Those coming from Black middle class backgrounds in South Africa and Kenya were prevented from owning many types of assets under colonial rule and Apartheid. How have these groups come to share in the wealth stock of their respective nations since then, asks Rebecca Simson?

One of the thorniest legacies of settler colonialism is that it leaves a disproportionate share of land, property and financial wealth in the hands of the descendants of the colonists, often resulting in marked racial wealth inequalities in postcolonial societies.

There are no simple remedies to this. Outright confiscation has rarely worked out well, as it sends investors and the highest skilled running for the door. Sometimes governments have purchased and redistributed or nationalised the assets of settler groups, but governments can usually only afford to do this on a small scale. Alternatively, societies can accept a racially uneven distribution of wealth and wait for slower processes of social mobility to gradually change the face of the asset-owning class. The hope is that as the income distribution shifts, high-earning members of the indigenous majority will be able to save, access mortgages, and acquire assets, be it housing, land of firms.

How have such processes of racial wealth transformation worked in practice? In recent research I have explored the dynamics of what we might think of as the middle class racial wealth transition in Kenya since independence in 1963 and South Africa after 1994. How have middle class Black South Africans and Kenyans, who were prevented from owning many types of assets under colonial rule and Apartheid, come to share in the wealth stock of their respective nations since?

Racial wealth inequality in the new South Africa

In a recent working paper, Mina Mahmoudzadeh and I measured the racial composition of the deceased leaving estates above R.250,000 (roughly £11,000). We concluded – perhaps not so surprisingly – that the racial wealth gap in South Africa remains large. Roughly half of all White adults in South Africa own wealth of at least R.250,000, while only 3% of Black adults do.

Roughly half of all White adults in South Africa own wealth of at least R.250,000, while only 3% of Black adults do

We also found that almost half of all Black South Africans who left such wealth at their deaths were resident in townships. South Africa’s townships were Apartheid-era public-housing estates designated for non-white urban residents, typically located on the outskirts of cities and consisting of small and simple houses. In the 1980s and 1990s, privatisation schemes made many former tenants private owners of these homes. Thus many of the township residents leaving estates today are probably bequeathing such a township house to their next of kin, as the anthropologist Max Bolt has demonstrated in the case of Johannesburg.

Consequently, the share of South Africa’s Black middle class earners that have acquired previously White-owned housing stock appears to be very small. A rough back-of-the-envelope calculation would suggest that only around 1% of Black South Africans dying today own property in formerly White areas. (The “dying today” caveat is important, however, and the picture might look a little less grim if we were observing younger generations that came of age after 1994).

These results seem to reaffirm the notion that it is hard to redistribute wealth through market means alone. Although South Africa has promoted a system for financial asset transfer through Black Economic Empowerment and successor programmes, and built several million low-cost social houses to which recipients will gradually gain title, whatever efforts have been made to aid broader middle class wealth acquisition don’t seem to have moved the dial significantly.

The Kenyan comparison

Kenya offers an interesting comparative case, despite several important differences: the colonial and subsequent period of minority rule was much shorter than in South Africa, the White population orders of magnitude smaller, and likewise the share of agricultural land appropriated by colonists. Even so, as in South Africa, Kenya’s European and Asian settler population owned much of the country’s asset stock at independence in 1963 and the transition to independence largely respected these colonial-era property rights.

Crucially, in Kenya, as in South Africa, what we might think of as today’s African middle class wealth-holders are typically owners of assets that came into the family’s possession before decolonisation or the end of Apartheid, or else were assets acquired with a helping hand from the state.

As in South Africa, today’s Kenyan middle class wealth-holders are typically owners of assets that came into the family’s possession *before* decolonisation, or else were assets acquired with a helping hand from the state.

Again, I use the characteristics of estate-leavers to shed light on the owners of assets. The majority of Kenyan estate-leavers since the 1980s were residents in areas within what was under colonial rule known as African reserves – largely rural parts of Kenya where land remained under peasant production and customary tenure, and were titled in the late 1950s or after. Most were probably bequeathing long-standing family land, claims to which often predated colonial rule, rather than wealth acquired since independence. Kenya did also undertake land redistribution in the 1960s, as the state bought and redistributed formerly European-owned farms to African households (albeit on loan terms), but the beneficiaries of such redistribution appear to make up a small share of today’s wealth-owning population.

In recent decades the share of Nairobi-resident estate-leavers has also been increasing. What we know about their asset portfolios is more speculative, but it seems that most African Kenyans owning property in and around Nairobi owned plots in neighbourhoods that were still undeveloped and under public ownership in 1963. It was probably sales of plots on public land, often below market price and to people with access to mortgages from state-owned banks, that drove the emergence of an African Kenyan urban property-owning class, more so than the reshuffling of ownership of already developed land. (I don’t want to make Nairobi out as a paragon of success, here: my back-of-the-envelope estimate using census data suggests that only 17% of Nairobi’s higher quality homes are owner-occupied today. Consequently, urban homeownership rates remain low, and mortgage markets function poorly, but arguably more rather than less state-intervention would have moved the dial further.)

The expansion of homeownership around the world

In Europe and the US, a big expansion in homeownership took place in the early postwar era, primarily between the 1950s and 1970s, when economies were booming and housing was relatively inexpensive relative to median incomes.

Favourable mortgage policies, various forms of state subsidies and, perhaps most important of all, a rapid pace of housing construction all aided the broadening of the homeowning class and consequent reduction in wealth inequality. In the US, the GI Bill guaranteed mortgages for WWII veterans; in Britain in the 1980s, the “Right to Buy” scheme allowed tenants in social housing to buy their homes at below-market rates. Both initiatives boosted homeownership further.

The pragmatic answer – build more?

The South African and Kenyan cases both suggest that assets haven’t quickly and organically changed hands after racial restrictions on ownership were abolished. For most middle class asset owners, the assets in their possession often predate independence, or owe much to schemes that privatised previously public assets.

The South African and Kenyan cases both suggest that assets haven’t quickly and organically changed hands after racial restrictions on ownership were abolished

What this leaves is essentially a problem of marked property inequality. While there is no simple fix, further historical case studies would probably reinforce the idea that the most tried and tested peacetime solution is to build more and expand the private asset stock, rather than reshuffling ownership. A big push to expand the existing housing stock would hold down house prices, while progressive mortgage policies can be used to influence the composition of the buyers. Having built a sizable stock of social housing for low-income households, South Africa may need to apply some of that same ambition to aid middle-class housing acquisition, albeit with more private finance in the mix.

A silver lining is that countries like South Africa and Kenya are not alone in facing worrying levels of wealth inequality. After the great levelling of the early post-WWII era, today many Western countries are also grappling with growing housing inequality, as rapid house price appreciation has driven a gulf between those that entered the property market early and benefitted from rising house prices, and those that did not. Consequently, governments around the world seem to be coming to accept that more interventionist policies – on mortgages, housing construction, investment and taxation – are needed to counter rising housing wealth inequality. South Africa’s challenge is particularly extreme, but at least it faces a global policy culture that is increasingly supportive of active housing market policies.

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All articles posted on this blog give the views of the author(s). They do not represent the position of LSE Inequalities, nor of the London School of Economics and Political Science.

Image credits: Banner image shows Soweto (South Western Townships), Johannesburg, South Africa. Photo by Atosan via Shutterstock.