Enduring Income Inequality in South Africa

With the end of Apartheid and the signing of the 1993 Interim Constitution, South Africa established universal adult suffrage, entitling all South Africans to full citizenship and all its attendant protections (at least nominally).The oppression of non-white populations in the Apartheid era, both de jure and de facto, would find no place in the country under the new constitution. At least politically, black, colored, and Asian South Africans are able to exercise the same political rights as their white countrymen. And with incorporation into political life, the expanded representative opportunity would have also presumably spread economic opportunity to citizens previously held in classes below. The government’s extension of “adequate housing” and education to every South African, codified in the Bill of Rights of the 1997 Constitution, proves that newfound commitment. In a country that is now a representative democracy and 8.2% white, white consolidation of political power would be unfeasible.


Voting in South Africa still falls largely along racial lines, with the majority of white and a sizeable number of colored voters, those South Africans of mixed white, African, and Asian descent, voting for the Democratic Alliance, the largest opposition party. The black vote, meanwhile, is splint among many groups, but the African National Congress (ANC) has long garnered a majority of it.


The other question, though, and the pertinent one to a country still grappling with Apartheid’s political legacies, is the question of distribution of power.


Government spending has reflected the changes in an eligible electorate and the representatives they have tapped. In the 1970s, for example, the Apartheid South African government spent nine times as much on whites than on blacks. Although proportionate government spending on all South Africans in the 1970s would not have changed the imbalance in earnings across ethnicity, being that the government elsewhere was very much committed to maintaining the dominant economic, cultural, and political profile (and instrumental to its occasioning in the first place), but the disproportionate spending then is still helpful in considering government spending today. Today, the South African government spends two times as much on blacks than on whites. Surely, this would seem to ameliorate the poverty that black, colored, and Asian South Africans have been saddled with due to their traditional socioeconomic position. The income levels of different South Africans largely falls along racial lines too. On average, whites earn annually about 1.5 times the level of Asians and 5 times the level of blacks. In 1993, whites earned annually about 2.5 times the level of Asians and nearly 7 times the level of blacks.


The degree of income inequality reported in 2016, a Gini coefficient of 0.66, is the same as when the Parliament of South Africa adopted the 1993 Interim Constitution. The Gini Coefficient (GC) measures inequality by comparing the income or wealth distribution of a nation to a model nation with equal distribution. On a scale of 0 (absolute equality) to 1 (absolute inequality), the GC is useful as an indicator but does not capture the whole story. Some countries report their GCs based on pre-tax earnings that reveal more inequality, while others report their GCs based on post-tax reportings that reveal less inequality as earnings are redistributed to poorer populations. Ninety percent of the income inequality in South Africa, however, can be attributed to earnings, according to a 2016 report commissioned by the government on the status of wage earners in South Africa. Further, the income inequality that exists because of institutional forces that have conditioned economic patterns among different groups of people has declined in the post-Apartheid era. With the increased political representation of nonwhite South Africans and increased government spending on nonwhite South Africans, South Africa has reduced the wide chasm between different racial groups in income. A 2010 study concluded that “whereas 61% of inequality in the AMPS data could in 1993 still be ascribed to inequality between groups, that proportion has now dwindled to 35%.”


What may be perplexing, then, is that income inequality has remained rather constant over twenty years after Apartheid ended. The same 2010 study speculated that “new opportunities for parts of the black population, previously constrained by apartheid-era policies, stimulated black upward mobility, while the removal of the protection earlier offered to the white population may have caused some downward mobility in parts of this group.” In other words, the income gap between racial groups has widened and between racial groups has declined. The overall inequality has remained the same, though, but not necessarily because the within and between group inequalities offset each other.


In 2012, South African President Jacob Zuma said in a speech that “the economic power relations of the apartheid era have remained intact” and that “the ownership of the economy is still primarily in the hands of white males as it always has been.” Zimbabwean dictator Robert Mugabe recently excoriated Zuma’s party, the ANC, for not restructuring the economy after Apartheid to benefit nonwhites, lamenting,“must we continue to depend on whites to set up the companies?” (Mugabe has seized land from white farmers and businesses from white owners during his thirty-seven year reign to purportedly redistribute those assets to black Zimbabweans. The economy, nevertheless, is still immiserated.) A 1993 study called for the breakup of the South African conglomerates owned by whites (including the banks), the formation of government ministries to stimulate small black-owned enterprises, and the formulation of affirmative action for nonwhites.All of these policies have been implemented, and yet income inequality remains at the same level.

Structurally, the economy in South Africa is not all too different from 1993. The prevailing income level disparities between racial groups and the overall Gini Coefficient indicate that much, but the economic concentration in South Africa proves that structural persistence. In 1996, for example, the control of the banking industry by South Africa’s four top banks was 81.85%. In 2015, that top-four bank concentration was 78.07%. As of 2015, five banks operating in South Africa owned 98.89% of all commercial assets. In 1996, that commercial asset ownership was 89.65%. (In the US asset ownership by the five top banks was 46.53% in 2015.) Even as affirmative action programs and increased government spending on nonwhite South Africans have opened up opportunities to new demographics, helped raise income levels, and the standard of living for many South Africans, the South African economy has changed very little. It presents people aiming to participate in it with structurally old opportunities. And so the income inequality has endured.  

Levi Mikel