Evaluate south Africa approach to redistribution of wealth and income
Answers
Answer:
For many middle income people, the accumulation of wealth follows a pattern over the life cycle: low among young adults, rising in middle age to a peak just before retirement and then reducing in post-retirement years. Such people accumulate wealth to provide for emergencies, specific needs, retirement and bequests. Wealth is held in order to smooth consumption over time. It follows that if an unexpected parcel of wealth is dropped on someone, that wealth will not be retained fully. Some of it will be converted into consumption, since the increase in wealth changes calculations about what can be consumed during the rest of the person’s life. That has been one the frustrations of wealth transfers under black economic empowerment: what has been transferred as wealth does not, in large measure, remain as wealth in the hands of the person who receives it.
The rich are different if they have assets at the outset and so are the poor who have few assets of any kind.
The distribution of income is easier to measure and more frequently measured than the distribution of wealth. One internationally used measure of income distribution is the Gini coefficient, which varies between zero (perfect equality) and one (perfect inequality, where one person receives all the income). The Gini coefficient is usually measured for the distribution of income between households. Using the 2011 census returns of income, one can estimate the Gini coefficient for South Africa at 0.68, in line with other recent estimates. By international standards, this is very high, though it is mitigated by a strongly redistributive pattern of taxation and state expendture.
For decades, there has been interest in South Africa in the distribution of personal income across population groups. In 1970, as in 1917, Whites had 70% of household income. However, the 2011 census yields the following estimates of shares: