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Entrenched inequality threatens SA's future

Nickolaus Bauer

South Africa has largely failed to provide equal opportunities to all citizens since the advent of democracy in 1994.

The report argued South Africa must tackle economic inequality in order to create jobs and bring down unemployment statistics. (Gallo)

A report released by the World Bank on Tuesday said although great strides had been made in providing basic education and sanitation, this did not equate to a level playing field for everyone.

"This inequality of opportunity, particularly in the labour market, is the highest for the youngest age group," Ambar Narayan, World Bank lead economist on poverty reduction told reporters in Johannesburg at the release of the South Africa Economic Update: Inequality of Opportunity report.

The report argued that South Africa must tackle economic inequality in order to create jobs and bring down unemployment statistics.

South Africa is one of the most unequal countries in the world, with a Gini coefficient of 0.7 in 2008, the bank noted.

The Gini coefficient is an internationally used measure of income inequality.

Comparing the realities of three young South Africans, in a manner similar to that used in Trevor Manuel's diagnostic report – the National Development Plan – the World Bank claimed South Africa had an entrenched "inequality of opportunity" that threatened its immediate future.

Education barriers
Of the three young South Africans mentioned in the report, Thandiwe and Nothando were from an urban township and rural village respectively and both hailed from households headed by a single parent with no education.

Andries on the other hand, lived in the suburbs in a household run by an individual with a secondary education.

The report found that while the trio had more or less the same opportunities in attending school up to the age of 15, their opportunities later in life differed significantly.

"Our results show that a South African child not only has to work harder to overcome the disadvantages at birth due to circumstances, but having done so, finds these re-emerge when seeking employment later in life," Sandeep Mahajan, World Bank task team leader for the report, said.

According to the report, Andries on average, will receive better access to electricity, primary and secondary education and sanitation than Thandiwe and Nothando – having drastic effects on their long term development and chances of future growth.

"South Africa's weak performance on providing employment opportunities is hampered not by slow job creation but also by a highly unequal access to the limited number of opportunities. Global comparisons show South Africa to be an outlier in terms of both the level and inequality of employment opportunities," the report reads.

Opportunity inequality 
But Mahajan was quick to explain that the gap in opportunities afforded to the three should not be solely equated with their difference in race.

"Among circumstances of opportunity inequality, location matters most across the board, followed by ethnicity and then gender," he said.

The report offered no immediate solutions to the disparity described, only to say that inclusive growth would go towards addressing some of the ingrained inequality.

"South Africa can only achieve a higher and sustained growth rate inclusively, by utilising the skills left idle through the unemployment of a lot of the population," Mahajan said.

The report also had grim news for South Africa's immediate economic prospects.

The World Bank revised South Africa's growth projection for 2012 down to 2.5% from 3.1% – mainly due to economic stagnation in the eurozone which has seen slowed growth, sparking predictions of a further recession in the debt-stricken region.

"South Africa is highly integrated with the global economy and is therefore susceptible to the ongoing slowdown in Europe and to a lesser extent China, the principal destinations for its goods and services," Asad Aslam, World Bank director for South Africa, said.

Creating employment
The top 10% of the population accounted for 58% of South Africa's income, the bank said.

The bottom 10% accounted for just 0.5% of income, and the bottom 50% less than 8%, said the bank.

"At the heart of high inequality lies the inability to create employment opportunities on a large enough scale," said the report.

Unemployment of 25.2% (or 33% if discouraged workers were included) was among the world's highest.

Social grants made up 70% of the income of the poorest 20% of South Africans.

If these grants were excluded, 40% of South Africans would have seen their income decline in the first decade after apartheid.

"Even after accounting for the equalising role of social assistance, income inequality remains extraordinarily high," said the bank.

"To reduce it to more reasonable levels over the long run, social assistance is clearly not enough and needs to be complemented by other initiatives."

South Africa should focus on human capital development, particularly among children and youth, according to the report. – Additional reporting by Sapa


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