Source: Politicsweb

SA’s true inequality culprits

RW Johnson | 23 August 2021

RW Johnson says understanding the widening wealth gap since 1994 requires understanding the ANC’s project

“SA Wealth Gap Since Apartheid Says World Inequality Lab” read the headline in Time magazine (5 August 2021). The World Inequality Lab (WIL) is Thomas Piketty’s outfit in Paris which surveys inequality around the world. Because of Piketty’s great prestige its findings are treated with respect. Its researchers solemnly told us that they had examined the trends in South Africa since 1994 and “could find no evidence” that inequalities had narrowed.

Which is, of course, silly. It’s a long way from Paris to Cape Town and reading their report made you think that these researchers were even further away, examining South Africa through a telescope. For, of course, they had asked the wrong question. Anyone can see that inequalities here are not less.

After all, the more unemployment grows the bigger the group of the absolutely poor. Even if the top groups didn’t earn more, the gap between them and the bottom groups has greatly increased, so overall inequality has increased. One just needs to know that unemployment was only about 3.5 million in 1994 and is over 11.4 million today to know that inequality has certainly increased.

So the Piketty men asked the wrong question. The question is not whether inequalities in South Africa have lessened since the end of apartheid. The right question is “have inequalities increased since the end of apartheid?”

And, as one might expect it is South African researchers who have asked – and answered – this question, notably Ibsaan Bassier and Ingrid Woolard at the Southern Africa Labour and Development Research Unit (Saldru) at UCT and Aroop Chatterjee of the Southern Centre for Inequality Studies (Scis) at Wits.

For the Saldru and Scis research shows quite clearly how inequality has grown under ANC rule. Between 2003 and 2019 the real average pre-tax income of the top 10% of earners rose by 30% while that of the bottom half fell by 30% – and the real average pre-tax income of the top 1% rose by 50%.

Moreover, this trend of rising inequality got much worse after 2008. In the period 2003-2017 the incomes of the top 1% grew at an annual compound rate of 4%-5% in real terms, thus nearly doubling their real incomes by 2017. This top 1% (incomes over R800,000 p.a.) is now 37% black.

It is easy to make a political translation: the trend towards inequality got much worse in the 2008-17 period, which corresponds exactly to the years of the Zuma presidency. 2008 saw the global financial crisis which greatly increased unemployment while Zuma’s response – which so horrified the IMF – was to give huge salary increases to the already well-paid public service. What this produces at the end of the day is a Gini coefficient (which measures inequality) of 0.74, higher than I have ever seen before anywhere in the world.

The South African state believes strongly in redistribution but even when all taxes and transfers are taken into account, there is still a Gini coefficient of 0.63, the highest in the world. Moreover, the transfers to the poor consist not only of welfare grants but the health and education spending on them.

The quality of the health and education services offered to the poor is utterly lousy so counting redistribution in that way greatly exaggerates the benefit received by the poor. And when one counts all the taxes paid by the poor one finds they are actually funding almost all that redistribution themselves. Given the dreadful quality of the services they receive, it seems likely that if they had a choice it might be for less tax and fewer “services”.  

The result of all this is that the poorest 50% of society is absolutely worse off now than they were in 1994. an awesome finding when one considers that there has been considerable economic growth since 1994 and when one remembers the repeated promise of “a better life for all”.

Measuring inequality between racial groups is difficult. To say, for example, that black people are paid less than whites in such-and-such a company is meaningless unless one takes into account job descriptions, qualifications, work experience, length of service and various other factors.

Similarly, the finding that overall income inequality between white and black has gone from 7:1 in 1994 to 4:1 now really needs to be adjusted in light of all those factors. Nonetheless, the virtual halving of gross racial income inequalities is very striking. One of the biggest changes is that whereas all the top 10% of earners were once white, now there are more blacks than whites in the top 10%.

This, then, gives us a very clear snapshot of what a generation of “liberation” has done to the social structure. The top 1% have done better than anyone else, partly because they have been able to benefit from large investment gains. They have benefited considerably from their ability to deploy capital internationally. 37% of these very wealthy people are now black – the beneficiaries of BEE and highly paid employment in SOEs.

The top 10%, who are mainly black, have also done very nicely indeed. The biggest single group of them are public servants. Liberation has seen the number of public service workers greatly expanded and their salaries have soared. If you express their salaries as a share of GDP you find that on that basis they are much better paid than public servants in the US, Norway or Japan, the world’s wealthiest countries, a fact which scandalizes the IMF.

Below that come many people who are “just getting by”. Just as there has been a spectacular diversion of resources towards blacks in the top 10% (and especially the top 1%), so there has been a considerable diversion of resources away from much of the old white middle and lower-middle classes, mainly as a result of much higher taxation together with the imposition of new job reservation practices which discriminate against whites. Partly as a result nearly a quarter of the white population has emigrated, greatly shrinking the tax base, though of course the new black middle class pays taxes too.

Beneath that the bottom 50% of society is absolutely worse off, mainly due to the mountainous unemployment figures. Despite all the leftist rhetoric, the red T-shirts and the assertion that the NDR is preparing the way to socialism, there has been a spectacular betrayal of the poor. Inequalities worsened most under the Zuma government, with its record number of SACP ministers. Zuma and his ilk became fabulously rich while the jobless numbers soared.

Indeed, the country’s four richest black people are Zuma, Ramaphosa, his brother in law, Patrice Motsepe and his sister, Bridget. Thus whichever ANC faction is in power we are ruled by a tiny group of the super-rich. A glance at the rest of Africa shows that this is what African nationalism is all about. The joke is really on the SACP activists who laboured to produce this result.

There is great anger in the townships because the process of “liberation” has been a betrayal. Much of our politics is about attempts to re-direct that anger so that it targets whites, Indian or Somali merchants, Coloureds, foreigners or abstract forces like colonialism. But follow the money, not the rhetoric.

This betrayal is the work not of these targeted groups but of the new black ruling class. This is why so much energy goes into hunting down suspected instances of “white racism” or Indian vigilantism or toppling the statue of Rhodes. These are all diversionary gambits, as are the attempts to blame apartheid for our present inequalities.

For let the truth be told: the huge enrichment of the new black ruling class at the expense of the poor has been the ANC’s great project. Ignore all the slogans and just look at the figures.

R.W. Johnson