The Curious Case of South Africa's Income Inequality




This is a selection of countries with a Gini coefficient of 70 or above as recorded by the World Income Inequality Database. All countries happen to be African countries, with South Africa being the most recent to join the ranks of the highest income inequality in the world. All of these nations have had a significant series of political and social turbulence around the time of their entering this Club, and also all have been colonized by European nations dealing with segregation in various forms. The after shocks of colonization and apartheid are still prevalent and can be attributed as a influential factor in these record-setting high Gini coefficients.

Understanding South Africa's Income Inequality

  Economy       Policy       Education       Population    

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Country Data

The statistics on the left are the most recent data available from the CIA World Factbook and UNSD UN World Facts database. These particular data points were chosen because they closely relate to some of the factors of inequality mentioned throughout the report. While agriculture and education were a large part of SSA's equalizers, the story in South Africa is a bit different according to these data.

Qualitative Data

This is a manual parsing of qualitative data from the UNDP report chosen within the parameters of the four highlighted topics in relation to one of the three countries mentioned previously and to the selected country data. This is not an exhaustive list, but what personally helped me understand the nuances of the factors that are connected with inequality.

Country South Africa Tanzania Ethiopia Collection of Qualitative Data
Population
(in millions)		 56 54 102 "...correlation between poverty rate and population variables is positive." "These proportions are inverted when weighing for population size." "Weighing countries' Gini with their population size does not greatly change the four trends identified..."
GDP
(PPP)		 $739.2 billion $150.3 billion $177.4 billion "The poverty-reducing power of growth has become pronounced since 2007, while the inequality-reducing power of growth was highest in 2011."
GDP Composition
(Agriculture)		 2.5% 24.5% 37.2% "The predominance of agriculture in rural areas, with minimal income disparities, could be a major factor for lower inequality..." "Policies that promote investment in agricultural productivity, including research and development, and extension services could help accelerate reduction of income inequality in Tanzania."
GDP Composition
(Industry)		 29% 27.6% 21.3% "...a progressive tax system and diversification of government revenues away from the extractive sector could help to reduce inequality in the continent." "...integration of domestic and world markets and favourably affected inequality via growth."
GDP Composition
(Services)		 68.6% 47.3% 41.5% "...integration of domestic and world markets and favourably affected inequality via growth."
Labor Force
(Agriculture)		 4.6% 66.9% 72.7% "...agriculture accounts for 66.0 per cent of total employment in SSA (excluding South Africa)." "...agricultural productivity per worker tends to push labour out of the sector..." "...distress rural-urban migration will become inevitable, with the effect of raising urban inequality..."
Labor Force
(Industry)		 23.5% 6.4% 7.4% "...the mining and manufacturing sectors is an exception that accounts for a small share of the change in total inequality."
Labor Force
(Services)		 71.9% 26.6% 19.9% "...the faster growth of employment in non-tradable and high-inequality commerce, FIRE, transport and public administration as compared to low-inequality and tradable urban agriculture, manufacturing and construction." "A major contribution to rising urban inequality was the employment of household heads in commerce and 'other services'."
Unemployment Rate 26.7% 10.3% 5.3% "...Government carried out public works to pave streets and build urban housing to increase employment..." "The failure of African training institutions to refocus their activities on the poor... has been linked to rising levels of unemployment, poverty and inequality" "The poor quality of education in the three countries contributes to rising joblessness, growth of vulnerable jobs and increasing informality."
Government Consumption
(% of GDP)		 20.5% 13.9% 9.7% "'A State divided into a small number of rich and a large number of poor will always develop a government manipulated by the rich to protect amenities represented by their property.'" "As a result, near 70.0 per cent of public spending is now allocated to pro-poor sectors." "...Tanzanian urban schools are four times more likely to have electricity, water and sanitation than rural schools..."
Taxes
(% of GDP)		 26.9% 14% 15.4% "In view of these contrasting findings, it is difficult to come to a conclusion about the progressivity of indirect taxation." "A possible solution to this problem is to raise the income threshold on which personal income tax and agricultural tax are applied."

 "...deepening their direct taxation, while some are shifting from indirect to direct taxation to reduce income inequality..."
Top 10%'s
Consumption		 51.3% 29.6% 25.6% "...rising demand for skilled jobs raised consumption per capita among the top quartiles." "This is mainly due to the progressive incidence of direct taxes on corporations, high-income households and rental-income earners." "This trend is also observed for the share of the highest 10.0 per cent of the population... The growth of non-farming activities could be linked to the increase in rural consumption."
Literacy Rate 94.4% 77.9% 49.1% "...average number of years of education rose from 5.4 to 7.7..." "...household differences in educational achievements became less important..." "...the Government opened a primary school in almost every village..."