Get Focus insights straight to your inbox
Inequality is a vast and complex challenge, one that will likely be a lived reality throughout our lives – from disparities in income, to access and opportunity. Not all is lost, however. We sit at an inflection point whereby inequality has accelerated exponentially and the consequence of this is that it harms growth, exacerbates poverty, and decreases the quality of public relations and individual self-worth. At the same time, we have never been more aware – through access to information and our own lived experiences – of the challenges we need to solve. Reducing inequality is foundational for the sustainability and prosperity of business and society.
What is concerning about the South African landscape is not just income inequality, but also unequal access to opportunities and essential services. Oxfam South Africa recently carried out a study that details the country’s deepening inequalities by showing the income and lifestyle differences between men and women across the class and race spectrum1. These are some of the eye-opening findings:
1. The average white male CEO earns the same as 461 black women in the bottom 10% of earners combined
2. Nine out of 10 black households do not have medical insurance, meaning that only 10% of households that are headed by a black person can afford medical aid
3. The average group of qualified black women earns 24% less than qualified white women
4. Black women providing care work are unpaid or underpaid for their services
These stats are jarring in a South African context. However, the pandemic gave us insight into just how unequal society is, across the world. It took just nine months for the fortunes of the top 1,000 billionaires to return to their pre-pandemic highs, while for the world’s poorest, the recovery could take more than a decade. History will also likely remember the pandemic as the first time since records began that inequality rose in virtually every country on Earth at the same time. The World Bank has calculated that if countries act now to reduce inequality, then poverty can be reduced to pre-crisis levels in just three years, rather than in over a decade. So I do believe there is hope.
A country of contrasts
My parents were always very intentional when it came to taking me and my brother on local adventures around South Africa. We would spend most holidays trotting around the West Coast or exploring the natural beauty of the Eastern Cape. We would base ourselves at our grandparents’ quaint homes and then explore the larney areas nearby. I would marvel at the still, crisp blue waters of Kraalbaai for a day of swimming followed by a trek to Snoekies in Hout Bay for fish and chips, where on the way I might observe a few little kids washing their hands in mere puddles in Imizamo Yethu. A road trip from the Western Cape to Gauteng was a journey of contrasts: from the whitewashed beach cottages scattered around Paternoster to the silver reflections glimmering off the roofs of the informal settlements in Soweto. The blooming vineyards in Riebeek Kasteel always seemed strikingly different from the dusty makeshift soccer grounds in Mitchell’s Plain we passed to get Gatsbies (a Gatsby is a type of sandwich much loved by people in the Western Cape) for lunch.
We were fortunate to visit places like this in our beautiful country, but that this was not the life for many. 27 odd years have passed since our first democratic elections and the above family travel memories still don’t look very different today. The desire to support local and see more of our beloved country has been something my husband and I have adopted in our marriage. Every year, for our anniversary, we make an effort to try to explore a new local spot. On one of our most recent hikes to the Tugela Falls, we passed through Phuthaditjhaba – a town where 82% of the residents earned less than R1600 per month, pre-pandemic. These kinds of revelations never sit right with me.
Coming from a family where some were the “haves” and some were “have nots” (I read this as: some lucky and others unlucky), these stark inequalities were prevalent at every big family affair. When entering the workforce or when starting to gain financial independence, it is easy to limit your contact with the unequal world – the South Africa that is part of the ‘have nots’, the hungry and marginalised. When I started working, I was able to assist the family members who had done their best to support me through school. I felt I needed to do my bit for those faces I did not know personally but saw on the road trips with family, by donating to charitable causes that help those in need. However, I don’t believe that this is where my role as an investment professional, an investor and a believer in a better future, ends. Charitable deeds are noble; it was one of those charitable causes that empowered me, and so many like me, to study further.
Being part of the solution
We live in a society where change can be achieved in many ways, one of which is to align our investments with our underlying beliefs. The Sustainable Development Goals (SDGs) are the blueprint to achieve a better and more sustainable future for all. SDG 10 speaks specifically about reducing the inequalities in and between countries, aiming to leave no one behind in the process.
One way to achieve this is by directing the flow of funds to fulfil a dual mandate – financial return on investment as well as specific social development goals. Investment activities by institutions and investors can align making profits and reducing inequality. After all, one of the key investment risks we need to mitigate against in the world today is the longevity of sustainable growth.
Investment activities by institutions and investors can align making profits and reducing inequality.
The 2020 Commitment to Reducing Inequality (CRI) Index ranks 158 governments across the world on their commitment to reducing inequality. The index measures government policies and actions that are directly related to reducing inequality. Countries that were hardest hit were generally the ones that had the lowest levels of spending on public healthcare and weak social protection systems and rights for workers. The recent report’s findings show how the majority of the world’s countries were not well prepared for the coronavirus pandemic. The failure of governments to tackle inequality is now forcing ordinary people to bear the brunt of the crisis and pay a much higher price than they should.
Muhammad Yunus, a Nobel Prize winner and the author of ‘Banker to the Poor’, believes that credit is a basic human right and not just the privilege of a fortunate few. He realised that the most impoverished members of his community (women) were systematically neglected by the banking system. As a result of this, the Grameen Bank was born. Six percent of the bank is held by the Bangladeshi government and 94% held by these very same women whom the bank aims to empower. The bank’s success lies in the fact that it acted as a practical poverty alleviation program for rural, poor women. Studies show that the Grameen Bank has had a positive impact providing sources of drinking water, improved medical treatment and lighting conditions of houses – all small elements that make a big difference towards reducing inequalities!
How can we emulate Muhammad Yunus through the power of capital that sits in our hands? One simple way is to start investing in companies or funds that work directly or advance capital to initiatives and projects that aid access to financial services, healthcare and education - companies or funds that marry our moral stances and our investment objectives. Through this, we can start closing the distance of inequality between us, removing barriers to entry for opportunities and provide meaningful solutions that deliver access to essential services.
Now that I am in the infancy stages of being part of the “haves” rather than the “have nots”, I aim to put my money where my heart is. We have the power not only to direct funds to achieve sustainable market-related returns but also to achieve ground-breaking social impact benefitting all of us as a whole. If we can mobilise finance in this way, our incredible South Africa can move from the country of contrast to the paradise of possibility.
My version of success would entail the following: if, at some point in my lifetime I can be part of a solution leading to the meaningful employment of a young girl from Imizamo Yethu and she tells me how much her community has changed for the better over the years because of this type of investment; or if I can assist in empowering a young boy from Soweto and, in doing so, he can put his frail grandmother on medical aid and pay for his younger sibling’s university fees, then I can continue dreaming of exploring new local towns with the hope of meeting someone who tells me of how she too - like SDG 10 - left no one behind.
1 https://www.oxfam.org.za/wp-content/uploads/2020/11/oxfam-sa-inequality-in-south-africa-report-2020.pdf and https://www.oecd.org/economy/labour/49421421.pdf
Responsible Investing and Sustainability at Investec Wealth & Investment
As Sustainability is core to our fundamental investment approach, we have integrated ESG considerations into our investment decision making and broader investment process.