Navigating the stark inequality in South Africa

A shantytown in Cape Town. (Photo by Jonnelle Marte)

Twenty-five years after the end of apartheid, the economic opportunities in South Africa are still very much divided along racial lines.

White people in the country make up a sliver of the population but own most of the wealth. A small number of black people have gained significant wealth since the end of apartheid, but they are in the minority. To add some numbers, the top 1 percent of South Africans – most of whom are white — own 71 percent of the country’s wealth. The bottom 60 percent of the population hold only 7 percent of the wealth.

Many of the executives we met with on this trip referenced the stark inequality as a distinct challenge that limits economic growth and shapes the identity of the client they work with. At the investment firm Investec, for example, most of their customers are middle-aged white South Africans. The firm has a philanthropic division aiming to close the gap by supporting education and entrepreneurship. But as one employee told CBS students, there are many issues to tackle related to racial inequality and all of them are equally important, making it difficult for well-meaning people to know where to start.

Apartheid was a discriminatory policy that segregated black South Africans from white South Africans and barred non-white people from working certain jobs and owning property. Families were forcibly removed from their homes and relocated into townships. Their opportunities were limited, and interracial relationships were prohibited.

Another hot issue mentioned by most of the business leaders we mentioned is the question of land reform. Some politicians and activists are calling for land to be returned to the South Africans who were robbed of their property during the apartheid era. The uncertainty over the future of land ownership is causing some people to hold back from making investments in agriculture and other industries that are reliant on land.

A neighborhood with colorful homes in Cape Town.. (Photo by J.C. Hay)

The unequal distribution of land is notable across the country. Some people have large homes, as well as access to good education and quality doctors. Many others, including the majority of black people in the country, are struggling to find jobs, let alone a place to live. Many reside in poor neighborhoods known as “townships.” In some shantytowns, people live in homes with a tin roof, cement walls and limited access to electricity.

The stagnant economy is making things worse people on the low end who are desperate to find work. With an unemployment rate of 27 percent, jobs are so scarce that agriculture firms hold back from automating tasks just to keep those jobs open. For example, sugar cane is harvested by hand, exposing workers to scorpions, snakes and other hazards. The work is difficult but there are people willing to take the risk for a paycheck.

The government has moved to support the poor by providing stipends and subsidizing education. But the efforts fall short of solving the inequality problem.

More businesses are starting to target consumers on the lower end by introducing financial products that more tailored to their needs. CBS students met with Michael le Roux, the founder of Capitec, a bank that launched in rural areas and grew rapidly by offering a simple account and lower rates on cash loans. The bank is now facing more competition from other companies targeting the low end of the market.

Discovery Limited, an insurance company that offers discounts to people who meet health targets, is launching a digital bank this month. The account will pay higher interest rates to people who adopt financially healthy habits, such as saving and paying off debt. TymeBank is another digital bank entering the market that will not charge monthly fees, arguing that it will save money by not offering physical bank branches, instead offering cash machines inside of grocery stores.

It will be interesting to see if these companies succeed.

— Jonnelle Marte ’19

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