Southern Centre for Inequality Studies (SCIS)

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A Wealth Tax for South Africa
(2018-01) Terreblanche, Sampie
A Wealth Tax for South Africa
(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.
Addressing Constraints to South Africa’s Agriculture Inclusiveness
(2021-09) Sihlobo, Wandile; Qobo, Mzukisi
South Africa’s agriculture remains dualistic, with large scale commercial farmers who are predominately white and small-scale and subsistence farmers that are mainly black. These disparities in fortunes result from the long history of segregation policies and apartheid. The efforts to build an inclusive agricultural sector through the upliftment of black farmers by the new democratic government since 1994 have failed. As such, black farmers in South Africa still constitute between 5 and 10 per cent of the overall commercial production. We explore the constraints to inclusive growth drive in the agricultural and agribusiness sector and offer recommendations for improvement. These include a need for increased efficiency at the local government for ensuring service delivery to farming towns, blended finance instruments for funding farmer development, and the prioritization of private-public-partnership approaches for farmer development and land reform projects. We frame the interventions for the post-COVID-19 dispensation, focusing on the potential role of agriculture in fostering inclusion and supporting rural economies and employment.
Austerity Without Consolidation: Fiscal policy and spending choices in Budget 2023
(SCIS, 2023-06-01) Michael Sachs; Rashaad Amra; Thokozile Madonko; Owen Willcox
Fiscal policy can play a crucial role in fostering growth and development by ensuring the sustainable delivery of essential public services. Managed effectively, government’s budget can help us build a common society and overcome the segregation and inequality of the past, without which sustained economic growth seems unlikely. It can also respond to temporary macroeconomic shocks to aggregate demand and livelihoods. South Africa however finds itself in a worsening fiscal impasse. There is continuous austerity, dating back more than a decade, but South Africa appears no closer to achieving fiscal consolidation. This position is steadily eroding the fiscal capabilities necessary for the state to realise the potential that fiscal action offers. Instead, the budget is increasingly becoming a drag on development.
Beyond a Treasury View of the World: Reflections from Theory and History on Heterodox Economic Policy Options for South Africa
(2018-05) Padayachee, Vishnu
Black Economic Empowerment Transactions in South Africa after 1994
(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.
Black Economic Empowerment: A Review of the Literature
(2021-09) Francis, David; Valodia, Imraan
South Africa has the highest income inequality in the world. A recent report by the World Bank found the Gini coefficient of income to be 0.66, the highest of all 149 countries for which the World Bank has reliable data. In the workplace, this is reflected in vast inequalities in salaries and wages between high and low earners, but importantly between different race and gender groups. Despite a plethora of legislation aimed at addressing inequality in the workplace, women and black workers in South Africa continue to be paid less than men and white employees, even when doing the same work (the pay gap), and are more likely to work in precarious, low-paid jobs (occupational segregation). These factors are driven by differences in the characteristics of workers, and by structural discrimination in the economy. Conceptually, we can decompose structural discrimination into two forms – that which discriminates against people who do the same job, based on race and gender (the pay gap) and that which discriminates indirectly by occupational segregation – black people and women are concentrated in low-paying occupations. In this paper, we review the literature on occupational segregation and the gender and race pay gaps in post-Apartheid South Africa. We examine the various policy interventions that have attempted to address this enduring problem. In particular, we ask whether broad-based black economic empowerment – while not explicitly a labour market intervention – has had any positive impact on reducing labour market inequalities.
Black Economic Empowerment in the Automotive Manufacturing Industry: A Case for Productive Capacity Development Transformation
(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.
Brazil Colonial Legacy and Growth Patterns
(Southern Centre for Inequality Studies, 2023-07-12) Lena, Lavinas; Domingues, José Maurício; Gonçalves, Guilherme Leite; Cordilha, Ana Carolina; Bedê, Francisco; Bressan, Lucas; Constantino, João Paulo; Rubin, Pedro
This paper provides a very concise view of the trajectory of Brazil since it became a republic. It goes through the 20th century and into the 21st century to systematize how the different phases of economic development reproduced and reformatted the inequalities inherited from the country´s colonial-slave period. Its objective is to provide a timeline, framed by the structural transformations in the economy and in the political regime, which has shifted between democratic and authoritarian periods, always with a strong role for the State. In addition to characterizing the industrial accumulation pattern of what was dubbed "developmentalism", and the rupture with this pattern caused by the financialization of the economy, in the midst of the democratization process of the country, starting in the mid-1980s, the paper briefly describes how the social question evolved over time and how the oligarchic power structures remained dominant in the state apparatus and in the political system.
Capital and Politics: Links and Distance During the Bolsonaro Government
(Southern Centre for Inequality Studies, 2023-07-19) Bedê, Francisco; Domingues, José Maurício; Herz, Mônica; Gonçalves, Guilherme Leite; Rodríguez, Maria Elena
The present article analyses the relation between the state and the political system, on the one side, and capital and capitalists, on the other, in Brazil, especially under the Bolsonaro government. Using data about the boards of directors of Brazil’s main companies and of the main government ministries, it brings out what amounts to an indirect relation between the two sides of this equation. It mobilizes both theoretical and empirical arguments in order to point to the idea of political dimension and political processes as a possible path to apprehend the more complex and less immediate ties between capital and politics. This does not belie the connections between them, but contradicts most of the literature, which sees a rather direct connection between them.
Characterising the Relationship Between Market Power and Inequality in Southern and East Africa. Why It Matters?
(Southern Centre for Inequality Studies, 2022) Padayachie, Karissa Moothoo; Vilakazi, Thando
This working paper focuses on competition in the southern and east Africa region where there is a range of large firms with significant market power operating across political borders. It is against this background that it is important to understand the link between market power and inequality (Kaira, 2017; Nsomba et al., 2022). This paper provides preliminary reflections on what we know about that relationship, and details reasons why we need to understand it.
Click farm platforms and informal work in Brazil.
(Southern Centre For Inequality Studies, 2022-11-15) Grohmann, Rafael; Govari, Caroline; Amaral, Adriana
This paper analyses work on click farm platforms in Brazil and argues that work on these platforms updates and reproduce traditional informal work in the country. The methods involve digital ethnography on click farm platforms, WhatsApp and Facebook groups and YouTube channels, and worker interviews. The findings present relationships between informal work and work for click farm platforms in these dimensions: a) culture and language, especially from WhatsApp groups, functioning as an extension of click farms; b) vocabularies and practices around “resale” as a sign of informal work in the country; c) the role of YouTubers in spreading neoliberal discourses; and d) boundaries around the piracy market and illegality. The paper contributes to debates on the taskification of work through digital labour platforms and the widespread neoliberal discourse and identity. First, the click farm platform deepens the mechanisms of micro-work platforms by presenting new layers of “fauxtomation” and “ghost work”, in a platform labour circuit marked only by Brazilians – consumers and workers. Second, it reveals the articulation among discourses of neoliberalism, entrepreneurship, and informal work in the context of the global South.
Competition and Inequality in Developing Countries
(Southern Centre for Inequality Studies, November 2022) Goga, Sha'ista
This paper examines the link between competition policy and inequality, with a specific focus on the impact on inequality of concentration and competitive abuses by firms. In particular, the paper focuses on the role that concentration and a lack of competition have on inequality more generally and specifically within the context of developing countries. Developing countries have contextual factors, such as concentrated product markets and labour markets characterised by high levels of unemployment. These factors may lead to variation in outcomes relative to those seen in more developed economies. It may also necessitate differences in prioritisation and implementation of competition policies. The paper concludes by providing some recommendations for how competition law and policy can be used to reduce inequality.
Competition Policy and Black Empowerment: South Africa’s Path to Inclusion
(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.
Devil’s in the Detail: How to assess transformation of ownership of the South African private sector
(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.
Enabling inclusive economic ecosystems in Africa: A role for city governments?
(Southern Centre for Inequality Studies, 2022-12) Joseph, Stacey-Leigh; Karuri-Sebina, Geci
This paper finds that the local state, and in particular major African cities, have a critical ecosystem role in advancing inclusive economic development and mitigating inequality. It reaches this conclusion by investigating: • What potential exists for African cities to design and implement inclusive local economic development approaches; and • How local actors (local government/municipal, civic, commercial and knowledge actors) can play an active role in positively influencing production and socio-economic equality, including through their leveraging of new technologies.
Estimates of Employment in South Africa Under the Five-Level Lockdown Framework SCIS Working
(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.
Estimating the Distribution of Household Wealth in South Africa
(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.
FINANCIAL DIRECTIONS AND BUDGET TRENDS IN GOVERNMENT HEALTHCARE
(Southern Centre for Inequality Studies, 2023-11) Michael Sachs; Fareed Abdullah; Thokozile Madonko; Kim Jonas; Nevilene Slingers; Tanaka Zvawada
This working paper provides evidence and analysis that can assist in taking forward the agenda of the Presidential Health Compact. It does so by reviewing the financial performance of the government healthcare system over the last decade. After assessing the financial management performance, it looks at the “financial health” challenges facing the system, including the problems of accruals and medico-legal claims. The report then examines the budget pressures faced by provincial healthcare departments, as well as the different allocation of resources and levels of care across provinces. It ends with a conclusion and tentative reflections informed by the evidence.
Firm Wage Premia, Rent-Sharing and Monopsony When Underemployment is High
(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. I show 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.

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