Here is the summary of this article – a government that fails to close the gap between its upper 10% citizens and the lower 10% citizen will soon find itself deploying soldiers to the streets to save its economy. The South African Economy accounted for 13.8% of Africa’s GDP in 2018. It is a service-driven economy, with tax revenue supporting the government heavily. It is one of the hot spots for tourism in the southern Africa region, has a strong mining business, an external reserve worth about US$55bn, GDP per capita of US$5,440. The South African economy is well respected among its peers.
One of the challenges bedeviling the South African economy is racism. Interestingly, this was aligned to white supremacy and the need for a black government, something Late Nelson Mandela fought for with his most of his entire youthful life. Sadly, the positive results from Late Mandela’s fight appear to be short-lived considering the previous xenophobia and the recent looting.
Data from the World Bank showed that approximately 55.5 percent (30.3 million people) of the population is living in poverty at the national upper poverty line (~ZAR 992) while a total of 13.8 million people (25 percent) are experiencing food poverty. Honestly, this is quite outrageous considering the level of economic wealth in South Africa. The puzzling part of this narrative is that although the pace of poverty slowed down from 1994 to 2010, most of the entire gain was eroded in just four years – 2011 to 2015. Besides, the Gini Index, which measures the extent of inequality was at 63 in 2014/15, putting it at one of the most unequal countries in the world.
What has fueled the poverty and inequality in South Africa is the wealth accumulation in the hands of a privileged few. The government has also not pushed for an efficient redistribution of income. One of the means to achieve this is for the government to sponsor children from poor families to go to school from primary level to graduate education. Imagine that at least one child from families in rural areas benefit from this scheme, the level of poverty and inequality would have been severely abridged. This is the main reason why developed economies have a low level of inequality – the education of their citizens.
The recent looting in South Africa is simply a reminder that the past government did not educate its rural-poor youth and adult enough to drive self-sufficiency in income generation in most rural-based families. Furthermore, weak redistribution of wealth, a small-sized middle class, and concentration of jobs and infrastructures in rural areas depict the insufficient effort and commitment of the government to maintain the past success of declining income inequality
What is the impact of this on South Africa? Business Leadership South Africa estimates that damages resulting from the looting amounted to over R5bn (~ US$270mn) for the retail industry alone. South African President Ramaphosa has stated that the impact of this looting and violence will last months and that is the reality. The outturn of violence, loss of inventories, and destruction of shopping malls among other vices constituted with the looting will leave the South African economy with the loss of foreign investment, jobs, and GDP. Considering the existing impact of COVID-19 on GDP globally, South Africa’s looting spree is fuel in the fire.
African economies like Nigeria must learn from what is happening in South Africa. A government must be genuinely interested in closing the inequality gap and this should start by providing affordable education (not necessarily a free one). The private sector and I mean the rich capitalist must also support the government in educating the citizens especially those in the rural areas; keeping their schools safe from armed bandits and exposing them to technology. Without this, the ‘forces’ of the future poor will consume the future rich class; it is only a matter of time.
Written by Michael Ogunremi