Inequality: The Achilles Heel of South Africa

Habib-Adam_001South Africa in 2014 is a far better place than it was in 1994. It is truly nonsensical to even debate this. The democratisation of our political system, the deracialisation of our public sphere, the enormous access in education and health provided to so many, the social support grants disbursed to the poorest third of our citizenry, overwhelms even the gross corruption of Nkandla, the service delivery failures of our municipalities, and the tragedies of Marikane. No sane person who lived through apartheid, at least one who is committed to humanist values, can truly argue that apartheid was a better political system.

But having bettered apartheid’s outcomes must not make the political leadership of contemporary South Africa complacent. After all exceeding the performance of the leadership of a political system described as a ‘crime against humanity’ cannot in itself be viewed as a great feat. Moreover, the political polarisation of our society in recent years, the violent service delivery protests and labour strikes, and the police reactions that it has provoked, threaten the political inclusion and democracy bequeathed by the grand compromise of 1994.

The source of the cycle of violence and polarisation is of course the levels of inequality in our society. South Africa achieved economic growth in 19 of the last 20 years, even if it was at a level far lower than we would have preferred. We have also brought down poverty levels in this period. But we simultaneously increased inequality every single year for the last 20 years. And in the midst of this democratisation, we increased our Gini Coefficient and overtook Brazil to become the most unequal society in the world. This is the badge of shame that some of our political leadership need to bear. And it is this scourge of inequality that is the source of the political polarisation in our society, and the cycle of violence that it has begun to breed.

Ironically, our political leadership followed the advice of mainstream democratic theorists who counselled in the 1990s that we should focus on elections and political inclusion and indefinitely postpone any pursuit of social justice, lest the democratisation itself be derailed. This political decision legitimised the tragic pursuance of conservative economic policies that led to the increase in economic inequalities. And it is precisely these very economic inequalities that are perpetuating the polarisation and cycle of violence that is now compromising the very political inclusion its postponement was meant to enable.

The lesson to be learnt from this tragic case is that postponing social justice only temporarily facilitates the democratisation of a society. If this political inclusion and democratisation is to be made sustainable, social justice itself has to be pursued as an independent goal in its own right. This means that if we are to avoid the possibility of an African spring, it is absolutely essential that we address the gross inequalities within our society. But is this necessity sufficiently recognised among our political and economic elites?

I believe not. Two powerful sets of stakeholders – corporate leaders and some in the political elite – are not sufficiently appreciative of the challenge in this regard. The executives in the corporate sector, and in particular the private sector economists that tend to serve them, assume that with economic growth, inequality with automatically stabilize and subsequently erode. But these stakeholders would do well to reflect on a recent article in the New York Times (12 March 2014) which reviews Thomas Piketty’s newly published study entitled Capital in the Twenty-First Century which explicitly demonstrates that inequality will grow across the world unless there is an explicit political attempt to counter this economic trend. Piketty himself in a commentary in the Financial Times (29/30 March 2014) recommends “a global progressive tax on individual net worth … so as to put global wealth dynamics under public scrutiny”.

The political elite, on the other hand, recognises the threat that inequality poses, but cannot muster the political will to do anything about it. Perhaps this is best demonstrated by the National Development Plan which has rallied support across the political divide, other than of course from NUMSA and some in COSATU. There is much that is of merit in the National Development Plan, especially with regards to the recommendations on addressing the challenges in Education and Health. But the Plan’s economic chapter has essentially ducked the fundamental question of our time. It assumes that by addressing poverty, we will automatically reduce inequality. It therefore proposes to expand livelihood opportunities at the lower end of society through a series of reforms: a new industrialisation plan targeting employment, expanding educational opportunities, and financing new entrepreneurs. These are important recommendations that will grow the economy, expand employment opportunities and address poverty. But they will not address inequality.

The essential problem is that even if we get livelihoods growing at the bottom end of society through unemployment, financial support for new entrepreneurs and the like, the incomes of those at the upper end of society is likely to grow even faster. This is because the rich have assets – property, stocks, bonds – and it is these assets, which the poorer do not have, which will ensure that the incomes of the rich will grow faster. The net effect is that even if poverty erodes, inequality will grow faster. This is essentially what happened in South Africa, Russia, India and China in the last 20 years. And it is the fundamental challenge of our time.

The only way economic inequalities can be addressed is if the expansion of livelihood opportunities at the base of society is coupled with either containing the enrichment at the top of society, or ensuring that the bottom grows faster than the top. The former can be done through caps on remuneration at the top end of the corporate sector and tax transfers as was done in Western Europe after the second World War, or in the United States prior to the first World War. The latter – growing the bottom faster than the top – was done in Brazil most recently through using the development finance institutions to finance small companies in the informal economy and to thereby shift them and their operations into the formal sector.

None of these strategies have been tried in South Africa. Neither are they being proposed in the National Development Plan. Instead we continue with a narrow Black Economic Empowerment program – even though we attach the suffix ‘broad’ to it. Our Black Economic Empowerment Program is essentially about enriching political elites and a narrow band of politically connected black entrepreneurs. Its net effect is thus to increase economic inequalities in our society, the very outcome that the National Development Plan claims it wants to prevent.

The Plan’s failure in this regard is perhaps the best demonstration of the lack of political will to address the inequalities within our midst. I recognise the difficulty of convincing the powerful stakeholders within the corporate sector and in the party about making sacrifices in the struggle against inequality. But if this is not done, then we truly risk a perpetuation of the political polarization, the cycle of violence, and ultimately the emergence of an African spring. If our economic and political elites, however, are prepared to make some sacrifices, then, while their enrichment may be tempered in the short term, their wealth and privileges will become more sustainable in South Africa in the medium to long term. This is essentially the choice that confronts them.

I can do no better in concluding these reflections on our recent past and current challenges than by quoting Pope Francis whose words have recently inspired so many across the world. In his Evangelii Gaudium (Joy of the Gospel), this Man of God argues that “as long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of the markets … and by attacking the structural causes of inequality, no solution will be found for the world’s problems…” He goes on to “beg the Lord to grant us more politicians (and corporate leaders) who are genuinely disturbed by the state of society, the people, the lives of the poor”.

I am told that the Ministers in the cabinet have been recently provided with the Pope’s text. Have they read it, and are they willing to heed his words? Are we all willing to do so? Do we have the political will to make this sacrifice he asks of us? Do we have the courage to demand of the rich the same sacrifices that we demand every day from the poor? These are questions that need to be posed to both Jacob Zuma and Helen Zille, Nicky Oppenheimer and Patrice Motsepe, Mark Cutifani and Joseph Mathunjwa, and even Sdumo Dlamini and Zwelinzima Vavi.  These are questions that need to be posed to every one of us.

Professor Adam Habib is Vice-Chancellor and Principal of the University of the Witwatersrand. An edited version of this piece was published in the Sunday Times on 27 April 2014. Read the article here: Sunday Times 27.04.14.

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