Is there a financial Kuznets curve for South Africa?

Abstract

This research report analyses the impact of financial sector development on Income inequality in South Africa for the period 1990 - 2021. The research report employs the Autoregressive Distributed Lag (ARDL) using data sourced from the South African Reserve Bank (SARB) and the World Inequality Database. The report finds that there is no evidence of a financial Kuznets curve for South Africa for the period of the study. The report adds to the sparse literature on the nexus between financial sector development and income equality in South Africa by using an index formulated using Principal Component Analysis (PCA) as a proxy for financial sector development and considering the impact of Social protection expenditure. Social protection expenditure, mostly in the form of cash social grants, is used the by South African government as one of the levers to address income inequality in the country