Causes of Unequal Economy in South Africa

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Updated: May 16, 2022
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My term paper explores the historical and institutional factors that have led South Africa to be known as the most unequal economy in the world. It will look at the South African economy through a historical lens, specifically examining how inequality within its economy has shifted from the end of the Apartheid regime up to modern day. The paper focuses on identifying and analyzing social factors that have contributed to an unequal economy in South Africa. This includes gender, race, and education.

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Through research and data collection on the history of South Africa, and its economic structures throughout the Apartheid regime, as well this time period, to identify what has led to its current standing. I identify that inequality of the Apartheid has been too strong to bring economic fairness among the people of the country. I found that gender inequality, racial biases, and limited educational resources has helped prevent South Africa from reducing poverty, shrinking income inequalities, and creating sustainable growth. My paper begins the process of understanding why South Africa is considered the most unequal economy in the world.


From 1948 to 1994 South Africa was led by the Afrikaner National Party with the slogan “Apartheid” meaning apartness. This is now known as the Apartheid Era. During the Apartheid Era laws were instated that kept black South Africans and white South Africans separated. Black South Africans were removed from their lands, and the lands were sold to white South Africans at a minimal price. People were divided by race in lands, schools, marriage, and so on. When the black South Africans attempted to rebel, they were met with teargas and gunfire. It was not until foreign intervention that the racism and segregation of The Apartheid Era ended.

Although it has been nearly 25 years since the end of the Apartheid Era, South Africa still struggles to recover. According to the National Bank, today, South Africa is considered the most unequal economy in the world. Over 50 percent of South Africans live below the poverty, 90 percent of which are black, making wages less than 50 dollars per month. Meanwhile 55 percent of South Africans make less than 5 dollars per day. In addition there is a 27 percent unemployment rate in South Africa. These factors have contributed to drastic wealth and income inequality in South Africa, solidifying South Africa as the most unequal economy in the world.

There are many social factors, including education, race, and gender, that have further contributed to South Africa becoming the most unequal economy in the world. Education in South Africa is underdeveloped and ineffective. As a result, it has prevented many black South Africans from getting the education they need to acquire a high-paying job position, making it difficult to reduce income and wealth inequality. Many laws during the Apartheid greatly set back blacks and women. There have since been attempts to redistribute wealth, but they have not been entirely effective. Redistribution is harder to instill in the law. In order to find economic equality, South Africa needs to reform social institutions collectively, so those affected by the Apartheid Era can recuperate.

The Apartheid Era

In order to explore the post-Apartheid economic state of South Africa , it is vital to understand what the Apartheid Era implemented, and what it meant for the people of South Africa. Inequality and racial segregation have always been in the fabric of South Africa. In 1913, only three years after Africa established its independence, the 1913 Land Act was passed (Msimang, 2018). The 1913 Land Act forced black South Africans to relocate and live on small reserves. In 1929 The Great Depression brought economic distress to South Africa. Only ten years after the beginning of The Great Depression, World War II began in 1939, bringing along even more challenges for the South African economy (Msimang, 2018). Facing economic struggles, many South Africans believed stricter racial segregation could aid their issues.

In 1948, the Afrikaner National Party won the general election under the premise of “separateness” (Msimang, 2018). The Afrikaner National Party aimed to further divide South Africans, not just by color, but by ethnicity. The party formed three categories of people: Whites, Coulerd, and Bantu. The party believed the more separated minorities were, the less chance they had to gain power (Msimang, 2018). Just two years later, by 1950, a number of Apartheid laws had been implemented. This included the illegalization of marriage between different races. In addition, even stronger land acts were enforced, giving whites the right to over 80% of the land, and forced minority races to obtain legal documents that allowed them on white properties (Msimang, 2018). Non-whites were kept isolated from whites in schools, work environments, and other establishments, nor could they hold office or participate in government.

When Hendrik Verwoerd became the Prime Minister in 1958, he continued apartness laws, making it nearly impossible for blacks to unify and revolt against their government (Msimang, 2018). Non-blacks were denied proper education, and were unable to hold professional positions. These laws not only costed black South Africans their lands and properties, but made it impossible to receive a proper education and make a sufficient living within the workforce. Even more so, the need for low-skill workers decreased, leaving blacks without any source of income (Msimang, 2018). Thus, during the Apartheid Era, the income and inequality gap grew substantially, hurting the economic status of South Africa. At time the non-whites of South Africa tried to rebel, but they were met with tear gas and gunfire (Msimang, 2018). It was not until 1973, that The Apartheid gained global attention, and began to decline. World peace organizations, such as The United Nations, began fighting against the Apartheid’s principles. Yet, the era did not officially end until 1994 with the help of a new constitution (Msimang, 2018).

South Africa’s Current Economic State

Although the Apartheid Era ended 25 years ago, South Africa’s economy is still dealing with the aftermath. Today, the National Bank considers South Africa as the most unequal economy in the world, based off of income and wealth inequality. More than 50 percent of South Africans live below the poverty, making wages that equal less than 50 dollars per month, while 55 percent of South Africans make less than 5 dollars per day (Leibbrandt, 2012).Of those living below poverty, 90 percent are black (Leibbrandt, 2012). Meanwhile, the elite are making substantial incomes, comparable to those of high-up business professionals in The United States, due to the advantages they had during Apartheid.

When it comes to wealth inequality, the 1% (white elites) own 70.9% of property and assets, as they were given land and other resources, such as factories and real estate, for extremely low prices during Apartheid. Meanwhile, the bottom 60% of South Africans only own 7% of the collective wealth in South Africa (Leibbrandt, 2012). Due to the displacement of many black South Africans, it is extremely difficult for them to find or hold a job, as they are living in underdeveloped areas without work opportunities. This has resulted in a 27% unemployment rate in South Africa (Leibbrandt, 2012). Segregation laws of the Apartheid Era have been dismantled, but that does not mean their effects no longer linger.

Social Factors: Education

It is undeniably important to look at the social factors that have contributed to South Africa’s drastically unequal economy in order to understand its current economic state. It is the social factors that have allowed inequality to grow immensely. One of the key social determinants is education. South Africa has been ranked 75th, in terms of its education system, out of 76 on list of OECD countries (Spaull, 2013). During the Apartheid Era blacks and whites were kept in separate schools. Although this law is no longer in place, it is still mostly black South Africans attending the inadequate schools that were used to educate black South Africans during the Apartheid Era, as those are located closer to their homes (Spaull, 2013).

Since the Apartheid government did not care much about black education, these schools were never fully developed. As a result, there is a great disparity between the education some are receiving. While those attending the previous white schools have a much stricter curriculum, those in the black schools are falling through the cracks (Spaull, 2013). Spaull even argues that there are two different school systems within South Africa, due to the inequalities. After 6 years of education, 50 percent of students cannot complete basic equations, while 27 percent cannot read (Spaull, 2013). A proper education is key in finding and maintaining employment. In South Africa, Education is a predictor of labour market outcomes in terms of employment and earnings. Without a good education, black South Africans can not ascend professional, raise their income, and mend the scars of The Apartheid.

Social Factors: Race

Race is another social factor that has contributed to South Africa’s extremely unequal economic status. During the Apartheid Era, approximately three million black South Africans were displaced from their land (Msimang, 2018). They were then placed in underdeveloped areas within South Africa. Although the Apartheid has ended, it lasted nearly 46 years. After 46 years, it is nearly impossible to find three million records of what lands belonged to which people. Returning land to the displaced would mean displacing another three million, who although only had to pay a small amount, paid for the land at the price the government set. Additionally, these underdeveloped lands have been home to the originally displaced for 46 years. As a result, these black South Africans have little interest in moving away from their homes to foreign lands their ancestors once owned. Although, for the most part, these South Africans are content in staying where they are, their inconvenient location contributes to the unequal economy (Msimang, 2018).

There are very few jobs in these areas of South Africa, especially high paying careers. Thus, many black South Africans have to travel very far to work in a professional realm (Msimang, 2018). Not only does this take up a great deal of time, but transportation is not free. It is estimated that the average South African commuter spends 40 percent of his or her income on transportation (Msimang, 2018). With all this money going towards simply getting to and from work, it does not leave much income to be allocated towards investments and growing wealth. Thus, this hurts black South Africans from closing the wealth gap.

In addition, many black South Africans do not look for work in the city, and accept lower paying rural work, so that they do not have to deal with a commute. Unmotivated to work in the city, forces many blacks to accept low-paying jobs, preventing the income gap to shrink (Ntuli et al, 2014). South Africa has instituted a minibus taxi program to provide cheaper public transportation from rural areas to the city (Leibbrandt, 2012). Programs like these are crucial, as they allow black South Africans to utilize their incomes in areas that will decrease the income and wealth gap.

During the Apartheid Era there was intense racism and segregation for so many years, that it has been difficult to correct. This includes bias in the workplace. People in South African have been molded for years to believe that blacks are lesser than, lowering their chances of being offered a high-paying job. Yet, the new the South African government has executed a number of new laws to bring equality to the workplace. (Albertyn, 2011). It is now illegal in South Africa for employers to discriminate against their workers during the hiring process, or while in the workplace. Instead, workplaces are encouraged to promote diversity in the workplace. In addition, there are now affirmative action programs to help black South Africans find and maintain position within the professional workforce (Albertyn, 2011).

Social Factors: Gender

As difficult as it is for black men in South Africa to find substantial work, it is even more difficult for women. South Africa has always been a patriarchal society, valuing men more than women. Women are still predominantly seen as homemakers who should be staying in the household to tend to housework and the children (Albertyn, 2011). Thirty-one percent of unemployment is composed of women, while fifty-two percent of young women remain unemployed (Plagerson et al, 2019). This drastically influences their ability to claim rights, goods, and resources. Thus, their social and economic status is quite low, as is their ability to make decisions about their lifestyles and bodies (Albertyn, 2011). Yet, post-Apartheid laws are attempting to bring equality between the genders. Constitutional rights have been emplaced to give women recognition and provide them with redistribution. Recognition deals with issues of social standing and body agency, where redistribution focused on material and monetary injustices (Albertyn, 2011).

Lawmakers have been very successful with recognition, implementing laws that denounce patriarchal boundaries, specifically the South African Law Reform Commission (Albertyn, 2011). This included the The 1998 Recognition of Customary Marriages Act which “secured women’s equal rights to status, property, decision-making and children” (Albertyn, 2011, p. 154). Laws such as these have helped women secure more jobs and help bridge the wealth gaps slightly. Nonetheless, changing attitudes of the people of South Africa is another issue altogether (Albertyn, 2011). Although this laws are solidified by the government, there is still much work to be done in practicing them.

Although recognition has gone well, redistribution has been much more difficult for the South African government to implement. Redistribution began as a race-based program, as more black South Africans suffer from economic inequalities (Albertyn, 2011). The South African government executed the Growth,Employment and Redistribution Strategy, also known as GEAR, that focused on three distinct forms of redistribution (Albertyn, 2011).

The first covered policies to try to address basic wrongdoings from the Apartheid with the reallocation of goods and services, specifically opportunities to secure land, housing, healthcare, and education (Albertyn, 2011). The second initiative designated considerable resources to “direct redistributive policies with the dual objectives of providing short-term income support to the poor and breaking intergenerational transmission of poverty by encouraging households to invest in better health, education and nutrition for their children” (Leibbrandt et al., 2010, p. 67).

The third action focused specifically on race. It worked out an “economic empowerment strategy,” (Albertyn, 2011, p. 147) that focused on expediting the “transfer of a significant share of the ownership and management of business and industry to black South Africans” (Albertyn, 2011, p. 147). Although these efforts are all admirable, social change concerning gender has been ineffective in lowering redistribution. Even through economic change, it is difficult to redistribute wealth from a legal perspective.


The Apartheid Era has left a remarkable scar on the economy of South Africa, resulting in it being the most unequal economy in the world. The Apartheid last roughly 48 year, and in those years the South African government implemented a number of laws that segregated blacks and whites, to the advantage of white South Africans. Black South Africans were displaced, they were not allowed to own land or properties, they were denied proper education, they could not marry or have sexual relations with another race. Although these laws have been revoked, and new ones have been instituted in attempt to right the wrongs of the past, it will take more reform to bring equality to South Africa’s economy. This will need to include more accessible and effective education. Better education will allow black South Africans to learn what is necessary to qualify for higher-paying jobs. Higher-paying jobs for black South Africans will help close the wealth and income inequality gap.

Second, racial and gendered injustices must continue to be fixed through further governing. If the government provides opportunities for blacks and women to grow in the workplace, income and wealth inequality can be further reduced. Yet, all these actions need to be done in unison. Fixing education, racial biases, or gendered issues on its on will not bring prosperity to black South Africans. There needs to be a collective effort across all platforms for reform to be effective for those wronged by the Apartheid.

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Causes of Unequal Economy in South Africa. (2021, May 10). Retrieved from