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If SA wants to be a less angry nation, we need a massive paradigm shift on inequality

JOHANNESBURG — In the third of a series on inequality, Sam van Coller speaks largely for the need of compromise as all South Africans have a shared future. To lift millions of people out of poverty, South Africa will need to become a more caring society while also a more rational one that doesn’t scare investors away. Here is van Coller’s final thought-provoking piece on this very important topic. – Gareth van Zyl

By Sam van Coller*

At this point the challenge seems insurmountable.

  • South Africa is already at the tipping point on taxation – increased rates will start to reduce the tax base
  • Redistribution is already happening. Income tax is on a steeply sliding scale, middle class citizens pay for all or some of the education of their children, their health care, retirement and security. Substantial State funding is being allocated to housing for the poor.

And yet little or no progress is perceived by the poor as being made to reduce inequality. In fact real progress can be made but it will require leaders in all sectors to make seemingly painful paradigm shifts in their worldview.

Read also: Solving South Africa’s inequality headache: Addressing wealth, income, opportunity

Political and labour leaders need to see successful business as critical to improving living standards not only for their shareholders and employees but also by generating a growing tax base. Cheap anti-business rhetoric needs to stop. At the same time, every effort must be made to strengthen competition and stamp out all collusion and corruption in business.

Business leaders need to adopt a new model that sees business as a partnership between shareholders and employees with executive management being the leaders of that partnership. Employees are equal risk takers with shareholders – they stand to lose just as much as shareholders.

Read also: SA’s inequality problem: Can you be pro-business, pro-poor at the same time?

The wealthy need to recognize that redistribution is in their interests. It will increase consumption expenditure, utilise the innate capacity of more South Africans and start to reduce the burden of the unemployed on the State.

Public servant leaders need to commit to managing State public services with integrity and sound management of available funds. The country’s limited resources need to be used to best effect.

Affirmative action now needs to shift its focus from Black South Africans to Poor South Africans – who will virtually all be Black. This will be very difficult for many to accept but as long as the current policy remains, middle class citizens will continue to benefit to the exclusion of the poor.

In line with these paradigm shifts here are some actions that could make a difference.

Housing

Granting full title needs to become as important as the completion of new accommodation units for the poor. To speed up the home ownership process, a greater share of available funds should be allocated to serviced stands for ownership by the poor. Housing will grow out of the ground!

Education

Again, the current distribution pattern of budgeted funds needs to move dramatically in favour of the poor at pre-school, primary, secondary and tertiary levels.

That means reducing the student intake at universities and increasing it at TVET Colleges, allocating a greater proportion of available funds to schools in poorer and particularly rural areas, expanding pre-school (pre Grade R) facilities in poorer areas – this with the help of the private sector.

For those unable to enter a tertiary level institution, skills development centres need to be widely established by the State and business working in partnership.

Business

As part of the national effort, Nedlac needs to formulate an agreed strategy that will democratize business by enabling employees to elect Non-Executive Directors and by expanding employee shareholder schemes at a sustainable rate.

Land

The South African land issue is an emotional scrambled egg. If ‘Expropriation without Compensation’ should become the main instrument of change, it will destroy South Africa. It does not fit into either the Redistribution or Free Enterprise strategy options. It is a form of Retribution and must be expected to generate the conflict and destruction that history tells us will happen.

A multi-faceted strategy will need to bring about a modern agricultural sector where Black South Africans play a critical role and inequality between owners and employees has been significantly reduced. It should involve the formulation of partnerships between shareholders and employees – particularly in the larger corporate style farms – as in other economic sectors – special programmes to develop farming and management skills for children of farm employees, expropriation of underutilised and playground farms for redistribution, finding home ownership solutions to housing of farm employees plus ….. 

If South Africa wants be a less angry country ‘where citizens no longer throw large rocks off bridges to kill motor car owners’, we all need to make a paradigm shift in our thinking – a shift that addresses the consequences of past exclusion by allocating significantly more resources to empowering the poor to lift themselves out of poverty. Gradually South Africans will heal their deep divisions and start working together to achieve Madiba’s dream and show the world it can be done.

  • Sam van Coller is Former Executive Director of SEIFSA and CEO of The Urban Foundation. He currently owns and runs a hospitality business in Limpopo that employs 28 previously disadvantaged and severely undereducated South Africans.
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