SA’s middle class closing in on the rich

The gap between the poor and middle class in South Africa is widening, but according to the World Bank, inequality between the rich and middle class is narrowing.

On Tuesday, the World Bank released its latest economic update on South Africa, where it analysed inequality in the country and made projections about how South Africa could look in 2030 if certain policies were changed.

Among the key findings in the report is that if policy changes are implemented, according to the World Bank’s model, then the number of poor people in South Africa could be more than halved from 10.5-million in 2018 to 4.1-million in 2030.

“Today, inequalities are driven by education and labour status – conditions that policies and public interventions can improve,” the World Bank said in its report.

Education remains crucial to development in the country, with the Washington-based institution already finding that progress made in access to education in South Africa has slowly led to more skilled workers in the labour force from poor backgrounds.

“Despite the slow growth environment that South Africa is currently facing, ongoing improvements in education among poor is slowly paying off as they gain skills and get an increasing share of skilled labor income,” said Sebastien Dessus, World Bank project leader, in a statement. “As a consequence, we project income inequalities to be lower in 2030 than in 1996.”

According to the bank, South Africa has the “highest polarised index in the world”, meaning that it has the highest inequality in terms of wealth distribution.
A breakdown of class inequality in the country from the bank indicates that South Africa’s population is:

  • 49% chronically poor
  • 20% middle class
  • 14% vulnerable
  • 13% transient poor
  • 4 elite/wealthy

In order to reduce the number of those who are chronically poor by 2030, the Bank says that corruption, free education and state-owned entities must be properly addressed in the country.

“They include, in the short term, continuing to address corruption, getting free higher education right, restoring policy certainty in mining, improving the competitiveness of strategic state owned enterprises, further exposing South Africa’s large conglomerates to foreign competition, and facilitating skilled immigration,” the Bank said.

In its long-term projections, the key to improving inequality in the country will come from basic education services and making inroads to remove apartheid spatial planning, so that the poor can be closer to economic opportunities.

“And, in the longer term, improving the quality of basic education delivered to students from poor backgrounds and reinforcing the spatial integration between economic hubs, where jobs are located, and underserviced informal settlements,” the Bank said.

The Bank warns, however, that if underlying causes of inequality are not treated seriously, then South Africa’s current improved economic outlook under President Cyril Ramaphosa and his new Cabinet may be short-lived.

“Stubbornly high levels of inequality reflect the weak capacity of many South Africans to contribute to skills-intensive economic development. Inequalities fuel contestation and policy uncertainty, deterring the investments and financial resources needed to innovate and expand productive capacities, and to redress historical injustice through targeted public interventions,” the Bank said. 

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