Confidential Sars figures show wealth of super-rich is growing
The study found SA has four times as many dollar millionaires as previously estimated
Research based on tax data has found SA could have as many as 182,000 dollar millionaires, significantly more than previous estimates of about 45,000, suggesting that inequality might be worse than previously reported.
According to a paper by academics Ihsaan Bassier and Ingrid Woolard, the top 1% of incomes is increasing rapidly even with low economic growth. The richest 5%, about 1.75-million adults earning more than R25,800 a month, earned in total close to 30% of SA’s national income in 2016.
And the top 0.01% of earners in SA, a group of about 3,500 earning more than R580,000 a month, received 1.2% of gross national income, SA’s total income from home and abroad.
University of Cape Town researcher Bassier and Woolard, dean of economics at Stellenbosch University, do not elaborate on lowest earners. Figures from Stats SA and the SA Revenue Service (Sars) show that of the 16-million employed South Africans only 4.8-million earned enough to pay tax in 2016.
While the 3,500 richest have incomes of more than R580,000 a month, comprising salaries, bonuses, profits and shares, among others, Stats SA reports that in the last quarter of 2016, the average monthly income for all formal sectors was between R16,000 and R18,000 per month.
Cutting inequality is one of the key targets of the National Development Plan. A World Bank report from March describes SA as the most unequal country in the world. It cites figures from the National Income Dynamics Study that indicate the top 5% of earners in SA enjoy an income higher than those in developed economies such as Austria, while the lowest 10% earned less than their counterparts in Bangladesh, considered one of the world’s poorest countries.
In addition to the significant income gap between the top and bottom earners in SA, the top 5% of incomes grew at about 5% a year from 2003 to 2016, compared with national income growth of 3.7% a year.
"This establishes that growth has not been inclusive. The gap between the stagnant middle and the prosperous top earners widened, and this continued after the 2008 recession," the academics’ paper stated.
The divergence appears to be partially driven by high growth in income from capital, which is likely to be closely related to high levels of wealth – and thus wealth inequality, according to the researchers. "The legacies and structures of the historical wealth distribution, designed under colonialism and apartheid to benefit a small, white elite to the exclusion of the black majority, remain deeply relevant for SA’s economic growth trajectories," it concluded.
The World Bank report estimates income growth of the bottom 29% to be 3.4% at most.
The study is based on confidential Sars tax figures, which the researchers say paint a more accurate picture of the incomes of high earners than household survey data.
Bassier and Woolard argue that being very rich is rare, which means individuals will not necessarily be selected in sample surveys. They say the very rich are also less likely than others to participate in household surveys, and if they do, they may be reluctant to be frank about what they earn.
"Tax information captures reported earnings and all kinds of income of taxpayers up to the highest level much more accurately," they say.
"Therefore, tax data provide a much better view of the distribution of income at higher levels of income in particular," the researchers say.
Economist Mike Schüssler agrees that surveys underestimate the wealth of top earners, but disagrees that top earners enjoyed a much higher growth rate than the rest of the adult population in recent years.
He says credit information and labour agreements have shown that generally wages rose at above inflation, now at 4.9%, and generally above 4% since 2011. SA’s inequality is largely exacerbated by the 27.2% unemployment rate, as opposed to low-versus high-income earners, says Schüssler.
Correction: September 25 2018
An earlier version of this article incorrectly stated that the top 0.01% of earners in SA was a group of 35,000. The group consists of 3,500 people.