforts by companies ‘to get their numbers right’; that is, ensuring that a minimum proportion of jobs or interviews are given to non-white South Africans, women or disabled people. On an individual basis, rejection must be disappointing but given the horrors of the past, those rejected should understand the validity of such strategies.
The imbalances in wealth and wages between rich and poor, white and black, and men and women have helped fuel demands for a minimum wage in South Africa. In November, deputy president Cyril Ramaphosa announced that the government’s ‘suggested’ level for the minimum wage to be introduced by July 2019 was R3,500 a month, or R20 an hour, similar to the minimum wage in Turkey, which has comparable GDP per capita.
Critics argue that the introduction of a minimum wage – and its impact on employment costs – will discourage companies from taking on new semi-skilled and low-skilled workers. The official unemployment rate is 27% but some people are not included in the figures and there is also a great deal of underemployment and informal work.
The introduction of minimum wages has helped to close the gap between the rich and poor in other parts of the world, including in Brazil during the first decade of the new millennium. Minimum wages are also common in many parts of Western Europe.
Finance minister Pravin Gordhan is considering raising taxes for high earners in his February budget, while a temporary levy on the wealthy is also being weighed up. Professor Imraan Valodia, the dean of the Commerce, Law and Management Department at Wits University, commented: “We should be very concerned about inequality. Given our history and the fact that we are considered to be among the most unequal societies in the world, significant growth in wealth disparities will undermine the social and economic fabric of our society.”