Southern Centre for Inequality Studies (SCIS) - (Working papers)
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Item Firm Wage Premia, Rent-Sharing and Monopsony When Underemployment is High(Southern Centre for Inequality Studies (SCIS), 2021-02) Bassier, IhsaanHow 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.Item Knowledge and Inequality: An Exploration(Southern Centre for Inequality Studies (SCIS), 2021-09) Nathan, DevItem A Wealth Tax for South Africa(Southern Centre for Inequality Studies (SCIS), 2021-01) Chatterjee, Aroop; Czajka, Léo; Gethin, AmoryThis 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.Item Working Alone in South Africa: A Tale of Increased Precarity and Deepened Inequality(Southern Centre for Inequality Studies (SCIS), 2021-10) Ewinyu, Arabo; Masikane, Fikile; Webster, EdwardItem Interrrogating a Framework for Universal Social Protection in India(Southern Centre for Inequality Studies (SCIS), 2021-01) Srivastava, RaviThe 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.Item Addressing Constraints to South Africa’s Agriculture Inclusiveness(Southern Centre for Inequality Studies (SCIS), 2021-09) Sihlobo, Wandile; Qobo, MzukisiSouth 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.Item Industrial Policy, the Manufacturing Sector and Black Empowerment in South Africa(Southern Centre for Inequality Studies (SCIS), 2021-09) Goga, Sumayya; Avenyo, Elvis KorkuBlack economic empowerment (BEE) in South Africa has undoubtedly been ambitious in seeking to transform ownership, control, and management of the economy’s productive assets and resources. It is ambitious because the changes that are needed to reverse decades of entrenchment of economic power in the hands of a few are far-reaching. Extensive transformation means challenging the position of incumbents in the economic system and the interests that work together to maintain those positions, in the context of a decidedly liberal economic policy context. While BEE policy has been applied as the African National Congress government’s primary strategy for bringing about transformation in the ownership and control of productive assets in the economy, the outcomes in key sectors of the economy have been poor in terms of inclusion. This paper considers the interrelations between the black empowerment programme and industrial policies in South Africa, with specific reference to transformation in the manufacturing sector. The paper examines the extent of transformation in the manufacturing sector in South Africa. The paper seeks to understand why South Africa has not seen the emergence of a large, economically significant black industrialist class that owns and controls economic assets and resources that are competitive at different levels in the manufacturing sector. The paper further explores the extent to which South Africa’s industrial policy strategies have contributed to or undermined deep transformation in the manufacturing sector. The paper identifies key limitations of BEE and South Africa’s industrial policy framework, and the gaps between these policies in terms of addressing the factors that restrict the inclusion of black-owned firms in manufacturing. It further considers how industrial transformation could be accelerated in South AfricaItem 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, AllaisThis 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.Item 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, LumkileThe 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.Item Competition Policy and Black Empowerment: South Africa’s Path to Inclusion(Southern Centre for Inequality Studies (SCIS), 2021-09) Mncube, Liberty; Ratshisusu, HardinCompetition 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.