EDUCATION LEVY TO REDRESS UNEQUAL EDUCATION LIMITING SOCIAL MOBILITY IN SOUTH AFRICA

WE CANNOT CHANGE THE PAST - WE CAN CHANGE THE FUTURE

Everyone in South Africa could give up a few indulgences to support an ‘Education Levy’ to fund free university education.  Based on a sliding scale on income, the levy would be the equivalent of a few cappuccinos, or beers with the boys, or a round of golf (of which there are 450 golf courses in South Africa), or a pair of shoes, or one less restaurant meal or take-away.  Non-essential expenditure you could actually forgo.


Violence is not the key to free education.  Key to free education is sound strategy and mental resilience with a degree of patience during the formative stages.  If students collaborate and co-design a fees model and believe they will get free or partially free education they are right.  If students don't believe they will get free education or partially free education and continue with violence they are also right.  This is a mental fight, not a physical fight.  Violence and chaos are the students worst enemy.  They are in turn becoming their worst enemy!

I attended an event in Pretoria East (De Villebois Mareuil Drive and Garstfontein Road) yesterday, an area I had not visited for thirty-three years.  I was astonished and astounded at the development in the area, both old and new properties (7 bedroom homes in Mooikloof Glen selling for 12 million rand) and the penny dropped!

South Africans have a wonderful lifestyle, the old elite benefited substantially financially during and before the apartheid years and now the new elite are also benefiting substantially.  Plus, due to compound interest, life could not be better for the old elite.  The length and breadth of South African suburbs, not just Pretoria East, these suburbs are full of residents who lead a very satisfactory lifestyle with a very comfortable income and investment savings.  A far cry from the life and struggles of our desperate university students.

OXFAM REPORT - FOR RICHER FOR POORER – THE CAPTURE OF GROWTH AND POLITICS IN EMERGING ECONOMIES Author Alice Krozer Doctoral Researcher at the Centre of Development Studies at the University of Cambridge January 2016 https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/rr-for-richer-or-poorer-270116-en.pdf

WHY SHOULD AN EDUCATION LEVY BE IMPLEMENTED ON INCOME AND PROPERTY OWNERSHIP SALE TRANSFER DUTY ON PRIMARY AND A HIGHER EDUCATION LEVY ON SECONDARY PROPERTIES?

APART FROM THE IMPACT OF APARTHEID WHICH WE ARE ALL WELL AWARE, THE FACTS EXTRACTED FROM THE REPORT ABOVE SPEAK VOLUMES AND THIS IS WHY AN EDUCATION LEVY SHOULD BE IMPLEMENTED ON INCOME AND PROPERTY OWNERSHIP TRANSFER DUTY TO REDRESS SOUTH AFRICAS PAST, PRESENT AND MOVE TOWARDS A BETTER FUTURE FOR THOSE WHO ACADEMICALLY QUALIFY AND HAVE THE COURAGE, HARD WORK AND TALENT TO MASTER THEIR FULL POTENTIAL AT UNIVERSITY THROUGH FREE EDUCATION

SOUTH AFRICA IS THE COUNTRY WITH THE HIGHEST INCOME-INEQUALITY LEVELS BY VIRTUALLY ALL INDICATORS

DIFFERENCES IN OPPORTUNITIES CAN BE CLEARLY OBSERVED IN THE EDUCATIONAL SPHERE

The emerging economies Brazil, Russia, India, China, South Africa, Mexico, Indonesia and Turkey – henceforth the BRICSAMIT – have come to be considered the economic powerhouses of recent decades, fostering a narrative of the growth of the South.  Today, all eight BRICSAMIT countries occupy the top ranks as some of the most unequal countries in the world. The price these countries – and millions of their citizens – pay for this is high.  Excessive inequality hampers development prospects: negatively impacting growth potential, threatening poverty reduction, leading to mass migra­tion flows and ‘brain drain’, and reducing opportunities for young people.

A single mother might not send her oldest child to school to ensure she can provide for her other children. Or a young person might choose not to pursue a university degree because she needs an income to support herself and/or relatives, cannot afford fees and does not want to take out a loan if future job opportunities are limited. Thus, lack of money in the present impairs people’s decision-making on investments, for instance relating to higher education, hence limiting opportunities for social mobility in the future.

Inequality affects all aspects of a person’s life and life chances, from health and education to living environment and prospects for old age. Extreme inequality perpetuates high levels of violence and crime, fuels mistrust and undermines social cohesion. It is now clear that the gains of economic growth in the BRICSAMIT have been captured by the very richest. Fortunes have been made by large corporations engaged primarily in the extractives, agribusiness, infrastructure, media and telecom­munications sectors. The capture of power by economic elites, including companies, drives inequality by ensuring the rules remain rigged in favour of the rich, who grow increasingly influential.  

 

This concentration of wealth and power in the hands of the few is clearly at the expense of the many. It reinforces existing social structures, perpetuating inequality and excluding millions of people from an equitable share in prosperity.

In fact, today all of the BRICSAMIT countries are among the most unequal in the world by at least one or more indicators:

SOUTH AFRICA IS THE COUNTRY WITH THE HIGHEST INCOME-INEQUALITY LEVELS BY VIRTUALLY ALL INDICATORS

As the political power of economic elites grows, the average citizen’s power to actively shape significant policies decreases. The more visible causes and conse­quences of the resulting inequalities manifest themselves in differentiated living standards for citizens according to income, including in the realms of health, educa­tion and life chances. They create two tiers of development in all aspects of life, where the wealthy enjoy increasing levels of affluence that do not fall short of any high-in­come group in the developed countries, while the lower income groups remain in conditions of deprivation. All of this affects social cohesion and societal stability.

TABLE 1: BASIC COUNTRY INDICATORS 2014

Country	Population 2013 (millions)	GDP, US$ (bil­lion)	GDP/cap 2014 (US$)	Government expenditure on education (% of GDP)	Public health expenditure (% of government expenditure 2013)
Russia	143.5	2,057.30	14,316.64	4.10	8.42
Brazil	200.4	2,244.13	11,067.48	6.35	6.93
Mexico	122.3	1,295.86	10,836.69	5.15	15.38
Turkey	74.9	813.32	10,518.29	2.86	10.74
China	1,357.4	10,355.35	7,572.36	1.91	12.63
South Africa	53.2	341.22	6,354.28	6.00	14.02
Indonesia	249.9	856.07	3,403.97	3.57	6.63
India	1,252.1	2,047.81	1,625.64	3.87	4.55

Source: Data from the World Bank (2015)

The BRICSAMIT countries share an additional number of important features

THE NARROW ELITE

1. The fact that much of their growth in recent decades has been appropriated by a narrow elite stems largely from the adoption of an inherently unequalizing economic model. This includes the reliance on mega-infrastructure projects, such as the Belo Monte and other large dam projects in Brazil, high-speed railways in India and Mexico, or even the FIFA World Cups in Brazil (2014), South Africa (2010) and Russia (2018), which drive country growth while generating benefits mainly for a small number of individuals and corporations, often with serious negative consequences for the environment and poor people.
2. Growth has no inherent benefit if it fails to achieve increased well-being for the majority of a country’s citizens. Inequality, on the other hand, has an intrinsic negative value: it is exclusionary, preventing some groups of society from realizing their full potential and rights in social, political and economic life. An inequality debate solely focused around the objective of achieving growth will limit understand­ing of the negative consequences that large disparities have on all aspects of society. The BRICSAMIT countries have experienced prolonged periods of economic growth.
3. An increasing share of the top is almost always accompanied and matched by a loss in share for the most vulnerable part of the population, i.e. the trajectories of the rich and poor groups in Figure 6 mirror each other (especially those starting from more equal distributions). Given the context of economic growth in the countries, this indicates that rich groups have been able to take advantage of growth benefits at the cost of the poorer groups.
4. Figures for South Africa show that the share of those at the very top has been increasing significantly, granting the richest 1% almost 17% of total income, up from around 8% in the early 1980s (although levels have not reached their peak of close to 24% in 1946).

This phenomenon of fractal division means that, for instance, the South African top 0.1% – just over 50,000 people – held 4.8% of total income in 2010; the richer 25,000 of this small group, however, appropriated close to 70% of this amount.

Where the increase of the top share is so large, proportionally other income groups lose out. As Figure 5 has shown that the middle income group’s share remains fairly stable at around 50%, the loss must therefore occur at the bottom of the distribution. This group’s voice tends to be represented less in policy circles, due to several factors. For instance, its lack of economic power means it has little exposure to networks and connections that are close to and have influence on decision makers. These groups also lack the resources to invest in professional lobbyists who could advocate their interests. At the same time, the very diverse interests of the low income groups further complicate advocacy dedicated to their concerns.

THE FAILURE OF TAX SYSTEMS TO REDRESS THE BALANCE

Government policies should and could increase the income share of the poor; one of the most effective ways of doing so could be through reducing the income of the top earners via progressive taxation. However, this is not currently an issue very high up the public policy agenda in the BRICSAMIT countries. For one, the total amount of tax collected is comparatively small: even the relatively high amount of 27.5% of GDP that South Africa collects falls far short of the OECD average of 34%.41 All BRICSAMIT top income-tax rates remain below the OECD average of 41.58%, with Russian top levels of 13% at the low end.

In South Africa, over 86% of adults took out a loan in 2013/14, making it the world’s number one country for people needing loans.50 Recipients do not seem to have enough money to meet even the most basic needs: 36% of loan-takers borrowed to pay for education and/or healthcare.

Only when individuals are endowed with savings or wealth of their own, may government transfers lose importance, because (temporarily) insufficient income can be compen­sated using personal means. So to assess people’s actual opportunities to enjoy equal living standards, particularly in the context of a limited welfare state, it is important not only to look at current incomes, but also at the distribution of wealth.

THE FAST-RISING WEALTH GAP

Wealth, defined as the value of financial assets plus real assets (principally housing) owned by households, less their debts,51 has grown rapidly in the BRICSAMIT coun­tries since 2000. It has tripled in Brazil, India, South Africa and Turkey, more than tripled in China, increased four-fold in Indonesia and by a startling eight times in Russia.52 Moreover, China now has more residents with wealth above US$50m than any other country except the USA. The official numbers are likely to vastly underesti­mate the extent of private wealth: for every ‘known’ one of China’s one million plus millionaires, by some accounts another two exist under the radar.  In South Africa, the number of millionaires with more than US$10m has grown 120% over one decade, compared with a world average growth of 71%.

In South Africa, where the difference between average income and that of the richest man is smallest, it would take the average worker 15,737 years to earn what the country’s richest man made in just one year.

The above suggests that the accumulation of wealth in this context works largely through small groups of individuals and families thriving through their proximity to political elites, and running the biggest raw-material and infrastructure companies of the country undoubtedly helps to provide certain political influence. These individu­als either happened to be in the right place and time at the moment of large-scale privatization (Russia, China); were long-standing friends of the leaders of old and new political regimes (India, Brazil); or they just became those leaders themselves (Mexico, South Africa). Since contracts over former public assets are made available exclusively through government permissions, these are susceptible to corruption by powerful actors, especially where combined with low public sector accountability or weak rule of law. This is a political problem, because it grants those people with the necessary economic means more influence than average citizens.

THE REVOLVING DOOR BETWEEN BUSINESS AND POLITICS

Meanwhile, in South Africa yet another strategy can be observed. Multi-millionaire investor-entrepreneur Cyril Ramaphosa, now Deputy President of the ANC, hopes to circumvent the politician-intermediary altogether by running for the country’s presidency himself in 2017. The many contradictory hats he has worn in the past (union leader and buster, black economic empowerment success story, and part-own­er of both McDonald’s and Coca-Cola’s South African outfits) testify to his adaptabili­ty and connectedness. Self-evidently, he also runs on a pro-business platform.

What is the impact of elite capture on the majority of people, who do not have direct links to executive power and are thus largely excluded from the decision-making processes that shape societal structures? Inequalities affect people in every area of their lives. Social structures of income and wealth concentration drive these inequalities, but demarcation lines of privilege may additionally run along dimensions such as gender, ethnicity or geography.

The problem is that all of the vital inequalities are far from randomly distributed; instead, they are very closely related to the presence (or absence) of economic resources at the individual’s disposal. The uneven distribution of economic resources comes to shape every aspect of a society. In capitalist societies127 to have money is to have freedom, while insufficient income and wealth leads to the denial of freedoms and exclusion from the main activities of a society.128 In the BRICSAMIT context, state provision of essential services is often limited, so the availability or otherwise of economic resources is a key determinant of well-being in most other dimensions, i.e. an individual can also improve their own and their children’s intrinsic situation by investing in the private, expensive version of key goods, including education, health­care and social protection, thereby securing higher income levels in the future. This effectively results in two tiers of development within the same society.

INEQUALITIES AFFECT EVERY ASPECT OF LIFE

Inequalities affect other important aspects of quality of life besides our incomes, includ­ing our physical and mental well-being, the environmental and social conditions we live in, as well as our prospects of leading a fulfilled life in terms of choosing the education and jobs we want to develop our own capabilities. Disaggregating the Human Develop­ment Index (HDI)129 according to income groups, we are faced with stark differences in developmental levels. Standards enjoyed by the highest quintile – the richest 20% of the population – exceed average levels of even the most economically advanced nations, whereas the lowest quintile’s levels compare to those of the least developed countries.

INEQUALITY UNDERMINES DEVELOPMENT

In sum, the persistent and reproducing inequalities in the BRICSAMIT countries are based on income and wealth differences and run along gender, ethnic, geographical, historical-institutional and generational divides. The list of their drivers and conse­quences is long: differences in exposure to environmental hazards; threats of violence and repression; unequal access to resources including healthcare, social protection and education. The two-tier health and education systems – whereby the rich can afford expensive private schools and hospitals while the poor have to rely on un­der-equipped public versions – further increase vulnerability for those who are already underprivileged.

The shifts in income and wealth distribution of the BRICSAMIT countries in the past three decades point to the importance of local conditions for inequality outcomes. Besides the highly unequally distributed accumulation and flow of financial resources across population groups, social inequalities – for instance in health and education – are also vast. Such inequalities are both cause and consequence of a set of power inequalities embedded in the respective historical-institutional environments of the BRICSAMIT countries.

These multiple and overlapping inequalities hinder the utilization of the full potential of a society. Economic development in terms of economic growth remains below its potential level in a context of inadequate investment and elite blockage of innovative policies. Extremely limited access to affordable and quality education decreases economic prospects on the personal and societal level, and limits the potential of social emancipation.

Lack of social cohesion and societal malfunctions in highly unequal societies also include the erosion of trust. This further strains quality of life: if people start feeling uncomfortable around their peers, in their neighbourhood, with their fellow humans, because they fear or despise, envy or pity them, or because insecure and often violent environments around them lead them to assume the worst of strangers – how will they live comfortably and happily, even if they happen to be so lucky as to be at the high end of the income distribution?

One of the reasons why it is so difficult to significantly ameliorate inequalities is that high income and wealth inequality obstruct egalitarian policy making where the elite is predominantly engaged in extractive sectors.

Yet it is possible to break the vicious cycle of inequality that is perpetuated by repressive and exclusionary processes, and instead create a virtuous cycle of egalitari­an and inclusive policy making as a precondition for tackling the root causes of inequality. Below are five areas for governments to include in their concerted strategy to fight inequalities and achieve more prosperous, equal societies – both mitigating the consequences of current inequality, and preventing new inequalities from arising.

REPORT CONCLUSIONS AND WAYS FORWARD

1 Re-frame the economic development model, and ensure that public interest, protection of human rights and reduction of inequality forms the core of the developmental agenda. This applies both within the BRICSAMIT countries but also in terms of the investment and cooperation model these countries are increasingly engaged in overseas, particularly in low-income countries.

2 Reform the regulatory environment, particularly around transparency in govern­ment. There is a need for measures that restrict conflict of interest; to decouple business from campaign financing; cooling periods to close revolving doors between big business and government; and binding disclosure of personal gains and contribu­tors – as well as the proper enforcement of these regulations.

3 Achieve a fair pre-distribution of incomes through formalizing informal jobs, raising minimum wages, creating employment and increasing the bargaining power of workers.

4 Achieve redistribution and strengthen tax systems by filling loopholes for tax evasion and aggressive tax planning; increasing top income-tax levels; and revising tax incentives for large corporations. Recognize the problem of rapidly increasing wealth inequality, and thus apply a high-threshold wealth tax in the form of inheritance tax or a tax on capital gains. Such a tax would have considerable redistributive impacts, as well as fill the public accounts, which in turn provide resources for more effective social policies and provision of public services.

5 Ameliorate the symptoms via inclusive social policy. In order to enhance well-be­ing across society and to reduce inequality, ensure there are more concerted efforts to provide public healthcare, education and social protection, allowing access for everybody, particularly those who have been excluded in the past.