Advice and Opinion

South Africa's Gini co-efficient a cause for concern

One of the results of being involved in the development and marketing of housing in South Africa, says Bill Rawson, Chairman of the Rawson Property Group, is that one becomes aware that certain poverty levels are so high that people’s lives become almost intolerable and their dissatisfaction can become dangerous.

The latest Gini co-efficient from the World Bank indicates clearly, says Rawson, that South Africa is now vulnerable as a result of a growing feeling that the income inequalities here are far too high.

The Gini co-efficient measures the extent of inequalities in income and lifestyle in most of the countries of the world in a scale of zero to one. A fairly affluent, but not radically unequal country like the UK will, therefore, have a Gini rating of 0,38. It is generally accepted by economists, added Rawson, that once the Gini rises above 0,4% trouble will ensue because the have-nots begin to resent their lack of wealth and second class status – Britain, therefore, with its 0, 38 rating, may be not far off a situation in which rising resentment at the lower end of the income scale could result in calls for higher taxation of the rich, increased welfare hand-outs and other socialist initiatives which in the long term will inevitably restrict growth.

The UK, says Rawson, is however, managing very well at the moment. In South Africa the situation is far more serious and should be of concern to those who endeavour to keep track of our affairs.

“The South African Gini rating is generally calculated at around 0,65%. This puts us well within the “on-going discontent” bracket. The figure of 0,65% represents a middle point between 0.79 and 0.59 which are the estimates of where South Africa would stand at the moment if welfare relief measures were not propping up the system and what the situation could be if the government welfare programmes were more effectively handled.”

“However one measures it, it is impossible to escape the realisation that we are living with a high level of inequality which our current economic growth rate makes it very difficult to deal with.”

Asked what solutions he would propose, Rawson said that if the Government’s NEPAD initiatives were fully implemented, that would be a step in the right direction. In the meantime, far greater emphasis should be placed on the development of a skilled work force, not just welfare and relief measures.

“70% of urban Chinese are qualified in one or other industrial or business activity by the time they leave school – and nearly half of these go on to further study which enables them to improve their earning ability. By 2030, it is estimated, the Chinese will be the most highly skilled nation in the world. Here in South Africa by contrast, we are still producing school leavers – including matriculants – who even those with genuine philanthropic ideals, find it extremely difficult to employ.”

In the housing sector, says Rawson, the effects of economic inequalities are especially evident:

Roughly 30% of the population cannot afford a home valued at R250,000.

Yet, says Rawson, it is now an established fact that the formerly disadvantaged members of our country increasingly recognise the value of home ownership and aspire to own their own homes.

“Our franchisees working in previously disadvantaged areas around the country report a strong desire to own a home among the people with whom they deal – a desire, which, it should be pointed out, is shared by almost all newly urbanised people worldwide.”