Thomas Piketty, the French economist specialising in wealth and inequality, said a lack of large- scale, forced land redistribution in South Africa from the rich to the poor has fuelled one of the world’s widest income gaps.
“Many successful development experiences in Europe and also in Asia did at some point in their trajectory use land reform and other forms of direct redistribution of property much more than South Africa did,” Piketty said in an interview on Thursday in Johannesburg. “You never had this kind of big phase of redistribution of property and probably that explains why the legacy of apartheid is still very much there in terms of inequality.”
More than two decades after the end of white minority rule, racial inequality is still stark in South Africa. Black South Africans, who make up about 80% of the population of 55 million, on average earn a sixth of what white citizens do, according to census data. Since coming to power in 1994, the ruling African National Congress has sought to redistribute wealth to blacks by imposing rules that require industries from mining to technology to sell stakes in companies to black investors. The ANC’s land reform policy is based on a willing seller-willing buyer model.
“South Africa is very unequal and did not become more equal after the end of apartheid, at least not as much as some people would have hoped,” Piketty said. “In some way, it has even become more unequal if we take the concentration of incomes in the top groups of the people.”
Labour unions have been calling for a national minimum wage and Deputy President Cyril Ramaphosa said last month implementing this plan is a matter of urgency. Such a pay floor, and a tax on the wealth of individuals rather than just their income, would contribute toward a more equal society inSouth Africa, Piketty told reporters in Johannesburg.
A national minimum wage “is an important tool to reduce extreme wage inequality,” Piketty said. “Creating an annual wealth tax with a low tax rate will be a way to create more transparency about who owns what in South Africa and how this is changing over time.”
South Africa raised income taxes for the first time in 20 years in the February budget, targeting all except the lowest income earners, to help plug a revenue shortfall. The Organisation for Economic Co-operation and Development said in July the government should increase taxes on wealthier individuals to help boost income needed to expand social and economic infrastructure.
Piketty is in South Africa to deliver the annual Nelson Mandela lecture on Oct. 3. He is author of the best-selling book, Capital in the Twenty-First Century, which investigates the concentration of wealth.
©2015 Bloomberg News