How much South Africa’s richest 0.1% owns

South Africa has the worst income inequality in the world, with the disparity between the top and bottom earners widening since the end of apartheid.

According to Imraan Valodia, the Director of the Southern Centre for Inequality Studies at Wits, when looking at wealth in the country, the top 0.01% of people – just 3,500 individuals – own about 15% of all of the wealth in South Africa.

The top 0.1% own 25% of the wealth, he said.

Although the end of apartheid brought with it participation equality as the majority of South Africans were allowed to vote, income equality is a challenge that democratic-era South Africa has continued to struggle with.

The problem is so bad that South Africa has the highest Gini coefficient in the world, a statistical measure that gauges how income is distributed across a population.

It takes values between 0 and 1, with 0 indicating perfect equality, while a coefficient of 1 indicates perfect inequality.

According to the World Bank’s Gini Index, the Slovak Republic is the most equal society globally, with a score of 0.29.

South Africa is on the other end of the scale, with a Gini Coefficient of 0.67.

Although still high, South Africa’s Gini Coefficient was at 0.59 in 1993.

Generally, European nations, including the Nordics and Baltic states, tend to have the most equal societies, while Southern African nations are at the other end of the scale.

However, it should be noted that other countries where data is not readily available may have higher inequality than South Africa. Hence, South Africa may be the most unequal country amongst those with accurate data.

Causes

Valodia said a major driver of inequality is the fact that large numbers of South Africans are unemployed or report very low incomes.

According to Stats SA’s latest Quarterly Labour Force Survey, the unemployment rate in South Africa increased to 32.9%, with over 8 million people unemployed.

Valodia also noted that incomes at the top end of the income distribution are very high. Data show that the richest 10% of households are responsible for 52% of all expenditures. On the other end of the scale, the poorest 10% of households contribute only 0.8% of all expenditures.

He added that despite its criticisms, the Employment Equity Act has successfully addressed some of South Africa’s patterns of inequality.

“However, not enough has been done – race-based inequality is still a real problem. In general, high-income South African households, irrespective of race, have done well over the last three decades, which is why inequality has remained stubbornly high,” the expert said.

It could be worse

Moreover, measuring inequality in South Africa based on wealth instead of income creates an even worse picture. Wealth includes inheritance, earnings from assets, and others.

“Some striking statistics are that the top 0.01% of people – just 3,500 individuals – own about 15% of all of the wealth in South Africa. The top 0.1% own 25% of the wealth.”

“The net wealth of the top 1% is R17.8 million (about $944,000). In contrast, the bottom 50% have a negative wealth position (have more liabilities than they do assets) of R16,000 (around $850).”

Solutions

He added that no single problem will address the issue. He said that it is incorrect to argue that employment is not growing because of labour protections, stating that it ignores the nuance of the country’s political and economic situation.

“I think we should rather be thinking about how to direct the benefits of economic growth and redistribution policies to benefit those at the bottom end.”

“This could involve, for example, raising incomes at the bottom, creating new opportunities and employment for those who don’t have them, and ensuring that the benefits of growth do not disproportionately benefit those at the top end of the income distribution.”

With input from The Conversation.

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