“Embarrassing” and “painful”. These were some of the words used to describe a recent interview between South Africa’s former national assembly speaker Baleka Mbete and Al Jazeera host Mehdi Hasan.
In an October 2019 episode of the current affairs TV show Head to Head, Mbete was asked about inequality in South Africa.
“In economic terms, when we talk about inequality, the World Bank says that South Africa today is the most unequal nation on earth. That’s a pretty embarrassing title for your country to hold, is it not?” Hasan asked.
“I must say it is very harsh,” Mbete responded. “But I wonder whether it’s not an exaggeration. I really think that we must see both good and bad. It can be said by the World Bank. The World Bank is not God.”
When pressed, Mbete said she did not believe the bank’s verdict.
“They are an institution that studies this stuff,” Hassan pointed out. “I’m not sure they have some anti South Africa agenda… So you don’t accept their verdict, is what you’re saying?”
“I don’t believe so,” Mbete said.
In this analysis, we take a closer look at the World Bank’s findings and what they tell us about inequality in South Africa.
What is inequality?
“Inequality is where some people have a greater share of wealth, power and prestige,” Edward Webster, distinguished research professor with the Southern Centre for Inequality Studies (SCIS) at Wits University, told Africa Check.
Most people use the term “inequality” loosely when they are, in fact, referring to economic inequality. And economic inequality includes both income and wealth inequality, Webster said.
What’s the difference? David Francis, deputy director at the SCIS, explained:
- Income inequality refers to the difference between people’s incomes. It can be measured by comparing salaries, or by the amount that people spend, and the information is collected by surveys.
- Wealth inequality is the difference in the value of wealth between people. It can be measured by comparing assets such as investments, shares in the stock market or property, among other things. But it’s difficult to identify who owns what, so wealth inequality can be hard to measure.
How do we measure inequality?
Both income and wealth inequality are commonly measured with the Gini index or coefficient. This is a measure that provides a figure between 0 (perfect equality) to 1 (perfect inequality), Christopher Rooney, a research analyst with the Development Policy Research Unit at the University of Cape Town, told Africa Check.
They “are harder to explain in general terms” and involve “some sophisticated maths”.
World Bank: South Africa’s Gini coefficient is 0.63
In March 2018, the World Bank released a report on poverty and inequality in South Africa.
The report says that in 2015, South Africa had a Gini coefficient of 0.63. This was based on individual consumption – one of the ways to measure income inequality.
This put South Africa at the top of a list of 164 countries. Namibia’s Gini coefficient of 0.59 placed it second, with Suriname, Zambia and the Central African Republic next on the list.
“No other country in the database maintained by the World Bank had this level of Gini coefficient,” said Victor Sulla, a senior economist with the World Bank.
Sulla told Africa Check that the World Bank’s estimate was calculated using the same survey and findings from the 2011 international comparison programme. This initiative collects data for comparison across 164 economies and 1,500 household surveys.
How reliable is the Gini coefficient?
There are some limitations to the Gini coefficient and their comparisons.
The first is the data on which the calculation is based. Sulla said “sampling errors” in the 2014/15 Living Conditions Survey were likely.
“The data is a survey, not a census of every family in South Africa.”
Country surveys also differ in terms of methodology and types of measures, which can make comparing the data tricky, he said.
Another significant challenge is that some countries do not have the data needed to measure their inequality, Prof Julian May, director of the NRF-DST Centre of Excellence of Food Security at the University of the Western Cape, told Africa Check.
He said that Gini coefficients are unavailable for about 25 countries, including Kuwait, Qatar and Saudi Arabia, which are known to have high inequality levels.
Still, the index is “probably the most widely recognised of the inequality measures and is used and reported on by most of the United Nations agencies,” May said. “It is quite easy to explain and allows for international benchmarking.”
So it can be said that South Africa is one of the most unequal of the countries that have the necessary income data, he said.
Looking at wealth inequality
The World Bank report also investigated wealth inequality, which provides further insight.
Wealth is measured as the difference between a household’s assets and liabilities, Dieter von Fintel, an associate professor in the department of economics at Stellenbosch University, told Africa Check.
Assets can include homes, investments and pension funds. Liabilities could be mortgages, loans and store credit.
The World Bank estimated that the wealthiest 10% of South Africa’s population held 71% of all wealth, while 60% of the population held just 7% of the wealth. The estimate used five nationally representative household surveys conducted by the University of South Africa from 2011 to 2015.
This showed wealth inequality was even larger than income inequality, the report said.
Many countries don’t have adequate data
Wealth inequality can also be difficult to measure as “many, many countries in the world do not have adequate data”, Von Fintel said.
In 2019, it placed South Africa at a high level of wealth inequality with a Gini coefficient of 0.81. It listed estimates for just 16 countries. Only two countries had higher Gini coefficients: Indonesia (0.83) and Brazil (0.85).
A challenge with measuring wealth is that the data comes from household surveys. These are voluntary and may not collect data from all groups of people in the correct proportions.
“If you study their document carefully, South Africa is the only country in Africa that has mildly adequate data to study this phenomenon and many other data gaps exist across the globe,” Von Fintel said.
Experts say Mbete’s claim ‘without basis’
“Post-apartheid South Africa is one of the most unequal countries in the world in terms of income and wealth,” Webster told Africa Check. He said high levels of inequality had been sustained and in some cases deepened.
“At the start of the 1990s, South Africa was the most unequal country in terms of income, of the 57 countries for which there were data at the time. Today, the World Bank still finds South Africa to be the most unequal country in the world for which there is data.”
May agreed, saying: “Mbete’s claim is without basis.”
He added: “The World Bank’s findings are based on data collected by South Africa’s official statistics agency, and are consistent with trends that have been observed since 1993.”
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