South Africa is widely recognised as the most unequal society in the world, with a startling 71% of the country's wealth concentrated in the hands of a mere 10% elite
South Africa is widely recognised as the most unequal society in the world, with a startling 71% of the country’s wealth concentrated in the hands of a mere 10% elite. As we grapple with this harsh reality, we find ourselves in a landscape marred by systemic failures, where electricity and water shortages persist, and the promises of economic justice seem like distant illusions.
A recent report from the G20 Finance Ministers’ meeting chaired by Brazil suggests a 2% tax on the world’s dollar billionaires. The anticipated outcome is an additional $200 billion to $250 billion globally, which could be used to alleviate poverty and bridge the inequality gap.
This proposal, supported by prominent economist Gabriel Zucman, highlights that the ultra-wealthy pay disproportionately lower taxes than their income and wealth. “The super-rich today pay very little in tax, and we’ve seen that, for instance, in the US, they paid almost zero income tax in most years. That’s not acceptable,” states Zucman.
While this measure holds promise, can these measures truly address the deep-seated inequalities in South Africa?
Numerous studies have delved into the drivers of this pervasive inequality, highlighting the legacy of apartheid, the skewed distribution of assets and opportunities and the persistent failure to address these deep-seated structural issues meaningfully. Despite the transition to democracy, implementing neoliberal economic policies has further exacerbated the wealth gap, prioritising the interests of the elite at the expense of the marginalised.
The implementation of such a tax is fraught with problems. The super-rich often exploit global tax havens and intricate financial structures to minimise their tax liabilities, making enforcement difficult. As Zucman points out, “When you’re very rich, it’s easy to structure your wealth such that this wealth will generate very little or sometimes no taxable income.”
Moreover, policymakers fear that taxing the rich will drive capital flight as the wealthy relocate to jurisdictions with more favourable tax regimes.
South Africa’s idea of taxing the wealthy has been met with support and scepticism. The late Archbishop Desmond Tutu once advocated for such measures, recognising the moral imperative to address the nation’s glaring inequalities. Yet, successive governments have hesitated, fearing investment and economic stability repercussions.
This approach, however, has failed to deliver on its promises. Lebogang Ramafoko, the executive director at Oxfam South Africa, criticises this approach, stating, “One of the things that is interesting is to look at the neoliberal way of looking at how you drive the economy. This trickle-down approach suggests that, first and foremost, it’s ahistorical; we never ask how this wealth was amassed in the first place.”
The notion of “trickle-down economics,” where benefits to the wealthy are supposed to percolate down to the poor, has been debunked repeatedly. Wealth has continued to concentrate at the top, exacerbating poverty and unemployment.
The proposed 2% tax on billionaires, while a step in the right direction, may fall short of addressing the root causes of inequality in South Africa. Comprehensive reforms, including redistributing assets, targeted investments in education and healthcare, and dismantling the neoliberal economic framework, are necessary to forge a more equitable and just society.
To understand the ethical implications of this inequality, we can turn to the philosophical arguments of John Rawls. In his seminal work, “A Theory of Justice,” Rawls posits that a just society would be chosen by rational individuals under a “veil of ignorance”, where they do not know their place in society. Rawls’s “difference principle” allows for inequalities only if they benefit the least advantaged members of society.
In South Africa, the economic policies and tax structures disproportionately favour the wealthy, offering little to no benefit to the underprivileged. The wealth accumulated by the top 1% — often through means that are exploitative or at least unaccountable — does not translate into social mobility or improved living conditions for people with low incomes. In this context, a wealth tax could be seen as a Rawlsian corrective measure designed to redistribute resources to benefit those most disadvantaged.
While introducing a wealth tax could theoretically reduce inequality, the practical realities in South Africa present significant obstacles. Corruption, inefficiency and little political will undermine meaningful reform efforts. The recent revelations of large corporations’ overstated profits and financial malpractices, combined with ongoing issues such as load-shedding and water shortages, highlight a system in disarray. The rich continue to evade their fiscal responsibilities, while the poor bear the brunt of economic mismanagement.
The reality is that South Africa’s deep-rooted inequality cannot be resolved through simple policy tweaks or international proposals. It requires a fundamental restructuring of the economic and political systems. This includes tax reform and measures to combat corruption, improve public services and create inclusive economic opportunities.
As we face the daunting task of addressing these issues, we must recognise that true progress will require more than just new taxes or policies. It demands a commitment to justice, transparency and equity — principles at the heart of any meaningful change in South Africa.
In the words of Rawls, “The principles of justice are chosen behind a veil of ignorance.” As South Africans, we must strive to create a society where these principles guide our actions, ensuring that every citizen, regardless of their background, has the opportunity to lead a life of dignity and fulfilment. Until then, proposals such as the wealth tax remain mere band-aids on the gaping wounds of our society
Thabo Motshweni is a PhD Candidate at the Department of Sociology, University of Johannesburg.