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South Africa’s most disturbing problem

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South Africa’s most disturbing problem

27th May 2011

By: Terence Creamer
Creamer Media Editor

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South Africa’s successful municipal elections last week provided yet more evidence that, when this country applies its mind, time and energy to an issue, almost any obstacle is surmountable. It was a timely confidence booster as memories of our 2010 FIFA World Cup successes fade.

Still, there is also no doubting that South Africa is singular in its contradictions.

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The country has incredible natural beauty, yet it is also one of the world’s most carbon intensive. It has nearly unsurpassed mineral riches and a relatively high commodity consciousness, yet it was entirely unprepared for the precrisis resources boom. It has unemploy- ment of above 25%, yet it’s labour unions remain an incredibly powerful industrial relations and political force. It spends a good deal of its fiscal resources on education, but seems incapable of dealing with its serious skills backlogs.

The greatest and most worrying of South Africa’s contradictions, however, relates to the issue of inequality and the vast differences in income distribution between South Africa’s poorest 40% and its richest 10%.

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No matter how the issue is measured, South Africa, along with some of its mineral-rich neighbours, leads the global inequality race – the one race all countries hope to lose.

A recent piece of work by Professor Gabriel Palma, a senior lecturer at Cambridge University’s economics faculty, offers new, and yet more disturbing, insights into the problem.

Palma shows that inequality in South Africa is not only incredibly high, but also stubbornly resilient against the global tendency for inequality to reduce as a country’s wealth expands. It is a statistical outlier, together with a handful of other Latin American and Southern African countries.

During a recent visited to South Africa, Palma explained that 80% of the world’s population now lives in regions whose median country has a Gini Coefficient (the key measure of the inequality) close to 40, where 0 is full equality and 100 is absolute inequality. But the country’s score of around 60 places it among the most unequal of the 135 countries studied – Namibia is worse at around 70,7.

Efforts to tackle the crisis, which is fuelled by persistently high levels of joblessness, have thus far proved ineffective. South Africa was also almost unique in showing that its middle class – or the 50% in between the desperately poor and the super wealthy – have been unable to “defend” its relative share of national income.

To truly deal with this scourge, South Africa will have to accept, as dismal as it may be, that its inequality and income distribution ratios are worsening. Palma argues that in his sample of 135 countries, only the poor in Namibia, Angola, Bolivia, Colombia and Haiti fare worse.

The country will then have to focus on discovering why it has been unable to reverse the trend and set in motion a set of active and measurable policies to redress a problem that, left unchecked, will eventually unravel all other gains made since 1994.

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