South population of orphans in the country, approximately

South Africa is the largest economy in Africa, “with the
government’s commitment to market economy making it a business hub for foreign
investment”, (Cavusgil et al., 2013). Large mineral reserves and incredibly
advanced manufacturing facilities have led to increased economic growth.
However, “history has shown that the economy was built on systematically
enforced racial division in every area of the country, leaving deep scars of
inequality and economic inefficiency”, as told by (Visagie, 1997).


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Although a rapidly advancing developing economy, like any
developing country, poverty is a problem seen far too often, proven by the
Human Development Index falling from 0.73 in 1995 to 0.67 in 2003 (UNDP,2004).
The increasing number of people who do not have access to basic healthcare and
education, can be seen with upwards of two million people dying from AIDS
(PlusNews, 2006). The mortality rate of AIDS victims who cannot access medical
attention is 100%, leading to a crisis with regards to social problems and increasing
population of orphans in the country, approximately two million of them in
2010, (Department of Social Development, 2005)


There has been increased investment in education reform
since the end of apartheid. Introduction of education to black citizens has led
to a dramatic increase in the black population completing higher level
education. Investment in education is still necessary, as the core text outlines,
as people who come from underprivileged neighbourhoods are being held back,
with 27% of 6th grade students being illiterate, compared to 4% of
the wealthier population, according to (Spaull, 2013). He bases this research
on the income inequality still faced by people and the segregation implemented
during apartheid, as an area that still needs to be addressed.

Income Inequality

Reforms have been introduced to evenly distribute public
finances and allow for widespread income equality. Sadly, there is still an unequal
distribution of wealth, with the expanding informal sector allowing the rich to
stay rich and the poor to stay poor. As stated in the core text, there is a
parallel 1st and 3rd world economy within a single
nation, which, unless merges together, will allow for unemployment rates and
income inequality to rise. Black people are still largely discriminated
against, accounting for 90% of the country’s poor population (United Nations,
2004). (Barbarinde, 2009) goes on to state that the level of income equality is
“particularly acute and based mainly upon racial stratification”.


Nearly quarter of a century since the abolition of
apartheid, in the third quarter of 2017, unemployment was reported to be at
27.7%. Black South Africans are still discriminated against, as they account
for 85% of the unskilled workforce and 40% of those unemployed in 2014,
(StasSA). While unemployment in low-skilled manufacturing may have increased
due to many manufacturing companies relocating to developing countries that
offer higher incentives for business, as found by (Seria and Cohen,2009), the
government is not doing enough to encourage development of the manufacturing
sector, predominantly associated with the black population.

Part 2

Rising levels of Inequality

As mentioned before, rising levels of inequality will allow
the rich to stay rich and the poor to stay poor. The pyramid scheme commonly
seen in developing countries where the smallest block occupies the rich, the mid-level
middle class earners and the large base group of low income earners is a
problem for investors. As a business, sales and profits will not grow in an
economy segmented by income inequality. “Greater inequality reduces our
incentive to create new products and establish positive marketing strategies”,
according to (Yurko, 2011). In a
report carried out by KPMG, it is stated that if the wealth within a country is
occupied by a small percentage of people, it is saved rather than spent (, 2015). Yet without increased
expenditure by the overall population, businesses as well as the economy will
not grow. This is a disaster for our company. Unlike in developed countries,
“where a new product can be marketed to early adopters and then decrease its
price and content to offer it to the majority”, in developing countries where
the wealth is so unevenly distributed, we cannot market to the lower or middle
classes. If we invest into an economy that is wrought with financial
instability we fail to interact with wider society as we only look to market to
the rich. As claimed by Bex Dawkes,
impoverished people at the bottom of the ladder, “will not buy anything deemed
unnecessary for survival, limiting the ability for growth of organisations
within the consumer-goods market”, (,

Wealth Redistribution

The idea of wealth redistribution in developing countries has
the potential to allow for increased investment by our business. While many
emerging economies possess vast quantities of valuable resources that can also
attract FDI’s, the need for wealth redistribution is the major factor that will
influence economic growth, as outlined by (Alesina
and Rodrik, 1994), as they concluded that “initial inequality seemed to be
empirically associated with lower growth rates”. The KPMG report mentioned
above, goes on to state that, of a developing nations population, if the
poorest of society are empowered through economic growth, it can increase
consumption and open new competitive markets which will increase economic
growth (, 2015).
With a nation’s wealth more evenly distributed, marketers have a larger target
audience to advertise and sell their products, as those who earn less tend to
spend more. Increased consumption leads to increased sales and profits, while wealth
redistribution ultimately leads to reduced poverty. We as a business can help
with reduction of wealth inequality and poverty, by following the plan of
Palmolive in India who set up small, local supply chains and distribution
systems, which led to increased “long term relations” with small-scale
enterprises. The poor want better opportunities, want to be employed and want
to work to create a better life for their family. Chief economist Francois
Bourguignon outlined that countries with high levels of wealth inequality who
failed to redistribute wealth and attend the needs of the poorest in society, “underutilize
their productive and growth potential to a greater degree than countries with
fewer poor people or with a more equitable distribution”.



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