We were two of nine foreigners invited by the Department of Finance of South Africa to participate in a weeklong workshop to advance a lengthy tax reform process initiated by South Africa’s first democratically elected government shortly after it took power. We believe it would take unusual insensitivity—even callousness—not to become emotionally engaged as well as intellectually committed to the success of this effort to redress, without rancor or recrimination, the consequences of decades of systematic injustice.
All developing countries face difficult problems in trying to marshal limited resources to promote economic growth. Few face a combination of problems as challenging as those confronting South Africa. Economic constraints are conjoined with the political legacy of apartheid. The democratically elected governments that took office in 1994 and 1999 have managed, with quite limited resources, to preserve a remarkable measure of political cohesion and to bring South Africa relatively unscathed through the Asian economic turmoil that threatened to spread to other developing nations. While it will take more than a little good luck to surmount the challenges South Africa faces, current auguries are hopeful.
Income inequality in South Africa is extreme. The standard index of inequality, the Gini coefficient, is 0.58, higher than that of any other country (with the possible exception of Brazil and Colombia) and is exceeded only by the Gini coefficient of the international as a whole. The reality of inequality is palpable. Squalid housing—corrugated iron shacks with neither water nor electricity and single-room dormitories, built for solitary miners separated from their families and now crowded by families of 6 or 8 or 10—exists in townships that border cities and suburbs as affluent as any in the United States. Various townships in the Cape flats, teeming with hundreds of thousands of squatters, border Cape Town, a city distinguished by wealth and beauty. Soweto (SOuthWEst TOwnship), which houses four million people and rivals its neighbor Johannesburg in size, contains a mixture of shacks, simpel concrete houses, and spacious dwellings luxurious by any standard.