The report examines the process of household income generation to identify the sources of inequality in the region. Titled “An Assessment of the Southern African Customs Union” it says consumption inequality across the SACU region is found to be more than 40 percent higher than the averages for both Sub-Saharan Africa and upper-middle-income countries. South Africa, the largest country in SACU, is the most unequal country in the world, ranking first among 164 countries in the World Bank’s global poverty database.
Botswana, Eswatini, and Namibia are among the 15 most unequal countries, and despite recent improvements, Lesotho still ranks among the top 20 percent, the report shows.
“We know from this report that inherited circumstances over which an individual has little or no control, drive overall inequality, and that despite SACU countries undertaking some of the most redistributive spending in the world, particularly on education and health, inequality remains extremely high,” said Marie Francoise Marie-Nelly, World Bank Country Director for Botswana, Eswatini, Lesotho, Namibia, and South Africa. “Levelling the playing field at birth through more inclusive delivery of quality education, health, and basic services is critical to reducing inequality in the region.”
At least one-fifth of inequality in SACU is explained by inherited circumstances such as location, gender, age, parental background and when race is included in the analysis, the contribution of inequality of opportunity more than doubles. High wealth inequality limits intergenerational economic mobility, making consumption inequality persistent over time. In the labor market, having post-secondary or tertiary education is key to both accessing jobs, and obtaining better wages once employed.
In Namibia and South Africa where inequality is distinctly higher than the rest of the countries, the sharp inequality in land ownership also contributes to perpetuating the historically high levels of income inequality. “This report shows that lack of access to key productive assets such as skills and land, is slowing progress towards a more equitable income distribution,” said Pierella Paci, World Bank Practice Manager of the Poverty and Equity Global Practice for Eastern and Southern Africa. “Improving access and availability of private sector jobs and access to productive assets such as land will help equalize opportunities”.
The report suggests promoting policy measures that foster equality of opportunity and address the highly skewed distribution of productive assets, which are critical to reducing the persistently high inequality in the five (SACU) countries. The report also suggests enhancing the capacity to respond to increasing climate and economic shocks, that generally affect the poor more severely. Enhancing the efficiency and effectiveness of social spending and improving the targeting of key social protection programs to redirect resources towards the most vulnerable for more sustainable and efficient fiscal redistribution, is key for accelerating reduction in inequality.