WHY……

The challenges of unemployment in South Africa are also compounded by high levels of poverty and inequality. South Africa is one of the countries which have a high Gini coefficient – the third highest in Africa after Namibia and the Seychelles. Since the advent of democracy in South Africa in 1994, various policies have been implemented to address these challenges. 

Few people collect all their income from one source, hold all their wealth in a single form of asset, or use their assets in one activity. Thus, we can say diversification is the norm. Diversification is defined as the process by which rural households construct increasingly diverse livelihood portfolios, making use of increasingly diverse combinations of resources and assets in order to meet their basic needs, improve their living standards or welfare, and manage risk.

Income diversification refers to the increase in income sources or the balance share among the different sources.

Household with multiple income sources will experience less variability in total income than specialized households. Households who have a greater diversity of income sources have a comparative advantage over those with lower diversity. An improving income diversification level causes a variation in both the number of earning activities and the distribution across volumes from each components.

 

THE DANGER……

When you first start out on your journey to investing, it is likely that most, if not all, of your household income, will come from your primary job. 

It is not a state of affairs with which you should be content for long. There is nothing more dangerous than relying on one or two employers to support your household’s income needs. Although this goes against conventional wisdom, which tends to focus on labor as the primary mechanism for economic security, make no mistake: Job security is an illusion. In fact, I would go so far as to say a talented small business owner who has the flexibility to enter new markets or adjust his cost structure, provided he or she has the financial knowledge to make wise decisions, is in a far less risky situation than a school teacher who could be laid off due to budgetary concerns despite the potentially higher volatility of cash flows.

 

The challenges of unemployment in South Africa are also compounded by high levels of poverty and inequality. South Africa is one of the countries which have a high Gini coefficient – the third highest in Africa after Namibia and the Seychelles.