The rising tide: floods as drivers of income and welfare inequality in South Africa

This paper examines how floods impact inequality in South Africa by linking georeferenced flood data with cross-sectional household and individual data from the National Income Dynamics Study survey. Using a difference-in-differences estimation, we assess the causal effects of five major flood events between 2008 and 2017 on individual welfare across multiple dimensions: labour income, income with social benefits, post-fiscal income, consumption, and material deprivation. Our findings reveal that floods significantly reduce all income measures for individuals within 0.5 km of flood zones, with substantial spill-over effects extending to 1 km. While South Africa's extensive social grant system provides some cushioning, it is insufficiently shockresponsive to prevent welfare declines. Post-fiscal income falls as coverage gaps exclude informal workers, grant values erode due to post-disaster inflation, and indirect taxes continue to burden affected individuals. Floods also reduce individual consumption and increase material deprivation by destroying assets, disrupting markets, and raising the cost of essentials. These effects are particularly severe for low-income individuals in informal settlements, who face disproportionate exposure, limited recovery capacity, and prolonged deprivation. Our results demonstrate that floods are not merely environmental shocks but powerful drivers of inequality that interact with South Africa's pre-existing spatial, racial, and economic disparities. The findings underscore the need for shock-responsive social protection, resilient infrastructure investment, and equitable climate adaptation policies to prevent floods from further entrenching structural inequality.