SA’s black middle class has grown considerably in 10 years, but still playing catch-up

(Source: UCT Liberty Institute of Strategic Marketing)

By Neesa Moodley

29 Sep 2022

South Africa’s black middle class showed incredible resilience during Covid, and the impact on their finances during the pandemic was seemingly limited — with 70% saying they were not worse off financially. This is according to a recent research report on the black middle class by the UCT Liberty Institute of Strategic Marketing.

Zandile Makhoba, a consumer economist at the Liberty Institute, says about 10% of the black middle class said they had access to R100,000 or more, compared to 37% of the white middle class who had access to R100,000 or more, to be able to weather tough economic periods.

However, even though there was evidence of resilience, finances were a major source of stress, with many households reporting challenges with mental health. Other areas of concern included their health, crime, their children’s future and not being able to support dependants financially.

“If we go from a household income of R22,000 and more, we find that the concentration of the black middle class is still very much at the beginning levels,” says Makhoba.

“On average, looking at household income, there is a R16,000 difference between a black middle class household and a white middle class household.

“In terms of asset accumulation, there’s a good R3-million difference between the two middle class racial groups, with R1.7-million for the black middle class compared to R4.5-million for the white middle class,” she says. The pandemic did create a bit of fear about “slipping back into a place of uncertainty”.

One respondent said: “Coming from a disadvantaged background, the pandemic caused me so much anxiety as I was afraid to lose my job, and afraid I might go back to the financial state I initially grew up under.”

black middle class inset (Source: UCT Liberty Institute of Strategic Marketing)

Makhoba says that within the context of the South African economy, it would take only a small change for someone who has just entered the middle class category to slip back.

Mpumi Radebe, also known as DJ Mamba of Mamba Productions, says the pandemic saw him making some big changes.

“When you are running a business and you are responsible for other people financially, it is a lot. My wife also lost her job and I found myself having to move from a double-storey, four-bedroom house to couch-hopping and staying with friends.

“Covid made us realise tomorrow is not guaranteed and we had no choice but to let go of our education policies, life insurance, medical aid. Now post-Covid, my income fluctuates and in a good month I earn R30,000, compared to some months during the pandemic where we were lucky if we made R5,000,” he says.

The study, which was conducted over one year and encompassed more than 1,900 middle class households — along with more than 300 interviews — defines the black middle class as households with an income of R22,000 per month and above. It notes that the black middle class constitutes 3.4 million people, making up 7% of South Africa’s black African population — with a spending power of R400-billion per year.

Dr James Lappeman, head of projects at the institute and co-author of the report, said one of the main challenges was the lack of a single narrative.

“If you look at the news headlines, for instance, it’s either a case of ‘the middle class struggling with debt’ or ‘middle class thriving’. One of our main findings was this idea of a paradox of struggling but thriving within the black middle class.”

The report found there had been a “maturation” of the black middle class over the past 15 years — with a new concerted focus on creating generational wealth.

There is now access to better education and the benefit of more time spent in the middle class, which has strengthened financial decision-making and created a stronger long-term financial outlook.

“We are now seeing more and more second-generation black middle class families emerging… more children are being born middle class. So, the parenting experience is also different. There are also changes in identity,” Lappeman said.

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Ten years ago, the term used to characterise the spending power and habits of this then emerging class, was “asset catch-up” — where black people in post-apartheid South Africa still needed to buy the car or house as they didn’t have the privilege of inheriting assets like their white counterparts. That has now shifted to a desire to create generational wealth — which wasn’t seen 10 to 15 years ago.

Travel wasn’t a strong part of the narrative 10 to 15 years ago either, but researchers say this was increasingly noticed as a feature where this segment was using their spending power.

Paul Egan, managing consultant at the institute and report co-author, says tertiary education was noted as a catalyst for enhanced economic outcomes in the black middle class.

“The correlation between economic outcomes and education is very strong. Completing a tertiary qualification enhances outcomes significantly. There will always be unemployed university graduates, but as a proportion of the unemployed, they are relatively small.”

Looking ahead, Lappeman says in the next 20 years, the first major wave of the black middle class will be retiring.

“Major shifts in this regard should be anticipated, and companies should be careful of simply using copy-and-paste strategies from the past when trying to meet the needs of this new emerging consumer,” he says. BM/DM

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