The real problem
A Sa nation we need to be real and confront the problems that we are faced with head on. To attain this we need to be deliberate about the problems that we are facing as a country and then begin to address those problems.
One of the main problems that we seem not ready to address as a country is that of inequality. Put in alternative terms, the problem we are not keen to address as a country is that of wealth concentration. The income and wealth of the country is concentrated in the hands of a few, while the majority of the indigents have to share a small slice of the pie. Unless we address the problem of income and wealth inequality head on, the economy shall continue to grow and the benefits of that growth will remain in the hands of a few people, while a majority of our people will not benefit from that growth.
The reality
The sad reality is that Eswatini is among the top 10 unequal societies in the world. The country’s gini coefficient is 51.5; poverty statistics show that approximately 58 per cent of the population lives below the poverty line, while 25 per cent of the overall population lives in extreme poverty. These sad statistics juxtapose with a relatively high per-capita GDP of approximately US$3 850, which is in the top 10 highest per-capita GDPs in Africa.
One can, therefore, not be faulted for contending that the poverty situation in the country seems to be one that is manufactured or rather created by the country’s stance towards inequality. We seem to be a country that is not interested in redistributive policies, hence the impact of that policy stance is the poverty burden that a majority of our people have to bear while a handful live like millionaires.
Negative impacts of wealth concentration
If a handful of the population controls a huge amount of the wealth in a country, they tend to have so much power. He who controls the wealth, controls the politics and the regulatory framework. Allowing an uneven distribution of the wealth is akin to giving a handful of people enough lobbying resources and lobbying power to influence and shape social and economic policy in the country for those who live in poverty.
Unfortunately the objective functions and goals of those who live in opulence do not tally with the objectives and goals of those who live in poverty. However, those who live opulently are endowed with the resources to make decisions for everyone in society and the outcome is a deeply inequitable society. This results in inadequate social provisioning and a growth path that benefits the rich at the peril of the poor. If we do not close the income inequality gap, Eswatini shall be a wealthy nation but not a developed nation.
Reduced multiplier effect
The skewed distribution of the income and wealth of a country results in a slower multiplier effect of any fiscal policy moves the government may adopt. Basic economic reasoning states that the marginal propensity for consume out of disposable income is higher for low income earners compared to high income earners, who tend to have a higher marginal propensity to save or invest. In an economy where inequality is high, most of the injection into the economy, through government expenditures, leaks heavily since the conduit through which it must traverse are the wealthy with a high marginal propensity to save.
Furthermore, the wealthy tend to have a relatively low tax burden compared to the poor, while in absolute terms it would seem like the wealthy pay more tax, however, as a proportion of their income that incidence is low. Relatively the wealthy will draw more from the fiscal purse than they put it. It is, therefore, imperative that the economy be redistributed to ensure maximum efficiency of each Lilangeni invested into the economy.
Take from the rich
Government has to develop policies that will take from the rich to ensure adequate provisioning for the poor resulting in an equitable society. The government must hasten efforts to redistribute the economy by expanding the tax categories; it is high time we introduce wealth tax, inheritance tax, capital gains tax and other taxes that will target those who have a lot of money, who at present are not paying any tax or very low tax because most of their consumption is not in the form of income. Currently, the fiscal purse is run mostly by an income tax and value-added tax contribution. Essentially, the poor and the working class are running this economy while the affluent who have the muscle to be suppliers to government are reaping the benefits.
BEnEfits oF EquIty
A more equitable society reaps the benefits of tranquility and shared prosperity. An equitable society has more social capital on which to draw from during times of turbulence, ensuring that the nation bends together and shares in the austerity measures. Unequal societies, on the other hand, tend to be more socially unstable. To retain the peace and stability Eswatini is famed for, the economy must be redistributed.