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Inequality: the massive elephant in the Room

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Picture: Supplied – People are still going to struggle because the national minimum wage is not enough to solve debt and poverty. While there was only a slight increase of R10.91 (0.2 percent), making the average cost of a household basket R4,928.34 for February.

By Isobel Frye

With the steady tread of our collective national march towards the very dark and cold reality of our loadshed winter, we are witnessing a number of former leaders in South Africa emerging with scathing comments about the dearth of political leadership in the country today.

The criticisms that have received the most media attention recently are those from former leaders from within the ruling party, the African National Congress. Are we witnessing the perhaps inevitable fall of the broad church of the Congress movement in all its glory, all its innocence and tragic hubris?

Make no mistake, there are grounds aplenty for criticism of the national leadership. The failure of the stewardship of the national electricity grid has been predicted since before the 2008 global financial crisis. The degree of culpability for the destruction of the national water and solid waste management systems across the country from metros to ghost towns in a water scarce country many would argue has long ago crossed from negligence to unlawful actus reus. The sordidness of this malfeasance appears at times to be even greater than the sanctity of liberation. Current ineffectiveness seems to accord with T S Eliot’s description in The Hollow Men of “Shape without form, shade without colour, Paralysed force, gesture without motion;”.

But it does seem unfair to ascribe all culpability for the failings of government and policy to the current incumbents of high office, when in reality a much larger elephant in the darkening room is the deepening level of inequality in South Africa. And this state of affairs has existed since before democracy, and it has the potential to lead to highly destructive violence unless concrete and visible actions are taken without delay.

Perhaps we have become inured to talking about the triple challenges that face South Africa of inequality, poverty and unemployment. Perhaps the structural complexities of the mutually reinforcing dynamics between these three social ills appear too entrenched for us to honestly believe that amelioration is possible.

Perhaps we fear that the whole edifice will topple, Jenga-style, and so we live in denial, and we seek relief through the regular selection from a variety of possibilities, our scape goats for the ills of our society.

But we have known for many years that inequality is a scourge in South Africa, and in recent years we have seen an increasing volume of respected reports that demonstrate how this inequality continues to deepen and grow.

And yet there is no call even for a commission of enquiry, let alone an effective policy response equal to the magnitude of the destructive force of inequality to the future of this democratic project. And having read some of the submissions of the incumbent party and opposition leaders around the 2023 February SONA and Budget speeches, inequality is not high on the agenda for the change in the coming provincial and national elections either.

The policy prescriptions are known, and we have the benefit of the lessons of other countries who have been faced with similar challenges and made their own choices. The Tunisian denial of the impact of inequality led to a revolution. Brazil’s adoption of unapologetic interventionalist policies that included a national minimum wage and the introduction of an almost universal cash transfer programme and zero hunger policies under President Lula’s PT party from 2002 transformed the face of a much large country that faced similar inequality trends to South Africa in 2002.

What do we know about inequality in South Africa?

The Gini coefficient is one the of the best-known measures of inequality internationally. A measure of 1 represents a society in which one person owns everything. A measure of zero represents a situation of collective ownership for all.

While unemployment is an obvious driver of poverty, wage inequality, or the ‘wage gap’ between highest and lowest income earners is one of the greatest drivers of inequality in South Africa.

In a 2023 global comparative report on income inequality, South Africa ranked 0.63. The US, a country renowned for its inequality ranked 0,33. Sweden ranked 0,29 and Brazil ranked 0,53.

The findings on the extent and impact of wage income inequality were widely published in a 2010 OECD report on South Africa. Regular release of data showed the growing bifurcation of wage incomes by academics, by Statistics South Africa’s 2019 Inequality Trends report and regular World Bank reports, and yet not even the obvious tool of fiscal policy has been used to reverse this trend.

And even more worrying in South Africa is the silence over the growth of wealth inequality. The shroud of secrecy over who has owned what for decades is virtually unchallenged. A 2018 Oxfam international report on inequality stated the obvious: the relationship between wealth and income is fundamental to inequality. Today’s income inequality becomes tomorrow’s wealth inequality, which deepens income inequality.

According to the 2019 StatsSA Inequality Trends report, while the richest 10 percent of the population has a 56 percent to 58 percent share of income, they have approximately 95 percent of all wealth. Furthermore, in South Africa, for the top 1 percent of the population incomes from shares, profit and capital gains represent almost 50 percent of their total income and that one of the key drivers of South Africa’s income inequality is the higher growth rate of capital income compared to labour income. Over the same period the economy grew by 4 percent, income from capital grew by between 10 and 20 percent for the top 5 percent of the population.

And of course, these patterns are highly skewed by race and gender. Legacies of the past that continue to shape not only our current existence but our futures, as we prevaricate and do nothing.

Exogenous shocks will shake the foundations of any society or economy. Global pandemics, climate destruction, the fallout of a war that is not our own or being caught up in the wake of international terror financing routes – these are beyond our control. What we do have to take responsibility for however is an assessment of how sturdy the foundations of our society are. When in good times we will not commit to dismantling the rotten core of inequality, we should fear the destruction that will come with the next apparently random event. We need to tackle the horrific impact of inequality in South Africa with courage and decisiveness.

While we cannot change everything overnight, what many have called for is the policy of a universal basic income grant. As the introduction of the Covid-19 grant showed, this is something that could be rolled out immediately. No one ever will ever go to bed in South Africa not knowing if they will have enough food tomorrow- the successful outcome of two of Brazil’s successful inequality interventions.

Research has shown that it would have an immediate impact on meeting basic needs and shock priming a rejuvenation of the economy even in the current energy- hungry times. It has also been demonstrated to be affordable if introduced at a decent level if its introduction comes with the adoption of much- needed reforms of the restrictive goals of South Africa’s failing macro- economic policies.

A decent universal basic income grant is no silver bullet, but it might just buy some time while we dismantle the more stubborn architecture of generations of elite capture.

For Eliot’s Hollow Men, the inevitable end came: “This is the way the world ends … Not with a bang, but a whimper”.

The choice is ours.

Isobel Frye is Executive Director of the Social Policy Initative