Can you tell how rich or poor someone is by looking at their skin in South Africa? Apartheid aimed to make it so. In 2020, has anything changed – in fact or in perception?

Many people believe that race is a proxy for poverty in South Africa today. David Masondo, former president of the Youth Communist League and current Deputy Minister of Finance, recently wrote in the Daily Maverick that “[d]ue to its colonial legacy, colour remains a proxy for inequality, poverty and unemployment in today’s South Africa”.

In September Steven Grootes wrote that “the simple fact is that the majority of South Africans believe that race indeed is a proxy for disadvantage. They believe, with firm evidence, as well as their lived experience, that white people are rich and poor people are black.”

And Thamsanqa Malusi, a lawyer with a Seattle-based law firm, wrote that as “beneficiaries of centuries’ long exploitation of black, coloured and Indian people, whites remain far more privileged in South Africa by comparison”.

And yet if you look at the Stats SA data that Grootes hyperlinks, in particular its Inequality Trends report, a different picture emerges.

South Africa has extreme income inequality, the top 10% earning more than half of national income. But how does this cut across race? Stats SA shows that in 2006 white South Africans earned almost half of all income, but by 2015 this was down to 34%.

Getting richer

If black income had increased at a higher pace than increasing white income this would surely have been a good thing, as happened in the mid-2000s. Most people were getting richer, but black people, starting from a lower base, simply outpaced white compatriots in income growth.

Since then, however, the economy effectively halved, compared to the growth path it was on in the 2000s.

By 2015 the black top 10% earned 25% of national income. The white top 10% earned 10%. The black middle 50% earned 21% of national income.

Only within the black category do you see the top 10% earning more in absolute terms than the middle 50%.

Using “black” on the broader BEE definition, the top 10% earned 32% of national income back in 2015. That means the BEE “disadvantaged” elite earned three times more in absolute terms than its white counterpart just at the time when “white monopoly capital” became the bogeyman to blame for all woes.

On the same basis, the number of black dollar millionaires was overtaking white equivalents around 2015, too, according to New World Wealth.

Nevertheless, in 2020 President Cyril Ramaphosa said the economy in which white people earn a third of all income is “colonial and racist” as trillions on the stock market and millions of jobs were shed.

If you think “white people are rich” you might assume no white person was badly affected. Yet over a million white people are now not economically active and over 100 000 are unemployed, according to Stats SA. Even if Grootes cannot see them, these people are not “nobody”.

Moving from data to “lived experience”, I cannot think of a single South African who is still surprised to see a black celebrity wedding, a black person driving a fancy car, sporting Gucci, or flying business class through Dubai. The common response to seeing a white beggar, especially in small towns, is no longer to take a photo or tell a friend. Rich black people and poor white people are not a secret to anyone, except pundits and politicians.

Weirdest lived experience

But the weirdest lived experience must be this. You see someone get out of a sports car, besuited and flash, to come and make a multimillion-rand deal. Her CV is splendid. She has worked with international firms, has connections in government, and boasts of her premium degree. Then BEE compels you to judge her “disadvantaged” and in special need of help because her skin is dark. This, or something like it, is the lived experience of every major deal-maker on West Street in Sandton.

So what, you may ask? Black elites and poor whites do not mean the legacy of apartheid is over. Look at the poorest half of the country; most people in dire straits are black. That is true, too.

According to Stats SA’s report, the black bottom 40% earned 3.7% of national income in 2015. That is seven times less than the black top 10%. Put another way the black elite earned 28 times more, per capita, than the black lower class.

The conventional argument following this observation is that poor black South Africans can only be lifted out of poverty by more legal discrimination on the basis of race. Malusi and Masondo both argue that this is the route forward, without explaining how poor, disaffected, and poorly educated black people are supposed to outcompete the incumbent black elite. Malusi avers that there is no other way and Masondo goes a step further to say, “the state has had to introduce black economic empowerment” to “solve inequalities”.

Statistical discrimination

This is what economists call “statistical discrimination”. When something important is hard to know and something unimportant is easy to know and the two are highly correlated people use one as a proxy for the other. Statistical discrimination can be benign and useful.

For example, sailors who lack high-tech navigation equipment use birds as proxies for land. They know which species have to land every evening so if they see such a bird in the sky they assume there is land nearby even though they cannot see it themselves. This proxy can be lifesaving.

For a low-stake racial example I was looking for someone who could speak English at a train station in Moscow. When I saw a black man, I guessed that he was foreign and so more likely to speak English than the rest. I went up and asked for directions in English; my guess was right, and he helped me find my way. (But not before engaging me in conversation that ended with him saying, “One day you can tell the story about when two Africans met on a train station in Moscow”, and a hug goodbye).

Though it can be useful and benign sometimes, statistical discrimination is pernicious. When police do “race profiling”, that is statistical discrimination where they guess who is antisocial by using race as a proxy for criminality.

BEE is explicitly statistical discrimination that uses race as a proxy for disadvantage. But is it helpful or harmful?

Effectiveness of statistical discrimination

Putting morality to the side, the effectiveness of statistical discrimination is dependent on how closely the known factor is to the unknown factor. If rich, educated, well-connected people were almost all white then race would be an effective proxy for advantage. Yet every time a black person makes a million, gets a degree, or gains the trust of someone in power, that correlation between disadvantage and race reduces.

So the first problem for BEE proponents is that, to whatever extent you think it worked over the last 15 years, it is no longer a useful proxy to exactly the same extent. Conversely, to whatever extent you think BEE is still a useful proxy, it has not worked.

The second, perhaps more surprising problem is that race turns out to be harder to see, from a government perspective, than income and education certification. Race is the invisible land while actual advantage is the visible bird in the sky.

Take the case that prompted Masondo’s and Malusi’s recent articles. Glen Snyman called himself “African” on a job application and was then briefly charged with “fraud”. Perhaps the most mind-boggling thing about the case is that the government not only had to ask Snyman for his race (lacking it on their own database), it also has no way to confirm or disprove his race in law.

Malusi said Snyman’s “official records” prove that he is “coloured” not black, but it is unclear what “official records” he has in mind. To be sure, Snyman was officially categorized by race during apartheid, but then the Population Registration Act was repealed in 1991. As it stands there is no “official” pencil test, DNA test, or method of any kind to prove the dispositive regarding a person’s race.

Access to evidence

By contrast, through the tax system and the social grants system, the government has immediate access to evidence of who earns millions and who hardly gets mealie-pips. Moreover, through the education accreditation system, reliable records can be established of what school and university qualifications you have. The government can in practice and in principle find out your actual, relevant advantages, but cannot begin to prove your race one way or another.

This could be changed by legislating new pencil- or DNA-based tests. But to what end? We already know how to figure out if people are poor and poorly educated and race does not come into it.

If the downtrodden masses in this country are to stand a chance of building wealth it will not be by using pencil tests to figure out if they can afford to buy a goldmine. It will be by using hard evidence to root out the looters; it will be by using the hard edge of law to break the crony cartels; and by judging one another as agents of change or devotees to what Justice Edwin Cameron called “more same, more same”. Nothing could be more “more same” than judging a South African’s need by the colour of her skin.

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9 COMMENTS

  1. The whole system of government procurement has been corrupted. When you use race, gender or any other means like level of poverty or education, you are warping the natural market mechanisms through which our economy would otherwise operate. This is why all systems of preference are intrinsically wrong from an ethical point of view.

    The more responsible means of enabling people is to educate them so that they can compete on a more equal footing. Also to provide equal access to everyone to the tender systems. And to have feedback available as to who was successful and how much they paid. But in all of these our government are most unobliging: poor levels of education, difficult to access procurement systems and restricted requests for quotes ensures that the playing fields remain totally uneven. Add the BEE stuff and you have a system where price and quality somehow don’t matter much any more.

  2. What colonial legacy? South Africa was only ever a colony of Great Britain, and that lasted until 1934. Apartheid was not colonialism.

    • Actually, South Africa’s status as full blown colony of the UK ended in 1910 when we became the Union of South Africa. Then, when we became the Republic of South Africa on 31 May 1961, the UK lost their final control over South African affairs.

  3. Bee started off with good intentions, but has been used to buy and bully the work force. No matter how we color it, the problems now emerging for the mid to lower income and workless black individuals, are that they do not have friends nor the correct family in the job market. The words spoken by people like Masondo, Malusi and Malema is to gain votes pure and simple. Not get people jobs, regardless of race.

  4. No man should ever be judged by the color of his skin but by the value of his efforts. Unfortunately it is true that the harder the work the less the pay and the smarter the work the higher the pay. In a normal world the pay goes with the responsibility but the Zondo commission has clearly shown that it is not true for the ANC cabinet members and their associates. It seems that responsibility is not part of their vocabulary.
    it is also true that the less you do the less you get and if that is not the case you are most probably a thieve.
    It is however also true that people are not equal, we are not born equal, we do not grow up equal and we do not die equal, neither do we have equal opportunities for it is more important who you know than what you know.
    It is more difficult for a person coming from a simple home to become wealthy than for somebody who grew up in in a sophisticated environment, but it is not impossible. Neither is it a fact that a person from a better home will grow up to be a better person. We are what we achieve.
    The fact that I am not a billionaire can only blamed on my disability to have achieved that. If I should go hungry that would also be blamed on me.
    If racism was the reason for poor blacks where did the black multi millionaires come from, and why are there poor whites?

  5. South Africa is by no means the only country that is or ever was facing the conundrum of race inequalities. And in most of these countries, it has been a matter of the stronger, wealthier, more numerous or more industrious race usually overshadows the other(s).

    That is the core definition of racism – where the majority implements discriminatory practices against the minority based on their race.

    And, unfortunately, the victims of this discrimination are eventually eradicated;
    either by means of genocide – like the systematic killing off of the agricultural engineers producing the food;
    or by usurping their traditions into those of the majority – like prohibiting the use of their language or forbidding their cultural celebrations such as attending church services or singing those songs, about living and dying for their country, that made them and their culture special;
    or by means of the government sanctioned indoctrination (brain-washing) of their children that makes them believe they are inferior, inadequate, inhuman, not entitled to anything and guilty of the sins of their forefathers as far back as 100 generations.

  6. Great article. I am left wondering if blacks are the masters of lies and deception, or the biggest racists on the planet?!?

  7. Brilliant analysis Gabriel. The only addition I could suggest is juxtaposing the living experience of the racial preference enjoyed by that very smart black lady you referred too with the treatment being meted out to black farmers right now . That smart lady undoubtedly owns her car, controls her bank affaires and would have full title of her real estate and quite rightly so, whereas a number of black farmers who have, some for decades, successfully established themselves on land allocated to them by this BBBEE ANC, have just been informed by that very same ANC that their farms are up for grabs. This iniquity is possible because title to that land has been cruelly refused by the ANC government in accordance with there communist inspired desire for state control of everything. In addition to all this madness it is also quite clear that those present experienced farmers will be at the bottom of the list should they apply to continue the lease of their farms. The Minister of Agriculture has made it quite clear that preference will be given to black woman, black youths and black disabled. No mention of skills. Another monstrous and inhumane ANC disaster in the making

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