Thank you to everyone who engaged with our recent newsletter on unemployment, the Gini coefficient, and the broader issues of income inequality in South Africa.
We were particularly struck by the insightful response from one of our readers, who took the time to share a well-considered perspective on the topic. With their permission, we’re sharing their contribution with you — not only to keep the conversation going, but to invite further discussion.
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South Africa’s rising unemployment, ongoing pay gap, and deep-rooted inequality stem from a mix of historical, economic, and structural factors:
- Unemployment is a major driver of inequality; South Africa’s unemployment rate remains alarmingly high. One key reason for this is the slow economic growth, which limits job creation. Add unto this, skills mismatches, which mean many workers lack the qualifications needed for available jobs. (Our Schools, Colleges and Universities, might be part of the problem as they do not always provide the necessary skills needed for people to be employable. Currently about 61% of the labour force in South Africa is unskilled, making it difficult for them to secure stable employment.
- Pay Gap: While many blame wage disparities within companies, economists argue that the real issue is the low number of people earning wages rather than differences in salaries. Less than half of working-age men in South Africa are employed, meaning a large portion of the population is excluded from wage income.
- Historical Inequality: South Africa’s inequality has remained extreme for over a century. The apartheid system legally entrenched racial and economic disparities, and while political rights were extended after 1994, economic inequalities have persisted. The top 10% of earners capture over 65% of total national income, while the bottom 50% receive just 5.3%.
- Regional Disparities: Economic opportunities are concentrated in urban centres like Gauteng, while rural provinces such as Limpopo and Eastern Cape struggle with lower income levels and fewer job prospects.
- Government Efforts: South Africa has attempted to address inequality through social spending, affirmative action, and wealth redistribution. However, these measures need to be complemented by private investment and job creation to be truly effective.
- Several additional factors contribute to South Africa’s economic challenges and persistent inequality. One major concern is the lack of political will, alongside government policies and legislation that may inadvertently hinder job creation and foreign investment. Policies such as Expropriation Without Compensation (EWC), Black Economic Empowerment (BEE), Affirmative Action (AA), and Employment Equity (EE) can create uncertainty for investors and limit opportunities for economic expansion.
Furthermore, the rigid enforcement of minimum wage laws, while intended to protect workers, can unintentionally exclude millions of jobseekers from entering the labour market, preventing them from earning an income and gaining valuable experience. Corruption exacerbates the issue, draining resources meant for development and weakening trust in institutions.
South Africa also faces a shortage of entrepreneurship-focused programs, particularly those aimed at equipping young people with the skills and opportunities needed to drive innovation and job creation. Combined with rapid population growth outpacing economic expansion, the country struggles to generate enough employment to absorb new jobseekers.
Addressing these issues requires a balanced approach, fostering inclusive policies that attract investment, encourage entrepreneurship, combat corruption, and ensure that labour regulations support both workers’ rights and economic participation.
Ultimately, tackling inequality requires boosting employment, improving education and skills training, and fostering inclusive economic growth. Moving people from social grants to formal employment is seen as one of the most effective ways to reduce inequality.
CHRISTO SCHOEMAN
28/05/2025