Saturday, May 28, 2022

Racial economic inequalities haunt post-apartheid South Africa

PRETORIA: In a country where a plumber in the Soweto township earns R5000.00 a month while their counterparts in the leafy suburban Sandton, for instance, make the same in one outing, the glaring racial economic disparities seem set to live with southern Africa’s power house for a long time to come.

To this end, South Africa is not only upbeat to grow the economy by 1.4 percent by the end of this year, but has also embarked on an ambitious plan to capacitate Small, Medium and Micro-sized Enterprises (SMMEs) as the catalyst to achieve economic growth and development. In addition, the country wants to create 100 industrialists to correct the past imbalances of colonialism and apartheid on the back of its Broad Based Black Economic Empowerment policy. Yet only this past week economists were predicting a depressing picture of a country leaning towards a 70 % chance for a downgrade by international credit rating agency Fitch on Friday.

Both Fitch and Standard & Poor (S&P) were expected to review the country’s rating by end of this week. The latest stage three power cuts, that were introduced last week, were expected to weigh heavily on the country’s fourth quarter GDP numbers.

Along with the country’s poor economic performance this year and an increasing government debt, economists say an increasing public sector wage bill are key areas of concern which the rating agencies will be looking at local media reported.

The Director of the Centre for Small Business Development (CSBD ) at the University of Johannesburg (UJ), Dr. Thami Mazwai thinks knee jerk interventions by the government meant to alleviate the problem aren’t the solution to reverse the yoke of colonialism and apartheid in a few decades without taking a leaf from emerging economic partners of Brazil, Russia, India, and China who together with South Africa form what is known as BRICS including poorer economies in the Southern African Development Community in order to inculcate entrepreneurship. Mazwai is calling for output driven interventions. “We have not outlived apartheid. The culture of entrepreneurship has been dulled. Entitlement is so daring we expect government to be the entrepreneur. We indulge in a push approach. Malawi and Zambia do better than us,” Mazwai says to would be entrepreneurs and government.

Boitumelo Setlhatswe, Head of the Centre for Risk Analysis at the South African Institute of Race Relations, says 2014 statistics show that for every 100 employed black South Africans, 70 others are unemployed while for the same number of their white counterparts employed, only seven are unemployed. She says about 50 percent of employable blacks are dependent on social welfare while their white counterparts account for only 10 percent. The racial economic inequality is also evident in access to medical insurance where 70 percent of the white middle class have medical insurance while a paltry 10 percent are from the black middle class.

Between 2001 and 2014, living standards in South Africa have risen yet the social grant recipients this year have doubled from 8 million in 2001 to 16 million this year. Setlhatswe partly blames South Africa’s dismal educational outputs as compared to those of other SADC countries for failing to extricate the black majority from dependence on state welfare. Dr Gaby Magomola, the author of the book Robben Island to Wall Street, proffers South Africa needs a private sector bank that is significantly owned by blacks in which the government puts some guarantees to protect against failure and risk to correct the racial economic inequalities of the past.

“The Central Bank regulations are very restrictive. When we started the African Bank, we could not raise enough share capital to comply with the Reserve Bank requirements so we went to commercial banks to put some equity which got us to the levels required to operate. The government needs to emulate this model to give black economic empowerment some validity,” says Magomola. Xolani Qubeka Secretary General at Black Business Council on the one hand is of the view that government needs to streamline direct foreign investments and ask banks to consider taking equity in financing. Investment Solutions economist, Chris Hart, has warned South Africa not to make the mistake of raising taxes on big business to finance SMMES in a capital deficient environment and labour unrest environment.

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