Gini in a bottle

In economics, the Gini coefficient is a metric used the world over to measure the degree of inequality of income or wealth within a country. South Africa has the dubious honour of having the highest Gini coefficient and as such, the planet’s highest income inequality among a given population.

Much like Aladdin’s fabled genie of the lamp who was bestowed with more power than any other being, we saw the power of inequality first-hand in July when many of our country’s poorest folk to the streets, malls and suburbs to show just how disgruntled they were with their lot.

We will long remember the rioting, looting and civil unrest witnessed in the wake of former president Jacob Zuma’s incarceration for defying a Constitutional Court order. While many have blamed Zuma’s supporters for bringing the province of KwaZulu-Natal to its knees (and Gauteng, to a lesser degree), the as-yet-to-be-confirmed root cause of the looting, along with criminal consequences for those responsible, sadly remain unclear.

But South Africa’s exceedingly high Gini coefficient offers some clues.

Beyond the headlines and images of destruction, unnecessary loss of lives and livelihoods, and the money needed to rebuild and repair the damage at a time when many can ill-afford it, lies gross inequality. The ANC government would do well to take heed of this and finally address it, especially if it plans to retain the seat of government in the future.

Prior to last month’s unrest and the unfortunately-timed Level 4 lockdown, South Africa’s GDP for 2021 was set to exceed 4.50% – a figure we have not achieved since the heydays of President Mbeki and the steady hand of Finance Minister Trevor Manuel. Growth at these levels is exactly what is needed to offset the country’s crippling unemployment levels and rising numbers of despondent and hopeless people, providing a sense of future employment opportunities and security. Growth at any lower rate is a catalyst for continued unrest, looting and violence.

The author and Baptist preacher Adrian Rogers famously said, “You cannot legislate the poor into prosperity by legislating the wealthy out of it” – a strategy our lawmakers have pursued since the advent of democracy in 1994.
One hopes that following President Ramaphosa’s recent cabinet reshuffle, coupled with the desperate need to stimulate decent growth, it has finally been understood that the ANC’s policies pursued up until July 2021 cannot continue beyond that tipping point.

If I were ever granted three wishes, that would surely be one of them.

Wishing you and your loved ones the very best as we navigate the tail of the third wave.

Steve Crouse
Chief Investment Officer and Senior Advisor