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17 October 2017 17:18 (South Africa)
Opinionista Ben Turok

We have work to do on inequality

  • Ben Turok
    Ben-Turok.jpg
    Ben Turok

    Ben Turok is a former anti-apartheid activist, Economics Professor, former South African member of parliament and a member of the African National Congress. See his Wikipedia profile

To reduce inequity in South Africa, we need to know more about how rich the wealthy really are, not just based on their income.

Thomas Piketty, presenting the Nelson Mandela Annual Lecture in 2015, identified a gap in our knowledge of our own social system which has yet to be cleared up. As a scholar who has spent decades studying wealth in many countries, he complained that there is “so little information about wealth” in South Africa. This is partly because “access to estate tax data is extremely difficult so its extremely difficult to show how many taxpayers transmitted wealth.”

In any case it is more important to know about the wealth of the living than wealth at death. He therefore proposed a very low annual tax on individual wealth, not for the funds it would produce but because it would reveal “who owns what”.

But why should we bother if it does not deliver a large sum to the fiscus? The answer lies in the generally accepted view that South Africa is one of the world’s most unequal countries, if not the most unequal. This judgment is however based on only half of the available information, namely, data on incomes, (derived from tax data), not wealth. Yet, it is now understood that inequality of wealth is greater than inequality of incomes. So we really need to know what is the true state of inequality based on incomes as well as wealth.

A serious effort to clear this up was made by Anna Orthofer in her excellent Phd thesis at Stellenbosch University in 2016. She confirmed that wealth inequality is greater than income inequality – 10% of the population own at least 90-95% of all assets, in contrast to their earning 55-60% of all income.

What makes the research more difficult is some of the wealthy avoid income, through salaries, interest, dividends, rents or capital gains, since it is taxable, and try to conceal their wealth. They may bequeath assets to their children but then estate duty comes into play. But this does not reveal the whole picture.

Is all this attention to wealth necessary ? It would seem so since Christine Lagarde, managing director of the IMF, has raised the issue of rising inequality globally in 2013 and again in 2017, pointing out that it has increased nationalism and populism, she advocated “more redistribution”. In a report prior to the World Economic Forum, 750 experts stated that rising income and wealth inequality were the most important trends determining global developments in the forthcoming decade.

In his book Capital, Piketty observes that there are periods in the history of individual countries when inequality shoots up and periods when there is a decline, generally as a result of popular resistance.

What is the condition of South Africa today?

On the face of it inequality is rising fast as evidenced by business executives salaries and bonuses of various kinds, and by the indications of abundant spending on properties and luxury goods. The emails about the Guptas indicate not only crass corruption, but also that it is associated with enormous greed.

There is a hunger for wealth out there which is indicative of a morbid fascination with the trappings of the rich.

We also get a sense of what is going on from the work of “Who Owns Whom” which produces fascinating information about incomes and ownership derived from data extracted from reporting to the Johannesburg Stock Exchange. In their Rich List they showed that in 2015 the top ten earners received R292 m in salaries, but R 339m in bonuses, totalling R631 m. Based on the same limited source Christo Wiese was said to be worth R81 billion.

Despite these occasional revelations, the fact remains that we know very little about wealth in South Africa. Academic research has focused almost exclusively on the poor and how some provision can be made to reduce the extreme hardship face by millions of poor South Africans. This is a worthy exercise, but it does little to reduce inequality which is now recognised by most of us as being a top priority.

For instance the proposals for national minimum wages will no doubt bring substantial benefits to many sectors of the work force. It may even inject some increased demand for goods and services in the economy as a whole. But given the huge disparities in incomes and wealth, it will do little to reduce public disquiet about our inequalities.

We therefore want to encourage our universities and government agencies to begin to map how wealth is held and distributed throughout the country. Piketty has shown us in Capital it is possible to do this within a particular country by rigorously going after the necessary data.

We are also providing an opportunity to discuss all this at our forthcoming conference “Confronting Inequality” where some of the best experts in the field will report on this perspectives and work in this area. This will be held at the Sandton Holiday Inn on Thursday 28 September 2017. DM

  • Professor Ben Turok, Director of the Institute for African Alternatives (IFAA) is the convenor. The conference is made possible by a grant from the Royal Netherlands Embassy. Turok is a former ANC MP.
  • Ben Turok
    Ben-Turok.jpg
    Ben Turok

    Ben Turok is a former anti-apartheid activist, Economics Professor, former South African member of parliament and a member of the African National Congress. See his Wikipedia profile

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