South Africa: Economic Policies to Promote Equality and Achieve High-Income Status

South Africa has exhibited high levels of income inequality and significant structural deficiencies that have resulted in weakening economic growth. The country features a dual economy: a developed economy in major metropolitan areas coexisting with a developing economy in townships, informal settlements, and poor rural areas. Due to this unique socioeconomic duality, South Africa remains one of the most unequal countries in the world, with disparities across space, race, and gender. The structural constraints that underpinned the economic development of South Africa largely find their origins in the politics of race that defined the country for over 100 years, leaving lasting socioeconomic effects on the population. Racialism was encapsulated in the ‘doctrine’ of Apartheid. The emergence of socioeconomic dualism during the Apartheid era was due to two major tendencies. First, the black majority provided cheap labor for the country’s booming natural resources sector, resulting in an increase in the demand for better wealth sharing; and, second, the government needed to keep the same black South Africans at a distance to ensure segregation. The government provided some form of housing and related social services that severely limited the movement of the black African population and prevented black Africans from permanently residing in places designated for white South Africans. It created open buffer areas with adequate land expansion away from white areas (Mahajan, 2014; Sonday, 2015). What is known today as townships have been characterized by low levels of physical infrastructure, such as electricity, sanitation, water, and, most importantly, low levels of economic infrastructure and services (Mahajan, 2014). The country needs a new growth strategy that will create quality jobs and promote equality because these issues are closely linked to the importance of transiting to high-income status. The chapter concludes by detailing the policy framework necessary for putting South Africa on the new growth path and ensuring structural transformation to transition to high-income status.