A World Bank report has re-ranked South Africa as the most unequal society in the World Bank’s global poverty database.
Ranked number one out of 164 countries and the largest South African Customs Union (SACU) country, the report found that inequality more than doubles when race is factored in as a contributor to inequality.
“At least one-fifth of the inequality in SACU is explained by hereditary conditions such as location, sex, age, parental background, and when race is included in the analysis, the contribution of opportunity inequality more than doubles,” the report said.
Unequal land ownership perpetuates generational poverty
In Namibia and South Africa, where inequality is clearly higher than in the rest of the countries, strong inequality in land tenure also contributes to perpetuating historically high income inequality.
†This report shows that a lack of access to key productive assets such as skills and land is slowing progress towards a more equitable income distribution.” said World Bank Practice Manager of the Poverty and Equity Global Practice for Eastern and Southern Africa Pierella Paci.
High wealth inequality limits economic mobility between generations, causing consumption inequality to persist over time.
In the labor market, having post-secondary or tertiary education is key to both accessing jobs and getting better wages once employed.
†Improvement access and availability of private sector jobs and access to productive assets such as land will help create equal opportunities,” Paci added.
South Africa and Namibia are the most unequal African countries
The report entitled ‘Inequality in Southern Africa: An Assessment of South Africa’s Customs Union‘, examined the process of household income generation to identify the sources of inequality.
It notes that the Member States of Botswana, Eswatini, Lesotho, Namibia and South Africa represent the most unequal region in the world.
While there are differences between countries, Namibia and South Africa clearly have greater inequality than the rest, with Lesotho having the least among them.
Consumption inequality is more than 40% higher than the averages for both Sub-Saharan Africa and the upper middle-income countries.
Botswana, Eswatini and Namibia are among the 15 most unequal countries, and despite recent improvements, Lesotho still ranks in the top 20% of the report.
“We know from this report that hereditary conditions over which individuals have little or no control contribute to overall inequality,” said Marie Francoise Marie-Nelly, World Bank Country Director for Botswana, Eswatini, Lesotho, Namibia and South Africa. .†
“Despite SACU countries incurring some of the most redistributive spending in the world, particularly in the areas of education and health, inequality remains extremely high,” adds Marie-Nelly†
Leveling the playing field at birth through more inclusive delivery of quality education, health care and basic services is critical to reducing inequality in the region.
Equality happens with corrective policy making
The report recommends promoting policies that promote equality in opportunity and address the highly skewed distribution of productive assets.
These are critical to reducing persistently high inequalities in the five SACU countries.
The report also proposes increasing the capacity to respond to mounting climate and economic shocks, which typically hit the poor more severely.
“In South Africa, the pandemic and ensuing lockdowns could lead to an increase in poverty of 4.8 percentage points, and per capita consumption could fall by as much as 10%,” the report said.
But the report shows that the presidency’s social protection package can absorb two-thirds of this impact, protecting 1.8 million people from poverty.
The government has announced several social security schemes, simulated in this analysis.
The simulations include:
- Unemployment benefits for three months to replace wage income for those who lost their jobs during the pandemic, with a minimum benefit of R 3,500 per month and a maximum of R 6,730 per month.
- Grant of supplements of R250 for disability benefits and state pensions, for the duration of the lockdown, as well as supplements of child benefits of R300 for one month and R500 for the rest of the lockdown.
- Emergency social assistance grants of R350 per month for those who have lost their jobs as a result of the pandemic but have not received any of the benefits described above.