Adam Habib: inequality is South Africa’s greatest challenge

16 April 2014 | Opinion

South Africa is now officially the most unequal society in the world – and if we do not have the courage to tackle this issue, “we are in trouble”.

Professor Adam Habib addresses the 5th Annual Social Investment Conference

So said Professor Adam Habib, vice-chancellor of the University of the Witwatersrand and prominent political analyst, in the closing address to the 5th Annual Social Investment Conference. The conference, sponsored by Tshikululu Social Investments, took place at the Gordon Institute of Business Science campus in Johannesburg on 2-3 April.

Apologising in advance for “ruffling some feathers and trampling some toes”, Habib said there is a “nonsensical” debate in South Africa at present, around what life is like now, and what it was like under apartheid.

“We take it for granted, but it’s a fundamental change [between then and now] … The fact that black people can vote, we take for granted these days. Nobody can say that life is worse off today, than it was in 1984 or 1985,” Habib said.

He pointed out that his utterances at the conference could have ended with his incarceration in the 1980s. Many of the people present would not have been allowed to attend the conference, and indeed, he would not be the vice-chancellor of Wits.

Even the “much-maligned” education system is better than it was, Habib argued.

“It’s true that most black people get a crappy education, but at least they get an education,” he said – adding that in 1985, they may not have received an education.

Instead, the “real substance of the debate” is: what is life like, and what could it be like?

South Africa has experienced growth for 19 of the past 20 years – at 2.4%, much lower than the 6-7% it should be, but growth nevertheless, said Habib, adding: “The problem is, Inequality has grown every single year for 20 years.”

He argued that “poverty and inequality are not the same thing”, however – and dealing with one does not resolve the other. Poverty relates to the level of livelihood of people, and whether they can live a decent life; inequality, on the other hand, is the difference and distinction between people at the top of the system, and those at the bottom.

There exist two “camps” regarding inequality, said Habib.

The first argues that inequality’s “not to be worried about”; it’s the way things are. But perspective plays a role here.

“A child falls into a pit latrine and drowns – it’s shocking,” said Habib, averring that in a country such as Germany, “the president would be fired” over such an incident. In South Africa, the story barely made it into the media.

“People’s perceptions – people’s sense of happiness – are always determined by your reference point. Your sense of unhappiness is not determined by statistical facts, but by your reference point.”

For example, averred Habib, South African platinum miners are demanding a R12 500 monthly salary. When compared to R27-million earned by mining company CEOs, such a demand is not unreasonable.

“Anybody who says inequality doesn’t matter, doesn’t understand people’s lives,” he said, adding that inequality polarises society, causes economic strife and scares off foreign investment.

The second school of thought around inequality, “who think and know inequality is a problem”, are tackling poverty and hoping inequality will go away.

“That’s exactly what’s in the National Development Plan (NDP),” said Habib.

The education, health and public administration sections of the NDP are very good, he continued, but the plan aims to address poverty and inequality through interventions such as small business development, clearing legislative hurdles, education and so forth.

The problem with this approach is that “you’re dealing with poverty, not inequality”. And as the economy grows, “the guys at the top grow faster” – further widening the inequality gap.

“It’s the fundamental dilemma of our times. And it’s the dilemma we duck,” said Habib.

Inequality cannot be reduced without political intervention, he continued, and “there’s only two or three ways to do it”:

  • Cap top executive earnings
  • Revise tax rates
  • Engage in formal business development

Turning to black economic empowerment (BEE), Habib said it is necessary – but it raises challenges, including that it accelerates inequality. Under the current BEE dispensation, resources go to the top end of the black population, resulting in more equality with the white population – but accelerating inequality within black population.

Regarding corporate social investment (Social Investment) in South Africa, Habib said the country does well, and Social Investment spend is high by international standards.

But where former president Nelson Mandela could extract funding from CEOs to build schools all over South Africa – “nobody wanted to say