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Blog: 19 February 2017 (SA's expenditure deciles)
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In today's blog we take a look at South Africa's expenditure groups, based on data released by the Consumer Price Index (CPI) division of Statistics South Africa. The aim of these expenditure groups in the CPI is to track the inflation experience of various economic groupings. I.e what is the inflation experience of the rich compared to that of the poor.
Note data is from Statistics South Africa's CPI and GDP Expenditure results |
Poorest 90% of households spend just under 3% more than richest 10%
As readers can deduce from the statement above, expenditure is South Africa is extremely skew. With the richest 10% of all households in South Africa spending just under 3% than the other 90% of households combined. This is a clear indication of just how unequal income, spending and participation in the South African economy is. The bar chart below groups households into various expenditure groups. Decile 1 represents the poorest 10% of households while Decile 10 represents the richest 10% of households
The bar and line chart above shows the contribution each decile group makes to overall expenditure (each decile group is represented by a bar in the bar chart) in South Africa as well as the cumulative spending shown by the line graph (essentially the sum of all the deciles up to a specific point). For example Decile 6, represents 5.61% of total spending in South Africa and the sum of total spending up to Decile 6 is 15.87%
It doesn't take a rocket scientist to know that something is seriously wrong with this picture and that a economy operating under such circumstances cannot be sustainable as wide spread inequality will lead to all sorts of social disruptions and uprisings as the masses protest against the blatant inequality.
According the the GDP Expenditure results households spent R2.417trillion in 2015. And there is roughly 16million households. Based on this data we can estimate what amount of money is spent each year by the average household within each of the above mentioned deciles.
The average household in Decile 1 (the poorest 10% of households) spends R7554 per year (or roughly R629 per month). The average household in Decile 5, which is in the middle spends R155 000 a year or R12 917 a month. While in Decile 10, which represents the richest 10% of households, the average household spends R777 008 per year or R64 750 per month. The table below provides the averge expenditure per year and month for each of the deciles.
Decile |
Avg Spend per Year (Rand) |
Avg Spend per Month (Rand) |
1 |
7,554 |
629.50 |
2 |
17,072 |
1,422.68 |
3 |
28,554 |
2,379.52 |
4 |
42,454 |
3,537.81 |
5 |
59,375 |
4,947.90 |
6 |
84,756 |
7,063.03 |
7 |
119,505 |
9,958.74 |
8 |
170,721 |
14,226.77 |
9 |
247,017 |
20,584.76 |
10 |
733,799 |
61,149.95 |
As can be seen from the table above the disparity between the poorest 10% and richest 10% in terms of expenditure is extremely high. Even between Decile 9 (2nd richest 10% of households) and Decile 10 (richest 10% of households) there are significant differences in these two grouping's expenditure on an annual and monthly basis.
Seeing such large differences between Decile 9 and Decile 10 makes one wonder if South Africa really has a middle class? Or is it a matter of either extremely poor citizens and then upper middle income and rich citizens with the so called "middle class" actually being poor and lower middle income earners.
The hardest task of this government is going to be addressing inequalities like these. As just taking from the rich and giving to the poor ala Robon Hood style is not a sustainable economic model. Why? Well the rich realise they fund the majority of government spending and that they are taxed the most and that their tax money are not really used to improve their lives but more the lives of others.
They will soon start working less so they are taxed less. Less tax money earned by government and less to redistribute to the poor. So government needs to tread carefully as continued reliance on the rich to fund state coffers will lead to tax revolts and the inevitable path of the rich leaving SA in order to get away from excessive taxes that are inefficiently spent and redistributed to the poor.
But how can government achieve this? Well this is a question that most countries governments struggle with. If it was easy everyone would be doing it and all countries would have a lot less inequality. Limiting excessive salaries and increasing the minimum wages would be a start to addressing such inequalities but those policies come with their own set of problems.