Submission on Income Levels to NDP

01 April 2012
Views 151

Racial Transformation in Income Levels
1 Introduction
1.1 South African Transformation Monitor (SAT Monitor)
1.2 South African transformation Index (SATI)
1.3 The use of terminology
1.4 Background to the study
1.5 Data for the study
2.1 Racial representation of disposable income
2.2 Annual total disposable income by race, 1996–2009
2.3 Annual per capita income by race, 1996–2009
2.4 Annual average household income by race, 1996–2008
2.5 Income inequality (Gini co-efficient) by race 1996-2008
2.6 Racial representation of the poverty gap 1996-2008
3 References
4 Appendices
In 1994, South Africa was characterised by a black1
population that was, as a rule,
poverty stricken and economically marginalised. As apartheid gave way to political
freedom, various companies began to hire black professionals for the first time. This
included such professionals as accountants, financial experts, IT specialists, engineers,
doctors, nurses etc. Since 1994, in order to rectify the skewed economical profile of
black South Africans, and to facilitate the entry of blacks into various professions, a vast
body of legislation, policies and charters in various sectors of the economy have been
introduced. Instrumental to ensuring black advancement are the Employment Equity Act
55 of 1998 and the Broad-Based Black Empowerment Act 53 of 2003, as well as
numerous others.
This study documents the actual progress made by the different racial groups in the
areas identified since the transition to democracy. It also considers the impact of these
changes on the broader political economy. My findings in the first phase of the project
were that blacks have advanced rapidly from an economic point of view since 1994. I
say this with the knowledge that I have been careful to measure black advancement and
transformation in South Africa in an accurate, comprehensive and objective manner.
Given the sensitive nature of a project such as this one, we take a very conservative
approach in reaching our conclusions.
1.1 SAT Monitor
The SAT Monitor will provide statistical evidence of the progress made by black South
Africans alongside other racial groups since 1994. Research will be broken down into
several phases, with each phase concentrating on a certain sector of the economy. The
sectors covered are as follows:
1.1.1 Black ownership of the Johannesburg Stock Exchange (JSE) and ownership of
insurance policies;
1.1.2 the public sector;
1.1.3 bank accounts, savings accounts and credit cards;
1.1.4 company registrations and directorships;

The broad definition of blacks includes Indians and Coloureds.
1.1.5 education enrolment and levels (primary, secondary, tertiary, public and private);
1.1.6 income;
1.1.7 land ownership, land holding and mortgages (private and government);
1.1.8 management (private sector);
1.1.9 occupations (skilled employment);
1.1.10 professions (IT, accountants, engineers, doctors, lawyers etc);
1.1.11 access to healthcare
1.1.12 tertiary education.
1.2 SATI
As previously stated, the SATI will be constructed using the research in each sector as a
cornerstone. The SATI will also be updated annually, using the research carried out in
the various sectors for a specific year.
1.3 The Use of Terminology
The study uses data spanning 1994 to 2009. The meaning of given terminology, with
specific reference to the use of ‘Indian/Asian’ and ‘African/black’ changed over this
period. An explanation of this terminology is important for the interpretation of this report.
Before the implementation of the Employment Equity Act in 1998 and the introduction of
new reporting structures by government, most government departments generally used
the word ‘black’ when referring to black (skin colour) South Africans and Asian when
referring to South Africans of Asian descent. After 1998 the reporting structure changed,
with the designation ‘African’ referring to black (skin colour) South Africans, Indians and
Coloureds. These three classifications make up what is now called the broad definition
of black in South Africa today. ‘White’ refers to South Africans with a white skin colour.
Throughout this study, the broad definition of ‘black’ (which includes African, Indian and
Coloured) is used.
1.4 Background to the study
During the climax of the apartheid period, 60% of South Africa’s laws were related to
race. This makes it hard to study any aspect of South Africa without mentioning race.
Since the transition to democracy, the government has come up with various policies to
correct the inequalities of the past. The questions to be answered by this study are:
What has been the impact of government policies such as Employment Equity Act, Skills
Development Act, and SAQA Act among many others on incomes of black South
Africans? What changes have taken place in the racial composition of income since
1994? What gaps still exist in the racial composition of income?
1.5 Data for the Study
The data for this study has been obtained from various sources given that no single
organisation/institution has comprehensive documented information on income levels by
race in South Africa. The data was mainly secondary data. It was collected from Stats
SA data, South African Institute of Race Relations’ publications, and other internet
sources. This data was then aggregated and analysed.
The focus of the analysis is not on the actual income figures by race but rather on the
change that has taken place in the income levels between 1994 and 2010. Tables and
charts will be used to show both actual numbers and also the change in income for the
various racial groups in South Africa.
2.1 Figure 1: Transformation in Earnings in formal non-agricultural employment in
the public and private sectors, 2000-2010
Source: Business Report 23 July 2010, based on SARB and Adcorp data. Chart
by author
According to figure 1, there has been a 143.1% increase in income in the public
sector compared to an 83% increase in the private sector. Therefore taxpayers have
paid more towards funding salary and wage increases in the public sector than they
have received themselves from their employers in private sector concerns over the
past 10 years.
2.2 Table 1: Annual total disposable income by race, 1996–2009
Annual total disposable income by race, 1996–2009
1996 312,714 54,790 34,449 331,048 733,001
1997 325,885 57,359 34,805 339,403 757,452
1998 333,643 58,646 34,633 339,271 766,193
1999 341,777 59,856 34,621 341,973 778,227
2000 358,435 62,632 35,454 352,251 808,772
2001 371,700 63,986 36,616 359,297 831,599
2002 390,047 65,758 38,184 367,008 860,997
2003 402,720 66,714 39,363 375,501 884,298
2004 428,076 69,902 41,290 397,982 937,250
2005 458,653 73,245 42,945 417,294 992,137
2006 506,274 78,503 45,784 434,221 1,064,782
2007 546,337 83,893 48,093 445,309 1,123,632
2008 569,452 86,578 49,889 444,307 1,150,226
2009 561,661 83,831 48,634 426,078 1,120,205
Change: 1996–
2008 79% 53% 41% 28% 53%
Source: Global Insight Southern Africa, Regional eXplorer, 2008
According to Table 1, between 1996 and 2009, the total annual disposable income in South
Africa increased from 733,001 Rmillion to 1,120,205 Rmillion., According to the table, the total
disposable income for all races increased significantly. For Africans, disposable income
increased 79% from 31, 2714 million to 56,1661million;. for Coloureds it increased by 53% from
54,790 million to 83,831million; for Indians it increased by 41% from 34,449 million to 48,634
million; and for whites, the increase was 28% from 331,048million to 426,078 million. However,
over the period studied, total disposable income for blacks (Africans, Indians coloured) is more
than that for whites and is continues to grow at a greater rate than that for whites. This is
illustrated below.
Figure 2: Annual total disposable income by race, 1996-2009.
Figure 2 shows that the disposable income of blacks increased from 55% of the total for all
races in 1996 to 62% in 2009. That for whites, has decreased from 45% of the total for all
races in 1996 to 38% in 2009. The popular view that the incomes of blacks are not increasing
when compared to those of whites, therefore, is a myth. The problem that arises when
measuring black incomes is that within the black population far too few blacks are income
earners. This fact is revealed when one examines per capita income, per capita disposable
income, and average incomes by race.
Figure 3: Percentage of Disposable Income by race (1960-2007)
Source: South African Institute of Race Relations SAIRR,
Disposable income is the after tax income available for households to either consume
or save/invest. An individual’s lifestyle is determined by the amount of disposable
income they have. In 1960, whites controlled 69.4% of disposable income in South
Africa. This dropped to 40.4% by 2007 whereas black control of disposable income
grew from 30.6% to 59.6% over the same period. There has, after all, been a
significant shift in the control of disposable income between blacks and whites, but,
however, black disposable income needs to grow further if it is to support the size of
the black population.
2.3. Figure 4: Annual per capita income by race, 1996–2008
Source: Global Insight Southern Africa, Regional eXplorer, 2008
Figure 4 shows that between 1996 and 2009 there was a 235% increase in the per capita
income of Africans, compared to a 217% increase for whites, 203% for coloureds and 180% for
Indians. In absolute terms, the incomes of blacks have increased significantly, in per capita
terms, but the increase is marginal when compared to that of whites. The reason is because
blacks constitute about 80% of the population and when the total income is divided by a large
population, the per capita income seems very little. However, blacks have advanced
significantly with respect to per capita income.
3.7 Figure 5: Annual average household income by race, 1996–2008
Source: Global Insight Southern Africa, Regional eXplorer, 2008
According to figure 5, there was a 166% increase in annual average household incomes for
Africans, 167% for coloureds, 140% for Indians and 186% for whites. The total annual increase for
all the races was 148%. Contrary to the popular view that incomes are not growing, incomes have
increased by more than 100% for all racial groups since 1996. This shows there was significant
black advancement in annual average household income.
Figure 6: Income Inequality (Gini co-efficient) by race 1996-2008
Source: Global Insight Southern Africa, Regional eXplorer, 2008
The Gini coefficient is a measure of income inequality. It can vary from 0 (complete equality) to
1 (complete inequality). According to figure 6 above, there has been an 11.11% change in the
gini coefficient for Africans from 1996 to 2009, the change for coloureds is 12.24%, 6.0% for
Indians and -8.16% for whites. Africans had the highest Gini coefficient in 2009, and whites the
lowest in same period, while coloureds show the highest growth rate in Gini coefficient between
1996 and 2009.
Figure 7: Racial Representation of the Poverty Gap 1996-2008
The poverty gap by race, 1996–2008 (in millions of Rands)
1996 16,677 618 56 176 17,527
1997 19,388 713 61 214 20,376
1998 22,168 816 70 256 23,310
1999 24,337 897 77 307 25,618
2000 25,504 940 81 328 26,852
2001 26,707 985 84 366 28,142
2002 28,650 1,057 91 392 30,189
2003 33,488 1,235 106 459 35,288
2004 34,556 1,274 109 473 36,413
2005 36,707 1,354 116 503 38,680
2006 35,964 1,326 114 493 37,897
2007 35,960 1,326 114 493 37,892
2008 35,240 1,300 111 483 37,134
Change: 1996–
2008 111.30% 110.40% 99.10% 174.50% 111.90%
a The poverty gap measures the difference between each poor household’s income
and the poverty line (as defined in the table Number of people living in relative poverty by race,
1996–2008, above).
Source: Global Insight Southern Africa, Regional eXplorer, 2008
2.7 Conclusion:
The key findings from this study reveal that the income gap between the races in South
Africa is narrowing and includes the following:
There has been a marked increase in wages for South Africans of all race groups and in all
sectors since the transition to democracy. Between 2000 and 2009, the public sector saw a
143.1% increase in income compared to an 83% increase in the private sector. The findings
reveal a marked increase between 1994 and 2010 in the incomes of Africans especially,
irrespective of the unit of measurement: annual total disposable income, average annual total
disposable income, per capita income, and annual average household income. White per capita
personal income in 2008 was 7.7 times higher than that of Africans, a decrease from the 15
times difference that existed in 1970. In the same year white per capital personal income was
4.5 times higher than that of coloureds, and 1.5 times higher than that of Indians. The per capita
income of Indians and coloured people was the same in 1917. However, since then Indian
income has grown at a higher rate than that of any other race group. At constant 2000 prices,
between 1993 and 2008 white per capita income rose from R46, 486 to R75, 297.That of
Indians rose from R19, 537 to R51, 457. Coloured people went from R12, 911 to R16, 567.
Income for blacks rose from R5073 to R9790. Therefore, differences in income levels between
the races cannot be attributed to lack of transformation but due to many different factors
including skills differences between the races, historical racial wealth accumulation differences
and high rates of black unemployment.
However one can asset that the economy is in the right path in terms of increasing incomes
wealth for its citizens especially the previously disadvantaged groups (Africans, Coloureds and
Indians) which have shown the highest levels of income growth when compared to the income
growth rates for whites within the same period.
1. South African Institute of Race Relations (SIACA),
2. Statistics South Africa
3. Quantec, 2007 (Stats SA OHS data for 1996-1999; Stats SA LFS data for 2000-2005
4. The Presidency of South Africa. Growth Indicators Publications 2009-2010
5. electronic research resources. Accessed 10/08/2010.

Comments on Submission on Income Levels to NDP