Southern Centre for Inequality Studies (SCIS) - (Working papers)

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A Wealth Tax for South Africa
(Southern Centre for Inquality Studies (SCIS), 2018-01) Terreblanche, Sampie
Beyond a Treasury View of the World: Reflections from Theory and History on Heterodox Economic Policy Options for South Africa
(University of the Witwatersrand, Johannesburg, 2018-05) Padayachee, Vishnu
Estimating the Distribution of Household Wealth in South Africa
(Southern Centre for Inequality Studies (SCIS), 2020-04) Chatterjee, Aroop; Czajka, Léo; Gethin, Amory
This paper estimates the distribution of personal wealth in South Africa by combining tax microdata covering the universe of income tax returns, household surveys and macroeconomic balance sheets statistics. We systematically compare estimates of the wealth distribution obtained by direct measurement of net worth, rescaling of reported wealth to balance sheets totals, and capitalisation of income flows. We document major inconsistencies between available data sources, in particular regarding the measurement of dividends, corporate assets and wealth held through trusts. Both household surveys and tax data remain insufficient to properly capture capital incomes. Notwithstanding a significant degree of uncertainty, our findings reveal unparalleled levels of wealth concentration. The top 10 per cent own 86 per cent of aggregate wealth and the top 0.1 per cent close to one third. The top 0.01 per cent of the distribution (3,500 individuals) concentrate 15 per cent of household net worth, more than the bottom 90 per cent as a whole. Such high levels of inequality can be accounted for in all forms of assets at the top end, including housing, pension funds and other financial assets. Our series show no sign of decreasing wealth inequality since apartheid: if anything, we find that inequality has remained broadly stable and has even slightly increased within top wealth groups.
Estimates of Employment in South Africa Under the Five-Level Lockdown Framework SCIS Working
(Southern Centre for Inequality Studies (SCIS), 2020-05) Francis, David; Ramburuth-Hurt, Kamal; Valodia, Imraan
During the COVID-19 pandemic and response, an important question, from both a health and economic policy perspective, is how many workers are able to return to work as the lockdown is eased and tightened in response to the spread of the virus. Using a static analysis derived from industry subsectors, we estimate employment allowed under each level of the five-level lockdown framework. We estimate that under level five of the lockdown framework, 40% of total employment is permitted, or 6.6 million workers. This rises to 55% (9.2 million) under level four; 71% (11.8 million) under level three; 94% (15.6 million) under level two and 100% under level one. This is a static analysis and assumes that no jobs are lost as a result of a lockdown. As such, its principle use is as a distributional analysis of the share of workers permitted to work under each level of the lockdown.
Not a Fairy Tale: Unicorns and Social Protection of Gig Workers in Columbia
(Southern Centre for Inequality Studies (SCIS), 2020-12) Velez Osorio, Veronica
In Colombia there has been little social dialogue or democratic debate about how to effectively extend labour and social protections to digital platform gig workers. Rappi Inc. is a digital platform founded in Bogota, Colombia, in 2015, with the support of Colombian public institutions. Through theplatform, customers can buy consumer goods such as meals, groceries, medicine, and so on. In 2019, Rappi Inc. became one of the most valuable digital technology companies in Latin America with a value of over $1 billion turning into what the venture capital business called a unicorn company. There is no regulatory framework in Colombia that enforces the continued relevance of employment relations in the platform economy. Therefore, the rapid growth of Rappi Inc. has not been accompanied by the fair redistribution of profits, due to gig workers being classified as ‘independent contractors’, which sharpens the asymmetries between capital and labour. Rappi Inc. workers have responded by forming the Movimiento Nacional de Repartidores de Plataformas Digitales (MNRP, National Movement of Digital Platform Workers) and also by recently forming a trade union that operates through an app, Unidapp. These workers are actively disputing the current trajectory of digital work in Colombia. Furthermore, the paper analyses debates about the possibilities of a universal basic income as anti-poverty-focused social protection, in the midst of intensifying calls for one in response to the crisis resulting from the Covid-19 pandemic. The government launched the Programa Ingreso Solidario (PIS, Solidarity Income Programme) to address the decrease in work-related incomes of poor households. The discussions on basic income have opened the debate on crucial public agenda issues, such as tax reform, public debt and vertical expansion of social protection, among others social demands.
Traversing the cracks: social protection toward the achievement of social justice, equality and dignity in South Africa
(Southern Centre for Inequality Studies (SCIS), 2020-12) Matthews, Thandiwe
South Africa has one of the most expansive social protection systems in Africa, yet it remains one of the most unequal countries in the world. The sudden onslaught of the Covid-19 pandemic has laid bare the devastating impact of deep global and domestic socio-economic inequalities, and the political, economic and social implications thereof. This paper explores how the conceptualisation and implementation of social protection policies can serve to simultaneously confront and reproduce the sources of power that sustain structural inequality in South Africa. Through an interdisciplinary lens, the research probes the gendered nexus between social policy and constitutionally protected socio economic rights to elucidate how multiple forms of discrimination perpetuate the exclusion of historically marginalised groups, and particularly black African women, in post-1994 democratic South Africa. Although social protection programmes have saved millions of households from falling deeper into poverty, the level of social grants is insufficient to meet households’ reproductive needs and undermines their very objectives. At the same time, the digitalisation of cash transfers coupled with the ‘marketisation of governance’ (Taylor, 2000) has trapped grant beneficiaries in relations of credit and debt. The paper concludes that comprehensive social protection requires an approach that is not only efficient and pragmatic but is substantively inclusive, equitable and participatory, with the aim of dismantling relations of power that reproduce structural inequalities. However, social protection alone cannot address the complexity of challenges associated with structural inequality, and must be linked to labour market policies geared at improving the conditions of work for black African women in South Africa.
Innovation, Digital Platform Technologies and Employment: An Overview of Key Issues and Emerging Trends in South Africa
(Southern Centre for Inequality Studies (SCIS), 2020-12) Naidoo, Karmen
This paper provides an analytical profile of the South African labour market, along with a descriptive overview of the nature and extent of digital platform labour in the country. The paper also discusses the conceptual links between different types of innovation and employment, before reflecting on the implications of new forms of digital labour relations on labour organization and regulation. The literature on South Africa’s digital platform labour is nascent. Some estimates suggest that there are about 135 000 platform workers in the country. There are, however, important concerns about the quality of platform work, and recent research suggests that many platforms do not provide workers with a living wage or decent working conditions. There are several challenges to regulating platform work, in part due to workers being classified as independent contractors. Despite this, there are new emerging forms of worker organization amongst precarious workers in South Africa that go beyond traditional trade unions to incorporate broader worker associations.
Social Protection in Ethiopia: Making the Case for a More Comprehensive and Equitable Intervention in the Digital Economy
(Southern Centre for Inequality Studies (SCIS), 2020-12) Berhane, Zerihun
Ethiopia implements a range of contributory and non-contributory social protection programmes that jointly cover about 21% of the population. Using document review and secondary data, this paper analyses coverage, adequacy, and options for the vertical and horizontal expansion of social protection in Ethiopia, including cost estimates. It argues that the major challenges for the expansion of social protection in the country are political and financial. Politically, the government’s use of social protection as an instrument to promoting political stability made social protection subscribe to productive objectives and caused it to be tied to public works and conditional on labour contribution. Moreover, food security strategy and institutions dominated social protection for decades, making it essentially a rural programme rather than being all-inclusive. Financially, the high cost of implementing large-scale programmes made donor financing a constant feature of social protection in Ethiopia, having implications for sustainability of programmes. This paper provides a cost estimate scenario analysis of three social protection options: social pensions, child benefits, and disability grants. The cost estimate results indicate that implementing these programmes would be fairly affordable, particularly if accompanied by domestic resource mobilization, and suggests restructuring social protection institutions to make them more inclusive.
The Future of Worker(ers) in Mozambique in the Digital Era
(Southern Centre for Inequality Studies (SCIS), 2020-12) Ali, Rosimina; Muianga, Carlos
As the digital platform economy and gig work have been accelerating, new expressions of work and tensions over working conditions, value creation and distribution, and over labour relations and regulation, are also emerging in Mozambique. Although digital work is still at an incipient stage in the country given the low access to information and communication technologies (ICTs) for the majorityof the population and their socioeconomic profile, ICT access has expanded over the past decade. The number of start-ups enabling digital work has risen in the past five years and more recently amid the Covid-19 pandemic. Research on social conditions of digital gig work in Mozambique’s economy remains largely unaddressed. Following a political economy approach, this paper explores how digitally mediated forms of work are (re)shaping, changing or exacerbating the existing nature of work and what questions it poses for the future of work(ers) in Mozambique. We argue that, in the current pattern of growth in Mozambique, labour markets have a fragmented nature where work is dominated by informal, irregular, unstable and insecure social conditions. The preliminary primary evidence from digital gig workers shows that the organisation of digitally mediated work seems to reproduce the existing disruptions within labour markets. This seems acute in a context where digital gig work is not yet legislated and trade unions are absent. The future of workers depends on the broad organisation of socioeconomic structures and relations which shape the nature of work, structurally linked to processes of accumulation on a global scale. A failure to broadly analyse work beyond the physically sphere, including the digitally mediated forms of work and its intersections with paid and unpaid forms of work, has implications for the design and effectiveness of public policies on labour.
On-Demand Platforms Workers in Columbia: A Labour Relationship in Disguise
(Southern Centre for Inequality Studies (SCIS), 2020-12) Torres Cierpe, Juana
This article is a study on the future of digital work in Colombia. It focuses on the case of workers in on-demand platforms, as they are the workforce most relevant to the notion of digital labour in the country. The research question was: What are the stakes of the legal vacuum in which on-demand platform workers find themselves? The methodological approach in the research paper consisted of analysis of secondary data (statistics and academic journal articles). The article consists of two parts. Part one gives an account of the labour changes of the past 30 years. These changes are analysed within the framework of neoliberal implementation, emphasising the phenomenon of informality. Part two concentrates on showing the situation of workers in the on-demand platform in Colombia. The problem of informality, into which this type of worker falls, is taken as an essential phenomenon. The section first shows a typology of the platforms operating in the country, where the on-demand platform workers perform. It then explores the implications of the legal vacuum that their situation involves. Finally, it analyses some studies that provide specific data regarding on-demand platform workers.
Devil’s in the Detail: How to assess transformation of ownership of the South African private sector
(Southern Centre for Inequality Studies (SCIS), 2021) Joubert, Michelle
This paper explores listed and unlisted equity ownership in the context of the distribution of South Africa’s national wealth. It is intended to contribute to a shared understanding of private sector ownership: how South Africans hold equity, how equity wealth is distributed among South African households, and transformation of ownership of equity ownership. This includes the listed segment, a crucial part of the bigger picture, as well as unlisted business. It also explores where ownership information is found and could be accessed in future. The hope is that this assessment will contribute to a broader discussion on accelerating transformation.
A Wealth Tax for South Africa
(Southern Centre for Inequality Studies (SCIS), 2021-01) Chatterjee, Aroop; Czajka, Léo; Gethin, Amory
This paper considers the feasibility of implementing a progressive wealth tax to collect additional government revenue to both reinforce fiscal sustainability in the wake of the COVID-19 crisis and reduce persistent extreme inequality in South Africa. Drawing on our new companion paper, we first identify the tax base and discuss the design of potential tax schedules. Testing alternative tax schedules, we estimate how much additional revenue could be collected from a progressive tax on the top 1% richest South Africans. Our results show that under conservative assumptions, a wealth tax could raise between 70 and 160 billion Rands—1.5% to 3.5% of the South African GDP.We discuss in turn how sensitive our estimates are to assumptions on (1) mismeasurement of wealth and (2) tax avoidance and evasion, based on the most recent tax policy literature. We examine technical issues related to the enforcement of the tax, and how third-party reporting and pre-filled declarations could be used to optimize measurement of taxable wealth and minimize evasion and avoidance opportunities. Finally, we explain how this new tax could interact with other capital related taxes already in place in South Africa, and discuss the potential impact on growth.
Interrrogating a Framework for Universal Social Protection in India
(Southern Centre for Inequality Studies (SCIS), 2021-01) Srivastava, Ravi
The paper begins by dealing with conceptual issues around social security, social protection, and a social protection floor and argues for a rights based social protection floor for India. It then describes the broad social security or social protection system in place in the country. Since social protection systems are contingent on the characteristics and nature of work and employment relations, the paper uses existing data sources to elaborate on the (gendered) nature of the workforce. It also points out how existing social security systems reinforce labour market inequalities. The paper goes on to discuss the nature of expansion of social security and social protection since the turn of the century. It describes two distinct phases: the first, from about 2002 to 2014 when these systems expanded due to grassroots movements, court judgments and government responses; the second, from 2014 onwards, when the new government turned its back on rights based social security, but populist pressures still led to the introduction of new measures, although the financial priority given to social protection declined. Finally, the paper focuses on the current issues and challenges in moving towards a rights based social protection floor in India. It argues that such a social protection floor should combine worker-centric and citizen-centric features and comprise minimum guarantees for all at the base, with a second level of contributory social security. It considers the possible options for social protection – contributory and non-contributory and a universal basic income. It also analyses the consequences of the government’s thrust on digital financialisation for benefit payments and on biometric identification of workers and argues that, while the introduction of a social security registration system for workers is essential, approaches currently being put in place impose high costs on the poorest, and do not build on adequate data privacy safeguards.
Firm Wage Premia, Rent-Sharing and Monopsony When Underemployment is High
(Southern Centre for Inequality Studies (SCIS), 2021-02) Bassier, Ihsaan
How important are firms in the labour markets of developing countries? Using matched employer-employee data from South Africa, I find firms explain a larger share of wages than in other, richer countries. It shows this can be parsimoniously explained by the high degree of underemployment. Estimating separations elasticities by instrumenting wages of matched workers with firm wages, among other methods, I find a low separations elasticity which generates a high degree of monopsony. The correspondingly high estimated rent-sharing elasticity explains the important role of firm wage policies, even in an economy with a large labour surplus. This paper is a work in progress.
Black Economic Empowerment Transactions in South Africa after 1994
(Southern Centre for Inequality Studies (SCIS), 2021-04) Gqubule, Duma
This paper reviews the implementation of policies to deracialise ownership within the Top 50 JSE listed companies with a focus on mining and finance which accounted for 75% of black ownership within these companies at the end of December 2020. It looks at the context in which the policies were implemented – the performance of the economy and the restructuring of apartheid era conglomerates since 1994 that created opportunities for BEE companies. The paper then evaluates the three waves of BEE transactions over the past 27 years and the failures of the Broad-Based Black Economic Empowerment (B-BBEE) policy framework, which included the BEE Codes of Good Practice and sector charters in mining and finance. The paper discusses the confusing maze of statistics on black ownership and presents its own findings. The paper argues that prospects for further transformation of apartheid ownership structures are not good, with the economy likely to experience a second lost decade in terms of economic development until 2030, and due to policy design failures that have provided weak incentives for companies to enter into replacement BEE transactions.
The Alignment of Black Economic Empowerment and Skills Policies in South Africa
(Southern Centre for Inequality Studies (SCIS), 2021-04) Kgalema, Victor; Marock, Carmel; Stephanie, Allais
This paper explores the relationship between the goals of broad-based black economic empowerment (BBBEE) and those of the skills development policy in South Africa. We review the relationship between the policy tools that have been developed for each of these policies. The paper finds that while the high-level goals of the two sets of strategy seem to be well-aligned, there are many challenges in practice. The first relates to National Skills Development Strategy (NSDS), whose key purpose is improving the effectiveness and efficiency of the country’s skills development system. The strategy represents an explicit commitment by government to encourage the linking of skills development to career paths and career development as well as to promote sustainable employment and in-work progression. However, the strategy lacks a tightly defined set of priorities, making it open to manipulation in terms of the achievement of targets. The second challenge relates to a host of implementation problems with skills policy in South Africa. At the same time, the monitoring mechanisms of the BBBEE code focus on whether skills training takes place, the numbers of people who access workplace experience and levels of expenditure, rather than on the extent to which the skills development activities result in the intended outcomes of the policies (either the BBBEE policy or the NSDS). This reinforces the first problem – a focus on measurable targets, rather than fundamental policy goals in both policies.
The Alignment of Black Economic Empowerment and Skills Policies in South Africa
(2021-04-16) Kgalema, Victor; Marock, Carmel; Allais, Stephanie
This paper explores the relationship between the goals of broad-based black economic empowerment (BBBEE) and those of the skills development policy in South Africa. We review the relationship between the policy tools that have been developed for each of these policies. We start from the premise that South Africa has developed a complex set of policies, many of which have not been aligned well with each other. In some instances, policies duplicate or contradict one another. The policies require multiple company reports that have tightly specified targets. Reporting requirements do not consistently support the achievement of the broader goals of the policy interventions and do not always work together. A second starting assumption is that empowerment is not just a matter of income and wealth – it is also about access to skills, resources and knowledge.
Competition Policy and Black Empowerment: South Africa’s Path to Inclusion
(Southern Centre for Inequality Studies (SCIS), 2021-09) Mncube, Liberty; Ratshisusu, Hardin
Competition law is not just about the efficiency goal. Placing value on opportunities for black owned businesses to enter, expand, and participate in markets is likely to be a key element in South Africa’s route to become an efficient, competitive economic environment focused on development and ultimately benefiting all South Africans. The first democratic government of South Africa prioritised the transformation of society on a non-racial, democratic and local foundation. The expectation was that all law in South Africa would contribute to, amongst other things, economic transformation and redress the imbalances created by past racial divisions, and more important foster the participation of the previously marginalised people to participate in the mainstream economy. In South Africa, equity is a recognized goal and a permissible consideration of competition law and a key driver of inclusive markets, economic development and, ultimately, empowerment of black people.
The Critical Role of State-owned Enterprises and Development Finance Institutions in Black Economic Empowerment :The case of Eskom, IDC and the DBSA
(Southern Centre for Inequality Studies (SCIS), 2021-09) Mondi, Lumkile
The underlying motivation for the establishment of state-owned entities and development of finance institutions was to provide the state with instruments to enable the building of a diversified industrial economy. Under the colonial and apartheid government, these were to play a key role in racially based job segregation and Afrikaner empowerment. This paper explores the role of Eskom, the IDC and DBSA during the democratic period in deracialising the economy through black economic empowerment. It explains the political and economic forces underlying the often failed efforts to reform Eskom in the face of power shortages, financial difficulties, questionable investment in capacity and economic empowerment. The paper shows how the IDC and the DBSA have contributed to black economic empowerment. Finally, the paper provides a window into understanding the policy trajectory and decision-making of the South African government as it deals with the competing challenges of business interests and black entrepreneurs long denied economic participation because of the injustice of apartheid.
Black Economic Empowerment in the Automotive Manufacturing Industry: A Case for Productive Capacity Development Transformation
(Southern Centre for Inequality Studies (SCIS), 2021-09) Mashilo, Alex Mohubetswane; Moothilal, Renai
The automotive manufacturing industry has received little, if any, sustained academic attention on Black Economic Empowerment (BEE) or Broad-Based Black Economic Empowerment (BBBEE). Most of the work is in the form of news capturing the reactions of industry role players, especially the lead firms in the automotive value chains, to BEE or BBBEE regulatory changes, and individual lead firms’ transformation initiatives. This working paper represents a modest attempt at laying the basis for a sustained focus on BBBEE in the automotive manufacturing industry, the mainstay of South Africa’s manufacturing base. We argue for a production development and industrial transformation approach, with the objectives of deepening and widening domestic value addition as part of localisation, and increasing employment with greater attention on expanding, diversifying and growing the lower tiers of the supplier base – the second and third-tiers.

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