Summary: The end of Apartheid in South Africa has led to many positive changes in the country. But the division of wealth and income remains inadequate to address Apartheid’s crippling economic legacy. Like many growing countries, South Africa faces the difficult challenge of redistributing its wealth. However, unlike other countries, South Africa is facing the challenge head on. CATRIONA PURFIELD, World Bank Senior Economist We look at the top ten percent. They are earning incomes that are a thousand times bigger than those in the bottom ten percent in South Africa. They are only earning ZAR 200 a year before fiscal policy takes effect. However, once we look at fiscal policy, we say that it takes taxes to the rich, and gives it to the poor in the form of fiscal benefits. And as a result of that, that gap narrows from a thousand times bigger, to sixty six times bigger. In South Africa, the government provides benefits in the form of cash payments such as child and old age grants to the poorest people. It also provides free education and free healthcare. As a rule, the poorest people receive more in cash benefits than they are required to pay in taxes. The most recent South Africa Economic Update finds that this is a level of redistribution unsurpassed by other countries. GABRIELA INCHAUSTE / World Bank Senior Economist And what we find is that in terms of fiscal policy’s ability to reduce inequality and to reduce poverty, South Africa stands out. It stands out both in its ability to redistribute, but also in its ability to actually produce impacts on reducing poverty. South Africa’s cash transfers are cutting the poverty rate for those living on less than $2.50 per day by about 7 percentage points. The money brings meals to the dinner tables of families who otherwise would have no reliable income. 66 year old Eunice Ngcobo lives in the township of Alexandra in Gauteng Province. She’s Raised her four grandchildren after they were orphaned. EUNICE NGCOBO/Social Security Grant Recipient If I wasn’t getting the old age and child support grants, life would be very difficult for me. I am not working, and I have high blood pressure, so I would be in and out asking for food for my kids as well. Despite the benefit of such a progressive fiscal policy for South Africa’s poor, the country is grappling with slowing growth, high fiscal deficits and a debt burden that has grown to 40 percent of GDP, leaving little room for expanded social spending . Ending the legacy of inequality in South Africa and ensuring a bright future for all of its citizens will require a greater emphasis on the quality of education and health spending. It also calls for higher growth that creates jobs, especially for the poor, so that all South Africans can increase their earning potential.
