Introduction

The dawn of democracy in 1994 created great hopes for the post-apartheid economy.
Prior to democracy, the South African economy was riddled with poor economic and
socioeconomic conditions. During apartheid systematic issues such as inequality,
poverty and unemployment deprived the general lives of the majority of South Africans.
The new democratic government aimed on addressing the socioeconomic instability
through the provision of housing, water, and electricity, and increasing the supply of
cash grants (Aucoin, 2016). Over the past few years the democratic government has
gradually reduced multidimensional poverty in South Africa. This is due to the
redistribution commitments made by the African National Congress, (ANC) government
with the aim of achieving economic growth (Aucoin, 2016). However, while the policies
implemented by the ANC have significantly reduced poverty and inequality, South Africa
is still riddled with socioeconomic instability.
This essay will analyse the indicators and causes of South Africa’s socioeconomic
instability and outline the persistent challenges that contribute to the countries persistent
rising levels of poverty, violence, inequality, and social discontent. The essay will then
discuss how South Africa’s socioeconomic instability affects the long run growth of the
country. Furthermore, the essay will consider the historical trends of socioeconomic
instability in the country since the fall of the Apartheid regime. In analyzing South
Africa’s socioeconomic instabilities, the essay will draw on conventional economic
theory and outline how economic theory holds in a South African context. Lastly the
essay will concluded by outlining the possible future scenarios that lie ahead for South
Africa’s socioeconomic instability.

Addressing South Africa’s socioeconomic instability

South Africa’s historical trend of socioeconomic instability post-Apartheid has cut both
ways. This is in the sense that fiscal redistribution has grown to record highs following
the demise of the Apartheid regime. However, unemployment and socioeconomic
stability still remains high. The redistribution commitments made by the ANC
government has played an important role in attempting to address the socioeconomic
problems of unemployment, poverty, and inequality faced by the large majority of Black
South Africans (Aucoin, 2016). The ANC government implemented two important and
overlapping phases, the first phase was implemented in the early 1990’s and focused
on providing housing, clean water, electricity, and certain free services (Aucoin, 2016).
During the first phase the ANC government was able to build over 3 million houses and
increase water access from 58% to 91% (Aucoin, 2016). The second phase was
implemented in the late1990’s and focused on the South African government increasing
the provision of cash grants. During the period from 1994 to 2015 the number of South
African’s receiving cash grants increased from 4 billion to 16.9 billion (Aucoin, 2016).
The policies implemented by ANC significantly changed the life trajectories of many
poverty stricken South Africans. However, According to Cilliers and Aucoin, the
measures that were implemented by the ANC government significantly reduced deep
rooted poverty and inequality but failed to reduce unemployment, which still remains the
greatest challenge of post-apartheid society (Aucoin, 2016).
In relation to South Africa, the World Bank found that following the demise of Apartheid,
South Africa had a Gin coefficient score of 57.8 in 2000 (Perotti, 1995). However,
between the years from 2000 to 2014 South Africa’s Gini coefficient score increased to
a staggering 63 (Perotti, 1995). Therefore, making South Africa one of the most unequal
societies in the world. The Gini coefficient index analyses income inequality and
according to the vicious cycle theory, countries that have high income inequality tend to
have high levels of social discontent and social unrest (Perotti, 1995). In addition, Stats
SA (2011) indicated that about 10.2 million South Africans are significantly poor, living
on less than R15 per day. This is an indication that over half of the population is
classified as poor, surviving on an income that is less than R779 per person per month.
The data above illustrates that Aucoin is correct in stating that although the ANC
government has implemented measures to reduce South Africa’s socioeconomic
problems, unemployment and thus income inequality, since income inequality is created
by unemployment is still one of South Africa’s greatest contributors to the nation’s
socioeconomic instability (Aucoin, 2016).
The effect of unemployment, inequality, poverty, and poor governance on social stability
is complex. According to Aucoin, poor living conditions can exacerbate an individual’s
chances of engaging in violent activity, as they have more exposure to violent culture
(Aucoin, 2016). Poor living conditions and exposure to violence can thus result in an
individual falling into a life of crime and violence in order to address the social exclusion
they perceive they have from society, due to not having the material goods which are
deemed to be important for social inclusion (Aucoin, 2016).
In South Africa, the gap between the rich and poor has resulted in social unrest and
violence. Being unemployed in South Africa certainly exacerbates an individual’s
chances of engaging in crime since they are unable to provide for their needs (Aucoin,
2016). Therefore, unemployed people tend to engage in violence due to increased
exposure to substance abuse, subculture, and the availability of crime as a solution to
readdress difficulties in not having efficient material goods that would increase social
inclusion (Aucoin, 2016). According to Cilliers and Aucoin, black people make up the
vast majority of individuals who are unemployed, and are therefore more likely to turn to
a life of crime (Aucoin, 2016).
Additionally, Alesina and Perotti argue that income inequality increases political
instability in an economy. According to Alesina and Perotti’s argument, unequal
societies are more politically unstable, and that the presence of a wealthy middle class
enhances political stability because a healthy middle class is conducive in helping to
accumulate capital Perotti, 1995). Political instability then leads to a reduction in
investment and a decline in investment leads to low economic growth. These political
unrests will negatively affect the prospects of highly needed investment into the country,
and without adequate investment there will be little room for fiscal distribution (Perotti,
1995).

The role of corruption on South Africa’s socioeconomic instability

Corruption has played an influential role in increasing unemployment, inequality,
poverty, and is a persistent challenge to South Africa’s rising levels of socioeconomic
instability (Pillay, 2019). Corruption has negatively affected South Africa’s long run
growth because according to the theory of economic growth, education, health care and
technology are vital tools for fast growing economies. Pillay argues that corruption is
bad for the economy as corruption is a misallocation of resources (Pillay, 2019).
Corruption is typically used for an individual’s own selfish needs as they distribute
economic resources to benefit themselves, usually at the cost of society’s best interests.
For example, corruption can deter a countries efforts to improve education as resources
intended to educate people will be misallocated by corrupted individuals. Education is
important in reducing socioeconomic instability because it creates highly skilled workers
and has a knock on effect on unemployment. An increase in highly skilled workers can
reduce the income gap and thus reduce the amount of socioeconomic instability (Pillay,
2019).
Additionally, Pillay argues that corruption crowds out investment (Pillay, 2019).
Corruption and unstable states are intertwined (Pillay, 2019). Therefore, when a state is
corrupt investors will perceive the state as unstable and would rather not invest in that
country. Pillay’s argument is consistent with Cilliers and Aucoin who argue that Social
instability affects economic growth and depresses investment. In South Africa, this can
be illustrated by the exogeneous increase in the SPI index by at least one standard
deviation causing a decrease in the share of investment as a percentage of the GDP of
6% points. There is a greater demand for fiscal distribution in a more unequal society
which is through distortionary tax.
Moreover, distortionary tax leads to an increase in a tax burden on investors and thus
depressing investment as investors will no longer be willing to invest because their
expected return would decrease due to higher taxes (Pillay, 2019). Without Investments
a country cannot grow. The South African economy is riddled with corruption. This can
explain why over the last 30 years South Africa has experienced slow economic growth
and increasing unemployment rates as investors would rather not invest in South Africa
due to corruption.
Furthermore, corruption hurts economic growth by reducing the standard of healthcare.
According to economic theory, countries with high levels of corruption tend to have poor
healthcare services (Pillay, 2019). When a country has poor healthcare services
economic productivity is not maximised as sick individuals will spend too much
inefficient healthcare system and will consequently suffocate long run economic growth
(Pillay, 2019).
Conclusion
In conclusion, this essay has analysed the indicators and causes of South Africa’s
socioeconomic instability and outlined the persistent challenges that contribute to the
countries persistent rising levels of poverty, violence, inequality and social discontent. It
can be argued that the underlying causes of South Africa’s social instability are poverty,
corruption, inequality, and unemployment. “South Africa is in a vicious cycle of
socioeconomic instability, economic insecurity and inequality fuel instability and unrest
this decreases growth. While low growth leads to economic vulnerability” (Aucoin,
2016). In order to curb these problems South Africa needs better governance,
accompanied by more spending on capital in order create jobs for people in the bottom
10%. However, this will not be enough to ensure a rise in the long-run growth rate. What
is needed is a more rigorous fiscal redistribution that is not mainly funded by taxes, but
rather by government investing on capital to ensure that the country grows in the long
run.
Reference
Aucoin, Cillers., 2016. "Economic,Governance and Instability in South Africa" Institute
for Security Studies. [Online]
Available at: https://www.issafrica.org/research/papers/economics-govenance-and-
instability-in-south-africa
Perotti, Alesina, 1995. Income distribution, political instability, and investment. [Online]
Available at:
https://www.dash.harvard.edu/bitstream/handle/alesina_incomedistributionpdf
Pillay, P., 2019. Corruption and its Repercussions on Employment, Poverty and
Inequality: Rwanda and South Africa compared. [Online]
Available at:
https://www.researchgate.net/publication/338193275_Corruption_and_its_Repercussion
s_on_Employment_Poverty_and_Inequality_Rwanda_ans_South_Africa_Compared