Section 2

Contents

Introduction
Average annual household income in 1995 by race
Income distribution
Measures of income inequality
Summary

The main findings regarding incomes

Introduction

It is well-known that incomes in South Africa are unevenly distributed by race,[The apartheid-based racial classification of South Africans as African, coloured, Indian and white is retained in this report as a classification variable to enable the CSS to monitor change in the life circumstances of those who were disadvantaged in the apartheid era.]
gender and urban/non-urban areas[An urban area is defined as one in which there is a fully established local government. A non-urban area, on the other hand, does not have an established local authority. The area could, for example, be part of a tribal authority or a regional authority.]of residence. But findings based on the 1995 IES indicate the extent of these inequalities. These income distributions serve as base-line indicators for future monitoring of change in income distributions. In future years, for example, we shall be able to measure whether or not average incomes of specific disadvantaged groups have increased in relation to other groups, and whether proportionately fewer non-urban households fall into the bottom income category when compared to the present situation.

National and provincial average annual household incomes in 1995

In October 1995, the average annual income per household in South Africa was found to be R41 000. This includes regular income, such as salaries and wages, as well as any other income. However, average annual household income varied when the data set was divided into different sub-groups or categories. In this section we examine these differences.

Average annual household income in 1995 by race

The IES results confirm that income in South Africa is unevenly distributed by race of the head of the household, with the largest race group in the country being the poorest.

The nine new provinces of South Africa

Since 1994, South Africa has been divided into nine provinces. These differ from each other, not only in population size,[In this discussion, we focus on the percentage of actual people in each province, rather than on the percentage of households, because population density is measured in terms of individuals in an area of a given size. In the rest of the report, however, we focus on households, since we are interested in household, not individual, income and expenditure.] but also in urban and non-urban population proportions. Africans constitute the majority of people in all provinces, except in the Western and Northern Cape, where coloureds are in the majority. The vast majority of the Indian population lives in KwaZulu-Natal, while whites are spread across all nine provinces – albeit unevenly.

The Eastern Cape
The Eastern Cape is largely non-urban, occupying 14% of the country’s land mass. It is estimated that 16% of the South African population lives in this province, making it the third largest in the country. Approximately 65% of people in this province live in non-urban areas. The former Transkei and Ciskei, two impoverished areas styled as ‘independent states’ under the bantustan policy of the apartheid regime, are found in this province. The vast majority of those living in the Eastern Cape (85%) are African.

The Free State
A relatively small number of people – some 7% of the total South African population – live in the Free State. It is the second smallest province in population size, and occupies 11% of the land mass. A high proportion of people live in small towns, with less than half the Free State’s population living in non-urban areas. A large proportion of people living in the Free State (81%) are Africans, who tend to live in former ‘homelands’ (Qwa Qwa or that small part of the former Boputhatswana which was allocated to the Free State), on large white-owned commercial farms, or in townships surrounding the towns.

The Northern Province
The Northern Province contains approximately 11% of all the people in the country, almost all (95%) of whom are African. The former ‘independent state’ of Venda, and large proportions of the former ‘self-governing territories’ of Lebowa and Gazankulu, are situated in this province. It is largely non-urban, with 88% of the population living in non-urban areas.

The North West Province
The North West Province contains 8% of all South Africans, making it the fourth smallest province in population size. It occupies 10% of South Africa’s land mass. It is largely non-urban, with 61% of the population living in these areas, and contains most of the former Boputhatswana. A large proportion of the remainder of the land in this province consists of white-owned commercial farms.

The Northern Cape
In terms of population size, the Northern Cape is the smallest in the country, since it has 2% of all the people. But in area, it is the largest province, covering a vast 30% of South Africa’s land mass. In common with the Western Cape, the majority of people in this province (57%) are coloured, while 29% are African. Those living in the province tend to be clustered in small towns or villages: 71% live in areas defined as urban, and large parts of the province are either uninhabited or sparsely inhabited.

Mpumalanga
With its 7% share of the people, Mpumalanga is the third smallest province as far as population size is concerned. It occupies 6% of the country’s land mass. The former ‘homelands’ of KwaNdebele and KaNgwane, and parts of Lebowa and Gazankulu, are found within its borders. Ninety percent of its people are African. Most people (70%) in the province live in non-urban areas.

KwaZulu-Natal
With its population of more than one-fifth (20%) of all the people in the country, KwaZulu-Natal is the most populous province, but occupies only 8% of South Africa’s land mass. While the vast majority of people in the province (83%) are African, a large proportion of the one million Indians in the country (80%) live here. It is largely rural in character, with 61% of the population living in non-urban areas.

The Western Cape
The Western Cape, containing approximately 11% of the population, is overwhelmingly urban – 86% of its people live in urban areas. Its essentially urban character distinguishes it from the other provinces discussed thus far. The province spreads over 11% of the land mass of South Africa. In common with the Northern Cape, the majority of people living in the province (57%) are coloured, while relatively few in the province (19%) are African.

Gauteng
Nineteen percent of South Africa’s population live in Gauteng, the second largest province in terms of population size. But it is the smallest province as far as land mass is concerned, occupying less than 2% of the country. It is almost entirely urban, with 94% of its population living in urban areas. The majority of people living in the province (62%) are African. However, a substantial proportion (31%) are white. Indeed, 40% of all whites in South Africa live in Gauteng.

Average household income in each province

Table 2 indicates the substantial differences that exist in average annual household incomes when comparing provinces. (Estimates of the design effects, standard errors and confidence intervals of a selection of the most important of these variables are available from the CSS.)

The table shows that the Eastern Cape, which is largely rural, has the lowest annual average household income (R24 000), while Gauteng, which is almost entirely urban, has the highest (R71 000).

Differences in average annual household income by province and race

Within each province, there are marked differences in average annual household income by race. This is also indicated in Table 2.

Table 2: Average annual household income by race of head of household in each province

Province Average annual household income
  African

R 000

Coloured

R 000

Indian

R 000

White

R 000

Total

R 000

Eastern Cape

Free State

Mpumalanga

North West

Northern Province

Northern Cape

KwaZulu-Natal

Western Cape

Gauteng

17

14

20

21

26

13

24

22

37

24

16

30

25

43

18

41

33

53

58

-

78

-

-

34

61

54

111

90

72

82

93

140

79

98

98

118

24

25

30

30

31

31

37

53

71

- Number of households in the survey was too small for this analysis.

Average annual household income by other sub-categories

In Table 3, the average annual household income is shown for a number of different sub-categories of the population, for example, urban residents and shack dwellers (those living in an informal dwelling).

- Households consisting of only one person have the lowest average incomes.

- This average tends to increase to reach its highest level (R51 000) in those households consisting of four people.

- Then it starts to decrease, reaching another low level of only R28 000 on average, per annum, for households consisting of eight or more people.

Table 3: Average annual household income in various sub-groups of the population

Sub-group

Average annual household income

R 000

Type of area of residence: Urban

Non-urban

55

23

Type of dwelling: House

Informal dwelling

Traditional dwelling

52

15

14

Household size: One person

Two people

Three people

Four people

Five people

Six people

Seven people

Eight or more people

25

49

47

51

46

37

30

28

Gender of head of household: Male

Female

48

25

Occupation of head of household: Management/prof./tech./admin.

Clerical and sales

Production/transport/services

Pensioners

101

41

38

23

Income distribution

Average incomes, on their own, do not describe how income is distributed within a particular sub-group. In this section, we examine the way in which income is distributed in various sub-groups by studying the proportion of households within each national income quintile for a number of variables.

Income distribution by race

Through looking at income quintiles, Figure 1 demonstrates that income is very unevenly distributed by race.

Figure 1: Income category by race of head of household

 

Income distribution by gender

Income in South Africa is also unevenly distributed by gender, with female-headed households being significantly poorer than male-headed ones.

Figure 2: Income category by gender of head of household

 

Income distribution by race and gender

Figure 3, which examines incomes by both race and gender, indicates that African, female-headed households are the poorest group in the country, followed by African, male-headed households, while white, male-headed households are the most affluent.

Figure 3: Income category by gender and race of head of household

 

 

Income distribution in urban and non-urban areas

The South African population is distributed evenly between urban and non-urban areas. But this distribution varies by race group. Almost two-thirds (63%) of Africans live in non-urban areas as against a far smaller proportion of coloureds (16%), Indians (5%) and whites (9%).

Annual household incomes vary widely in urban, compared to non-urban, areas, as shown in
Figure 4.

Figure 4: Income category among urban and non-urban households

 

Income distribution by gender in urban and non-urban areas

Figure 5 examines income quintiles by gender of head of household, in both urban and non-urban areas. It demonstrates that non-urban, female-headed households are the poorest in the country, followed by non-urban, male-headed ones. On the other hand, male-headed households in urban areas are the most affluent.

Figure 5: Income category by gender of household head in urban and non-urban areas

 

Race and gender differences in income in urban and non-urban areas

Urban, non-urban and gender differences in incomes are most pronounced in African households, compared with coloured and white ones. (Indian households are excluded in this section, because there were too few female-headed, Indian households in the sample, particularly in non-urban areas, for further breakdowns). This emerges from a comparison of income quintiles by race and gender in both urban and non-urban areas.

African households
Table 4 shows that African, male-headed households living in urban areas have higher incomes than African, male-headed households in non-urban areas. However, African, female-headed households in non-urban areas have the lowest incomes of all.

Table 4: Income distribution by race and gender in urban and non-urban areas

Income quintile by race Non-urban female Non-urban male Urban female Urban male Total
 

%*

%*

%*

%*

%*

African: Top quintile: Quintile 1

Quintile 2

Quintile 3

Quintile 4

Bottom quintile: Quintile 5

Total

3

12

18

28

37

100

7

15

25

28

26

100

11

24

25

21

19

100

19

29

27

17

8

100

10

19

24

24

23

100

Coloured: Top quintile: Quintile 1

Quintile 2

Quintile 3

Quintile 4

Bottom quintile: Quintile 5

Total

6

14

21

28

31

100

3

13

25

39

20

100

12

26

28

19

15

100

24

35

23

13

5

100

17

29

25

18

11

100

White: Top quintile: Quintile 1

Quintile 2

Quintile 3

Quintile 4

Bottom quintile: Quintile 5

Total

52

31

7

8

2

100

75

18

4

2

1

100

38

32

17

8

5

100

73

19

6

2

0

100

65

22

8

4

1

100

* Due to rounding, figures may not always add up to exactly 100%

Among Africans, non-urban households are the poorest in the country. There are proportionately fewer female-headed households in urban areas in the lower income categories, compared to male-headed non-urban households.

Coloured households
In households where the head is coloured, a similar pattern emerges although, overall, these households tend to have higher incomes than African households.

White households
White, male-headed households are amongst the most affluent in the country, while white, female-headed households are less affluent.

This demonstrates that not only absolute, but also relative, comparisons are important considerations in understanding South African income distributions. White households generally have the highest incomes in the country, but within the category of white households, there are significant gender inequalities. White, female-headed households in both urban and non-urban areas are relatively well-off, compared with African and coloured households in these areas. But when compared with white, male-headed households, they are relatively poorer.

Differences in income distributions by province

Figure 6 demonstrates the uneven distribution of income within the provinces.

Figure 6: Income category by province

 

Income distribution by gender and area within each province

In Table 5, we examine income distribution differences among male-headed and female-headed households in urban and non-urban areas in each province, starting with the province that has the largest proportion of households in the lowest income category, and ending with the province that has the smallest.

Table 5: Income distribution by gender and urban/non-urban areas within each province

Income quintile by province Non-urban female Non-urban male Urban female Urban male Total
 

%*

%*

%*

%*

%*

Eastern Cape: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

2

7

11

28

53

100

5

9

20

35

31

100

10

21

22

22

25

100

31

23

19

17

11

100

11

13

17

27

32

100

Free State: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

2

5

7

27

60

100

4

5

14

30

47

100

6

14

23

28

29

100

27

25

18

20

10

100

13

14

17

25

31

100

Northern Province: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

6

14

18

24

37

100

17

18

20

24

22

100

16

25

27

21

11

100

40

28

15

9

8

100

15

18

19

23

26

100

North West: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

3

11

16

32

38

100

5

11

18

32

34

100

11

23

23

21

22

100

33

25

24

12

6

100

14

17

20

25

24

100

Northern Cape: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

7

15

18

22

38

100

13

9

12

34

34

100

6

16

27

27

25

100

21

23

27

17

13

100

14

17

22

24

23

100

Mpumalanga: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

3

15

31

28

23

100

9

18

30

24

19

100

14

25

23

18

20

100

33

29

19

11

8

100

12

19

28

22

17

100

KwaZulu-Natal: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

4

17

26

30

22

100

7

21

31

26

15

100

22

29

26

16

7

100

42

31

16

8

3

100

19

24

25

20

12

100

Western Cape: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

30

24

18

20

8

100

12

14

33

32

9

100

20

28

26

15

11

100

38

29

20

10

3

100

30

27

23

14

6

100

Gauteng: Quintile 1 (top)

Quintile 2

Quintile 3

Quintile 4

Quintile 5 (bottom)

Total

19

18

16

26

21

100

32

12

25

21

9

100

27

32

22

12

7

100

50

25

16

7

3

100

42

26

18

10

5

100

* Due to rounding off, figures may not always add up to exactly 100%

Eastern Cape
Table 5 shows that, in the Eastern Cape, incomes are highly unequally distributed by gender of the head of household and by urban or non-urban place of residence.

Free State
Incomes are even more unequally distributed by gender and by urban versus non-urban place of residence in the Free State than they are in the Eastern Cape.

When comparing all provinces, income distribution in the Free State is the most unequal in the country.

The Northern Province
There is a similar pattern of income distribution in the Northern Province as in the Eastern Cape.

The North West Province
Income distribution in the North West Province, and inequalities in incomes, are very similar to the Northern Province.

The Northern Cape

Mpumalanga

KwaZulu-Natal

The Western Cape

Gauteng
Findings regarding non-urban distributions of household income in Gauteng should be treated with caution, since the income distribution patterns among both female- and male-headed households in non-urban areas are based on a small number of households in the sample. Nevertheless, the picture that emerges is consistent with the overall picture in other provinces.

This establishes that income distributions, even in the wealthiest province, tend to be highly unequal.

Measures of income inequality

Two additional measures of income inequality, namely Lorenz curves and Gini coefficients, further demonstrate the extent of income disparities in South Africa.

A Lorenz curve is a graph showing the cumulative income distribution in a given population, as illustrated in Figure 7. The relevant population in this case is the number of households in the country. The cumulative percentage of households, arranged from poorest to most affluent (from 0% to 100%), has been plotted on the horizontal axis, while the cumulative percentage of income, arranged from least to most, (also from 0% to 100%) has been indicated on the vertical axis.

A cut-off point of 20% on the horizontal axis indicates the poorest 20% of households, while a cut-off point of 60% indicates the bottom 60% of households. A cut off point of 20% on the vertical axis indicates 20% of income while a cut-off point of 60% indicates 60% of income. A diagonal line joins the vertical and horizontal axes.

In a Lorenz curve, the vertical axis on the right-hand side represents one side of a triangle, while the horizontal axis represents the second, and the diagonal connecting the two axes represents the third side of the triangle. The Lorenz curve is drawn within this triangle. The curved line in Figure 7 is the actual Lorenz curve.

The nearer this curve is to a straight diagonal line, the more equal the income distribution. The more curved the line, the less equal the income.

A Gini coefficient involves a convenient short-hand way of indicating the relative degree of income inequality, based on the Lorenz curve. It can vary from the value of zero, indicative of absolute equality in income distribution, to the value of one, indicative of absolute inequality. It is essentially a ratio. The area between the Lorenz curve and the diagonal forms the enumerator, while the total area of the triangle in the Lorenz curve forms the denominator.

In other words, the richest 20% of households have 65% of all household money at their disposal, while the poorest 20% have only 3%.

Figure 7: Lorenz curve indicating the extent of income inequalities in 1995

 

Table 6 gives the Gini coefficient for the country as a whole, and for various sub-groups of households.

Table 6: Gini coefficients of different types of South African households

Type of household Gini coefficient
All households

0,59

Race of head of household:

African

Coloured

Indian

White

0,52

0,50

0,44

0,49

Gender of head of household:

Male

Female

0,75

0,55

Type of area:

Urban

Non-urban

0,57

0,55

Summary

Income in South Africa is distributed in a highly unequal manner. Annual household incomes vary by race, gender and province; within province; and by urban and non-urban environments. African female-headed and male-headed households in non-urban areas are the poorest. Indeed, African households generally tend to be the least affluent, followed by coloured and Indian households, while the most affluent are white. Female-headed households in urban areas are better off than male-headed households in non-urban areas.