Literture review on Wicked Problem of INEQUALITY in South Africa

The Wicked Problem of Inequality in South Africa
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Abstract
Inequality has been a major issue in South Africa since the days of Apartheid. The problem is still there and does not seem like it is about to go away anytime soon. Some of the solutions to the issue that have been suggested in the past only lead to new challenges. In fact, there seems to be no reasonable solution that will not result in other problems. This research discusses the various elements of the society and the economy that lead to the development and proliferation of the problem. It references various studies that have been conducted on the topic before and compares their arguments to come up with a more robust argument on what solutions can help curb the problem. The study advises against the method of using caps on the salaries of top earners to reduce income inequalities. It instead proposes the method of increasing wealth tax while reducing income tax. Other measures like utilizing Corporate Social Responsibility (CSR) are also suggested as viable ways of reducing inequality in the South African society.
Keywords: Inequality, Income Inequality, South Africa, Apartheid
The Wicked Problem of Inequality in South Africa
Introduction
“After more than 20 years of democracy and” self-governance, the level of “economic inequalities in South Africa remain very high” (BBL, 2008). Issues of survey comparability make it tricky to analyze trends. However, it is evident that there has been no decline in the aggregate income inequality.

In fact, the nation has for a long time occupied the top slots in the Gini coefficient ranking of the world’s most unequal countries. The 21st-century peak of 0.72 is said to be the highest that has ever been recorded. Nonetheless, there are some stimulating sub-trends about the matter that are quite clear. The Theil index that permits analysts to assess inequality within groups and that between groups separately reveals that the gap that exists between groups makes just 35% of the total income disparity of South Africa. This figure is way lower than the 61% figure of 1993 but far higher than that in many other nations. Even though the difference in income between various races has reduced, the sudden drop “in the Theil index” shows that the level of inequality between racial groups spiraled up (BBL, 2008). This article analyzes the wicked problem of “inequality in South Africa and” reviews various theories to determine how the issue can be solved (BBL, 2008).
Explaining Inequality in the Country
Most of the disparities that exist between the white and the “black people in South Africa” originate from the new forces that shaped distribution of resources in the nation after Apartheid (BBL, 2008). After South Africa got its independence in 1994, the blacks enjoyed wide income gains across almost every sector of the country’s economy (BBL, 2008). Well-educated blacks were the biggest winners because they were in the best position to grasp the fresh chances for upward movement, and there was a rapid rise in the black high and middle-income classes in the country. In particular, the black middle class increased to three million in 2012 from three hundred thousand in 1993. Also, the entire black middle-class representation rose from 11 percent to 41 percent within the same period (Seekings & Nattrass, 2008). The initial consumption trends of the blacks in the middle class were notably different from those of their white people in the same class because they started with limited assets. The new order benefited even the poorer blacks to some extent. The benefits were not because of the market opportunities as the most destitute of this lot is still at the tail of a lengthy job queue. This queue was only shortened slightly by the millions of employment opportunities that came up within the prosperous period that spanned from 2000 to 2008. Government policies should receive most of the credit for the fact that the poor have improved their living standards.
The economic situations which “allowed for looser fiscal constraints enabled the speedy growth of programs like the new Child Support Grant that substantially reduced poverty” (Seekings & Nattrass, 2008). Over 11 million kids below 18 years old now receive the grant. However, because the poor blacks had lower income gains than the black middle class, the income gaps widened among the blacks. The Gini coefficient of inequality within the black South Africans was 0.66 which was even greater than the Brazilian figure. Income inequality among the white population also went up though for a different reason. Most of the whites in South Africa today, just like the blacks, have better incomes than they had at the conclusion of Apartheid. However, the higher medical costs, costs of security maintenance, and school fees washed away “these gains and the white incomes are” experiencing a relatively slower growth (Leibbrandt, Woolard & Bhorat, 2000). The less educated and poorer whites were the only ones who clearly lost with the new order. The job protection that they had during the Apartheid died with the Apartheid. To make matters worse, the values of the social pensions as well as other grants they used to receive were leveled. This made the degree of inequality among the white population to also go up.
After the power transition, the black population had hopes of better municipal infrastructure and housing, as well as improved education and healthcare. The delivery of “hard services” like sanitation, water, electricity, and housing got better, and private providers could even be contracted to provide these services (Leibbrandt, Finn, & Woolard, 2012). However, the quality of construction suffered due to the haste with which it was executed. Besides, rapid building of houses “was much easier when there was” plenty of open lands available than it is now when complex negotiations have to take place between communities before land is freed to upgrade the squatter regions (Leibbrandt, Finn, & Woolard, 2012). This new complexity slowed the provision of new housing stocks significantly.
The capacity of the state seems to be most limited when it comes to the delivery of “soft services” such as schooling and healthcare (Gelb, 2003). Movements in public expenditure to fund more health centers and equalize the spending on education helped better the pupil-teacher ratios as well as the access to education and healthcare. However, most of these services have abysmal quality. Most of the poor people with serious health issues prefer to pay for their treatment in private health institutions to using the ill-equipped free clinics. The quality of education in most learning institutions within South Africa is also so poor that on average, the country’s primary school pupils register worse scores than children from its poor neighbors like Swaziland on international examinations.
In general, the redistribution prospects of the country’s income are not positive. The sources of the country’s income inequality are mostly rooted “in the labor market; the Gini coefficient for the country’s wages is 0.60” (Leibbrandt, Finn, & Woolard, 2012). Other than grants which slightly better the income distribution prospects, factors like unemployment, property income and dividends, and household composition and size help increase the Gini number. The inadequacy of skilled labor means that the small group of highly skilled individuals enjoys much higher wages than the majority who are unskilled. This phenomenon forms the base for a general income inequality and the vast wage gap that follows between the unskilled and the skilled; two elements that are likely to persist for a long time. “State policy has not had much of an effect” on the problem of inequality in South Africa (May, 2000). Grants help in lowering the poverty levels; however, they do not have any significant impact on inequality. The fiscal room for growing the social grant framework is also presently limited. Great inequality will most likely remain an element of the South African community for decades if innovative measures are not tailored to help lower the inequality levels.
Possible Solutions
Wicked problems like inequality have no easy and quick solutions. In fact, at times the solution to a wicked problem might be the cause of other problems. As a result, anyone intending to solve problems like inequality in South Africa must devise a very carefully and creatively crafted solution. Without meaningful improvements in the “human capital of the poor, income inequality will remain wide” (Leibbrandt, Finn, & Woolard, 2012). Corporate social responsibility is a tool that most organizations in the world today use to improve the human capital and the living standards of the communities in which they operate. In South Africa, apart from CSR being a frequent discussion topic, “it is also a tangible effort by many companies” (Leibbrandt, Finn, & Woolard, 2012). The regimes that have governed the power since the end of Apartheid in 1994 have made many deliberate attempts to reduce the social gaps through different public initiatives and various social programs. However, the regimes have also put in place policies that make it almost mandatory for organizations to give their input on the social measures designed to reduce inequality in the country. To be concise, not all companies voluntarily engage in CSR. Some of the CSR efforts of South African companies are a quest to comply with the “Black Economic Empowerment legislation (BEE)” (Leibbrandt, Finn, & Woolard, 2012).
This Act forces all companies based in South Africa to take all stakeholders into account while conducting their external and internal operations in a bid to eradicate the economic and social inequalities that the regimes inherited from the days of Apartheid (Ravallion, 2001). This policy was also meant to coerce organizations to help the government encourage groups that were previously discriminated to take part in growing the country’s economy. When a big company is situated in a region that was previously subjected to discrimination, CSR requires the company to at least employ some of the locals. When these people are employed, they not only help develop the economy of the country, they also improve their living standards hence reducing poverty and unemployment rates in the country (Bhorat, 2001). In South Africa, the companies that fail to comply with the BEE legislation get negative scorecard ratings, lowering their ability to operate in any part of the country. For South Africa, it is not just about employing the locals; it is also about what percentage of what race of the locals one employs. This policy makes companies to indirectly address the racial inequality in employment and contribute to making the country’s socio-economic band stronger in terms of fairness and equality.
However, even away from CSR, formal organizations in South Africa could still play a role in helping the government reduce the inequality issue in the country. Analysts previously suggested organizations’ caps on the salaries of executives as a way of reducing the income inequality in nations like South Africa. However, after careful analysis, this research brands that method an uncalled for interference with the potential of leading to losses in skill. Therefore, the best help that social movements can give to the government in reducing inequality apart from employing people from all races and classes is collaborating with the government to lower income taxes and raise taxes on wealth (Leibbrandt, Finn, & Woolard, 2012). These organizations could achieve this by colluding with the government to ensure that the wealthy individuals associated to with them either as shareholders or senior employees do not get any contracts or are fined every time they fail to comply with the increased wealth tax policy. Each organization can be given online access to the tax returns of the wealth of each employee so that they can ensure that the system is transparent and fair to everyone. The money generated from the added wealth tax can enable the government to lower the income taxes and help reduce the income difference between the ordinary and the wealthy South Africans.
Conclusion
The problem of inequality is indeed a big problem in South Africa. The Gini index places the country in the second position globally among the nations with the highest inequality levels. This issue was there during and after the Apartheid and still does not look like it is going away any time soon. The government has initiated measures to try solving the problem, but most of these are not very effective. Measures like giving grants do help improve the capital possessed by the discriminated groups; however, it does not substantially impact on the levels of inequality in the country. Methods that have been suggested before like caps on the salaries of chief executives are also not as helpful as they were intended to be. Combining all these methods with an increase in wealth tax and a reduction in income tax might just be the missing link that South Africa needs to start seeing significant reductions in the rates of inequality in the country
References
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Gelb, S. (2003). Inequality in South Africa: Nature, causes and responses. Edge Institute.
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