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32. Wage inequality, firm characteristics, and firm wage premia in South Africa
- Author:
- Shakeba Foster
- Publication Date:
- 10-2023
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper investigates the role of firm characteristics in driving wage inequality and firm wage premia in the South African labour market. The Abowd, Kramarz, and Margolis (AKM) and Kline, Saggio, and Sølvsten (KSS) regression-based decomposition methods are applied to matched employer–employee administrative tax data for the period 2011–19. Additionally, the Theil index is used as a comparative tool for estimating wage inequality, given that the variance of logarithms applied in the regression-based decomposition methods has been established as an imprecise measure of inequality. The results show significantly high dispersion in wages, as estimated by both the AKM and the KSS methods as well as the Theil index, reaffirming the extent of high inequality in the country. Worker and firm characteristics account for 35 per cent and 18 per cent of wage dispersion, respectively, with a positive worker–firm covariance accounting for 11 per cent. Firm size, industry, profits, geographical location, and whether firms are locally or foreign-owned are found to be important in driving firm wage premia.
- Topic:
- Labor Issues, Inequality, Economy, and Wages
- Political Geography:
- Africa and South Africa
33. A reform option for pension fund contribution as tax expenditure in South Africa
- Author:
- Ada Jansen, Winele Ngobeni, and Wynnona Steyn
- Publication Date:
- 11-2023
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- South Africa has a progressive broad-based personal income tax system with relatively few tax expenditures. The two most important are the medical contribution plus additional tax credits for medical expenses, and the deductions allowed for retirement contributions. A pertinent question for tax reform in South Africa is whether redistributive gains can be achieved by restructuring expenditures in the personal income tax system. This paper considers the redistributive implications of converting the tax deduction for retirement contributions to a tax credit. This would build on the gains achieved by introducing a medical tax credit system in 2012. We analyse the tax revenue gains/losses of income groups and in total in terms of distributional effects and progressivity outcomes using a static microsimulation model based on data for the 2019/20 tax year. We find a high concentration of taxpayers in terms of taxable income and retirement contributions. The concentration of contributions is highly skewed towards lower- and middle-income earners, whose annual contribution amounts are low compared with higher-income earners. We recommend a conversion rate that considers the current distribution of taxpayers contributing to retirement funds. Converting the pension contribution deduction to a tax credit would raise additional revenue and make the tax system more progressive, benefiting low-income earners with marginal tax rates of less than the proposed conversion rate. The revenue gained would provide increased fiscal space to fund social expenditure or reduce government debt. Further distributional and behavioural analyses are needed on low-income earners and those earning below/above the minimum tax threshold, to refine understanding of the impact on low-and middle-income earners’ contributions to retirement funds.
- Topic:
- Economics, Reform, Tax Systems, and Pension
- Political Geography:
- Africa and South Africa
34. Climate Change and Trade to the EU Priority Sectors for Policy Intervention in South Africa
- Author:
- Jason F. Bell, Sumayya Goga, and Nishal Robb
- Publication Date:
- 07-2023
- Content Type:
- Policy Brief
- Institution:
- Centre for Business and Development Studies (CBDS), Copenhagen Business School
- Abstract:
- The deepening climate crisis has resulted in countries instituting a range of measures to curb emissions. The European Union (EU) has the most advanced climate policies, captured under the umbrella of its European Green Deal (EGD). While many of the measures being implemented impact countries within the EU, the measures are expected to impact Europe’s trading partners. The impacts on trading partners is occurring through changing regulations and policies such as the Carbon Border Adjustment Mechanism (CBAM), shifting consumer preferences, and impacts through value chains as a result of changing competitiveness of end products. EGD policies are forcing trading partners to the EU to adjust and decarbonise production processes, measure and report on emissions and other sustainability criteria, and, in some cases, even transform sectors to retain market share (the move towards electric vehicles). These policies include, among others, carbon taxes through the CBAM, the move towards electric vehicles in order to curb emissions, and a range of measures within the food sector. Together, these policies bring significant changes in the global trading system and the functioning of value chains. The costs associated with adjusting to these policies are high. Furthermore, these costs need to be borne by developing countries over and above the adaptation costs.
- Topic:
- Foreign Policy, Climate Change, Development, European Union, and Trade
- Political Geography:
- Africa, Europe, and South Africa
35. Sustainability in the South African Wine Industry: Status, Opportunities and Challenges
- Author:
- Reena das Nair, Shingie Chisoro, and Stefano Ponte
- Publication Date:
- 09-2023
- Content Type:
- Working Paper
- Institution:
- Centre for Business and Development Studies (CBDS), Copenhagen Business School
- Abstract:
- South Africa has been a pioneer in developing a variety of sustainability programmes and initiatives from farm to bottle, placing it at the forefront of sustainability in the global wine industry. In addition to global sustainability standards, such as Fairtrade and organics, and standards applied by retailers in the Global North, domestic sustainability initiatives and regulations have also been developed since the late 1990s. The existence of sustainability initiatives however does not automatically entail that they are easing the local environmental impacts of viticulture and winemaking, that working conditions are necessarily improving, or that there has been more inclusive participation and ownership by historically disadvantaged persons (HDPs). In this working paper, we unpack whether, how and to what extent different demands and initiatives on sustainability are reshaping the functioning of the wine industry in South Africa and with what benefits for whom. We examine the various sustainability programmes and initiatives in South African wine and assess the implications for costs, investments and profitability of actors in the value chain. Furthermore, to provide a sense of how South Africa fares in the international arena, we also undertake a comparison with sustainability initiatives in the Italian wine industry. We frame sustainability initiatives in broad terms, covering environmental, social and economic sustainability. The growing effects of climate change globally demand that grape growers adapt from an environmental perspective. The pressure for social sustainability emanates from the highly skewed patterns of ownership by HDPs, legacies of racialised inequalities, and a tainted history of poor worker conditions on farms and cellars. We also cover economic sustainability, as it both affects and is affected by environmental and social sustainability initiatives and is critical for the future of commercial production. The research results presented here are part of a larger project funded by the Danish Independent Research Fund Denmark (Project #0133-00046B) on ‘Power and inequality in global production systems’ (PIPS) that also covers industrial fisheries in South Africa and the salmon and wine industries in Chile (with Stefano Ponte as the PI). This paper is focused on presenting the main empirical findings of this part of the project and is targeted at a broad audience. It is built on feedback we received on an earlier version that was discussed with South African industry actors at a webinar on 28 June 2023. More analytical and theoretical publications will follow in selected academic journals.
- Topic:
- Environment, Labor Issues, Governance, Business, Sustainability, Production, and Wine Industry
- Political Geography:
- Africa and South Africa
36. Interrogating the legality, appropriateness and sustainability of vigilantism against migrants in South Africa
- Author:
- Charity Mawire and Clayton Hazvinei Vhumbunu
- Publication Date:
- 10-2023
- Content Type:
- Journal Article
- Journal:
- Conflict Trends
- Institution:
- The African Centre for the Constructive Resolution of Disputes (ACCORD)
- Abstract:
- Since mid-2021, in the period preceding the run-up to the South African Municipal Elections that took place on 1 November 2021 to elect councils for district, metropolitan and local municipalities, South Africa experienced a rise of vigilantism against migrants and anti-immigration activism. Vigilantism against migrants and anti-immigration activism existed before 1994 and in the post-apartheid era, and it has often resulted in, or triggered, xenophobic attacks and xenophobic violence. However, it is the emergence of anti-immigration groups that has given rise to some community members, especially in urban areas, conducting vigils aimed at enforcing the country’s immigration laws and labour laws relating to the employment of foreign nationals. The communities are also focused on enforcing compliance with municipal by-laws on the regulation, control and licencing required for hiring and use of municipal premises and facilities for trading by foreign nationals, and the Foodstuffs, Cosmetics and Disinfectants (FCD) Act 54 of 1972 together with public health regulations relating to the alleged selling of expired, contaminated, unsafe, unhygienic or counterfeit food and food products by foreign nationals mostly operating spazas or small shops. Anti-immigration groups include Operation ‘Dudula’, the social media-based Put South Africa First Movement, the South Africa First Party, and All Truck Drivers Foundation (ATDF), among others. Vigilantism against migrants in South Africa rose in intensity, scale and scope in the first quarter of 2022, reaching disturbing levels on 7 April 2022, when a Zimbabwean national living in South Africa, Elvis Mbodazwe Banajo Nyathi, was brutally assaulted and burnt to death in the Johannesburg township of Diepsloot.1 As vigilante groups continue to engage in anti-migrant activism and grow their grassroots support and geographical and regional coverage, this paper seeks to interrogate the legality, appropriateness and sustainability of vigilantism against migrants in South Africa. The analysis adds to the ongoing mainstream debate on illegal migration in South Africa.
- Topic:
- Security, Crime, Discrimination, Xenophobia, Peace, Stigmatization, and Migrants
- Political Geography:
- Africa and South Africa
37. Characteristics and efficacy of I4P in Southern Africa
- Author:
- Oita Etyang and Tunji Namaiko
- Publication Date:
- 10-2023
- Content Type:
- Journal Article
- Journal:
- Conflict Trends
- Institution:
- The African Centre for the Constructive Resolution of Disputes (ACCORD)
- Abstract:
- Compared to other regions, Southern Africa has been considered peaceful for a period of time. The relative peace experienced in the region has partly been attributed to the late decolonisation experience and the existence of strong regional institutions, such as the Southern Africa Development Community (SADC), that have midwifed and quelled potential threats to peace and security. Certainly, SADC has established and operationalised peace and security organs that strategically intervene in cases of destabilisation in the region,1 including militarily in some countries. For instance, military forces under the ambit of SADC were deployed in the Democratic Republic of the Congo (DRC) and Lesotho. More recently, forces were deployed by the region to quell the insurgency in Cabo Delgado in Mozambique.2 SADC has also intervened in member states to assuage political crises, as recently experienced in Eswatini where the SADC Troika was seized with this matter. Suffice it to mention that while the SADC intervention in Eswatini prevented the situation from escalating further, the root causes of political tensions remain salient. Despite the efforts outlined above, the emergence of conflict, violent demonstrations and riots experienced in some countries in this region, including Zimbabwe (2013, 2018), Zambia (2016), Eswatini (2021) and Madagascar (2020/2022), coupled with the evolving peace and security threats, such as armed insurgency, governance deficit, economic downturn, vagaries of climate change and the lack of economic development, have triggered an academic and policy appetite on the nature and efficacy of Infrastructure for Peace (I4P) in the region. Secondly, discussions on the subject area have predominantly focused on security apparatus, with little attention to other non-state-centric I4P. This article, therefore, interrogates the status of I4P within the Southern African region. Specifically, it unpacks their characteristics and roles in peace building, conflict prevention, conflict management, community cohesion and integration. The article goes further to highlight the challenges that I4P face in executing their respective mandates.
- Topic:
- Conflict, Protests, Destabilization, Peacebuilding, and Infrastructure for Peace (I4P)
- Political Geography:
- Africa and South Africa
38. How Inequality and Polarization Interact: America’s Challenges Through a South African Lens
- Author:
- Brian Levy
- Publication Date:
- 04-2022
- Content Type:
- Working Paper
- Institution:
- Carnegie Endowment for International Peace
- Abstract:
- Over the past decade, toxic interactions between persistent inequality, racial tensions, and political polarization have undercut the promise of South Africa’s so-called rainbow miracle transition from apartheid to democracy. South Africa’s recent history sheds light on the United States’ recent political travails. It illustrates how interactions between inclusion and inequality on the one hand and political ideas and entrepreneurship on the other can fuel positive spirals of hope, economic dynamism, and political legitimacy—but can also trigger vicious, downward spirals of disillusion, anger, and political polarization. South Africa was able to transition from a society structured around racial oppression into a nonracial democracy whose new government promised “a better life for all.” Especially remarkable was the speed with which one set of national ideas appeared to give way to its polar opposite. From a society marked by racial dominance and oppression, there emerged the aspiration to build an inclusive, cooperative social order, underpinned by the principles of equal dignity and shared citizenship. In the initial glow of transition, South Africa’s citizens could hope for a better life for themselves and their children. In time, though, the promise wore thin. It became increasingly evident that the economic deck would continue to be stacked, and that the possibility of upward mobility would remain quite limited. Fueled by massive continuing inequities in wealth, income, and opportunity, South Africans increasingly turned from hope to anger. In the United States, a steady and equitably growing economy and a vibrant civil rights movement had fostered the hope of social and economic inclusion. But that hope turned to anger as the benefits of growth became increasingly skewed from the 1980s onward. In 2019, the U.S. economy was more unequal than it had been since the 1920s. Younger generations could no longer expect that their lives would be better than those of their parents. Such economic adversity and associated status anxiety can trigger a heightened propensity for us-versus-them ways of engaging the world. In both South Africa and the United States, polarization was fueled by divisive political entrepreneurs, and in both countries, these entrepreneurs leveraged inequality in ways that added fuel to the fire. In the 2010s, South Africa went through a new ideational reckoning, in part to correct the view that the transition to democracy had washed the country’s apartheid history clean. But opportunistic political entrepreneurs also pushed an increasingly polarized and re-racialized political discourse and pressure on public institutions, with predictable economic consequences. South Africa’s economy slid into sustained stagnation. Paralleling South Africa, America’s divisive political entrepreneurs also cultivated an us-versus-them divisiveness. However, unlike in South Africa, political entrepreneurs and economic elites in the United States also used divisive rhetoric as a way to persuade voters to embrace inequality-increasing policies that might otherwise not have won support. By the late 2010s, the risks were palpable in both South Africa and the United States of an accelerating breakdown of the norms and institutions that sustain inclusive political settlements. For South Africa, the reversals were not wholly unexpected, given the country’s difficult inheritance—though a recent turn away from angry populism suggests that, paradoxically, the rawness and recency of the anti-apartheid struggle and triumph might perhaps offer some immunization against a further-accelerating a downward spiral. But for the United States, the converse may be true. Increases in inequality since the 1980s, and their attendant social and political consequences, have been largely self-inflicted wounds. Complacency bred of long stability may, for decades, have been lulling the country into political recklessness at the inequality-ethnicity intersection, a recklessness that risks plunging the country into disaster. But this paper’s analysis is not all gloom and doom. South Africa’s escape from the shackles of apartheid teaches that, even in the most unlikely settings, downward spirals of despair and anger can transmute into virtuous spirals of hope. The country’s first fifteen years of democracy also show that, once a commitment to change has taken hold, making the shift to an inclusion-supporting economy is less daunting than it might seem. Reforms that foster “good enough inclusion” can be enough to provide initial momentum, with the changes themselves unfolding over time—and an initial round of change can bring in its wake a variety of positive knock-on effects. But lessons can be overlearned. Mass political mobilization was pivotal to South Africa’s shaking loose the shackles of apartheid—and new calls to the barricades might seem to be the obvious response to current political and governmental dysfunction. However, different times and different challenges call for different responses. In both contemporary South Africa and contemporary America, the frontier challenge is not to overthrow an unjust political order but to renew preexisting formal commitments to the idea that citizenship implies some shared purpose. Renewal of this kind might best be realized not by confrontation but rather by a social movement centered around a vision of shared citizenship, a movement that views cooperation in pursuit of win-win possibilities not as weakness but as the key to the sustainability of thriving, open, and inclusive societies.
- Topic:
- Governance, Democracy, Inequality, Institutions, and Polarization
- Political Geography:
- Africa, South Africa, North America, and United States of America
39. ‘Delangokubona’ and the distribution of rents and opportunity
- Author:
- Ayabonga Cawe
- Publication Date:
- 06-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Capital spending on infrastructure presents a significant counter-cyclical tool, however contested it might be in a society as unequal as South Africa. The history of racial capitalism, racebased exclusion from economic participation, and an enduring political economy based on the concentration of capital, product, and service markets has given rise to a post-apartheid ‘politics of entry’ that mobilizes both formal and informal adaptations of redistributive policies aimed at ensuring redress of past injustices and access and participation by small and medium-sized enterprises owned by historically disadvantaged people. This is observed in stark form in the capital spending on economic and social infrastructure, which the South African government envisages as the ‘flywheel’ of the country’s economic reconstruction and recovery. Applying a combination of tools from new institutional economics, political sociology, and heterodox political economy frameworks, this paper considers the ‘informal’ and at times violent adaptation of policy, here defined as the ‘Delangokubona phenomenon’, which uses both formal mechanisms and the threat (perceived or real) of violent disruption to negotiate access to policy-sanctioned economic ‘rents’ under the auspices of ‘black economic empowerment’ in public infrastructure projects.
- Topic:
- Infrastructure, Economy, Rent, Redistribution, and Empowerment
- Political Geography:
- Africa and South Africa
40. Monetary policy in South Africa, 2007–21
- Author:
- Patrick Honohan and Athanasios Orphanides
- Publication Date:
- 03-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper reviews South Africa’s monetary policy since 2007 and makes recommendations towards improving the inflation-targeting framework currently in place. Following a surge in inflation into double digits in 2007/08, the South African Reserve Bank managed to guide inflation in line with the 3–6 per cent target band. Estimates of South Africa’s potential output underwent successive downward revisions. The resulting output gap misperceptions contributed to the tendency of inflation to be closer to the upper edge of the band in the 2010s. Our assessment is that the current definition of the target is not ambitious enough and reduces the benefits that inflation targeting could otherwise provide. An eventual point target of 3 per cent would better promote growth and protect the value of the currency, as mandated by the Republic’s Constitution.
- Topic:
- Monetary Policy, Economy, History, and Inflation
- Political Geography:
- Africa and South Africa