Coronavirus pandemic and the economic freedom of Black South Africa

By Jehron Muhammad | Last updated: May 6, 2020 - 1:32:34 PM

South Africa’s initial uptick in Covid-19 cases involved principally the wealthy, meaning Whites and those that had been traveling. However, if the coronavirus pandemic is not contained and community transmission increases, it could pose a very high risk to lower-income communities including those who must continue working, rely on public transportation, lack savings, cannot afford hygiene products, live in large households, and reside in informal settlements.

As the numbers increase, the spread of the virus will increase rapidly, reported Atlantic Council. Indeed, the number of cases in South Africa has skyrocketed from a reported 150 cases March 19 to a reported 5,350 cases April 29—in just over one month.

According to theconversation.com what South Africa needs to assist in mitigating the pandemic is a wealth tax. “Our study reveals that half of the adult population survives with near-zero savings, while 3,500 individuals own 15% of the country’s wealth. The response to the crisis must take this into account to help the most vulnerable while still safeguarding fiscal sustainability,” the website reported.

Another way of viewing South Africa’s unequal society, reports Huff Post is the fact that 10 percent of mostly White South Africans own 90 percent of the country’s wealth.

The wealth tax research professionals estimate on the richest 354,000 individuals could raise at least $7.9 billion. That would equate to 29 percent of the announced $27.75 billion fiscal cost of the relief package.

“It’s very consistent with our position here (in South Africa), most of us. We have been calling for progressive taxation for quite a while, but most importantly such tax as we could levy the very rich in the country,” said Redge Nkosi, founder and executive director of Firstsource Money and Public Banking of South Africa, from his office in Pretoria. Nkosi, who has worked on economic issues during the Mandela, Mbeki and Zuma administrations said almost all of those that control South Africa’s wealth are White.

“Absolutely they are White. These are the people that have benefited immensely from the apartheid regime and they continue to benefit right now, in this new dispensation here. And they’re getting richer and richer and richer.”

Nkosi whose focus has been in macroeconomics, money, banking and development economics, added, “We’ve been calling on the government to say these people have to be taxed like everyone else, but these people have amassed immense wealth, obscene wealth if you want to call it, just to the point that it would be sensible to tax these rich people.”

Studies have shown how extreme income inequality is in South Africa. But according to the converstation.com little has been documented about wealth.

“Net wealth is the sum of all assets less any debts. Assets include cash, bank deposits, pensions, life insurance, property, bonds and stocks. Debt includes mortgages and other loans such as retail store credit accounts or loans from friends, family and money lenders,” the website explained.

The study, maybe the first of its kind, extended to all forms of assets. The richest 10 percent owned 99.8 percent of bonds and stocks—which accounted for 35 percent of wealth. The top percentile or mainly White grouping owns 60 percent of housing wealth and 64 percent of pension assets. Housing wealth amounts to 29 percent of wealth and pension assets to 33 percent.

April 27 marked South Africa’s Freedom Day, commemorating the first post-apartheid elections in 1994. During this year’s celebration President Cyril Ramaphosa underscored the fight against the coronavirus pandemic by highlighting the country’s lasting disparities between the rich and the poor. “Some people have been able to endure the coronavirus lockdown in a comfortable home with a fully stocked fridge, with private medical care and online learning for their children,” the almost billionaire said during a televised address.

Nkosi recently presented during a recent Final Call newspaper online forum, “Africa: The Economic Ramifications Of Coronavirus Pandemic,” and believes the challenge with wealthy mostly White South Africans is “these people are very powerful.”

“Powerful in the sense that they have their hands into the African National Congress, the ruling party and they tend to sponsor the ruling party in many of its activities. And to the extent that they do that obviously in return, they look for favors. Some of such favors include (not) being taxed like normal persons like I am,” he said.

“Nonetheless,” Nkosi said, “there are some people in the African National Congress who remain very, very keen to see a higher tax on these individuals.”

Nkosi said he knew those “individually” and personally that support the wealth tax. He said in addition to many members of the ANC; the South African Communist Party; members of the labor movement, the Congress Of South African Trade Unions or COASATU; and the Economic Freedom Fighters party or EFF, led by Julius Malema are supporters of this wealth tax being imposed on rich South African Whites.

He argues the 1996 resignation of Mr. Ramaphosa from the ANC secretary general position was a “smokescreen,” enabling him to become a major beneficiary in empowerment deals. These deals were aimed at creating wealth outside of the ANC formal structures and assisted it in developing relationships within the private sector, said Nkosi.

According to a News24 report headlined: “How Cyril Ramaphosa obtained his wealth,” “This was done … to create a funding loophole which could not be done within the ANC as the capitals raised were from within its own alliance … It also provided a mechanism for broad based ownership on the JSE (Johannesburg Stock Exchange) and link private sector companies to theA NC.”

According to News24 the issue was Ramaphosa’s falling out with Nelson Mandela for not being recognized as his successor, which went to South Africa’s second post-apartheid president, Thabo Mbeki.

Responding to a question concerning a recent statement by South Africa’s treasury department Nkosa said, “It’s not a treasury department of a republic, it’s actually an arm of the International Monetary Fund (IMF).” The treasury department is “frankly very regressive,” he said. “One of those regressive steps is too look for what they think is international finance from the IMF, the World Bank and so on.”

He argues that South Africa does not need any financing from anyone. “We can do that. We have the reserve bank. We’ve got a domestic banking system that can supply as much money as we want.”

Nkosa said the reason they go outside of the South African economy and not from within the domestic banking system, “is because they want to use the power of the IMF to come and continue, or if you want, subject South Africa to the structural adjustment programs, or structural reforms.”

Nkosa who is a part of many internal ANC discussions said, “There is massive opposition from within the ANC. And I think that the opposition may have an upper hand going forward.”

Seems the coronavirus pandemic may be expediting the freedom of Black South Africa.—Follow @JehronMuhammad on Twitter

Referenced links:

The Final Call