WORDS ON WEALTH
Martin Hesse
I recently had the privilege of attending a highly enlightening presentation marking the release of a new study by the UCT Liberty Institute of Strategic Marketing on the state of South Africa’s black middle class.
It has been 15 years since the institute, one of South Africa’s leading marketing think-tanks, conducted its first study into this sector. What was already starting to become apparent back in 2007 has been confirmed by this research: the growth of the black middle class during South Africa’s democratic era has been extraordinary. In 2012, the institute noted this dramatic growth, when, for the first time, the black middle class outstripped the white middle class. The latest report charts its significant and continued rise, describes how it has changed in the last decade, and identifies trends likely to further entrench the sector as South Africa’s foremost consumer group.
So what does one mean by “middle class”? The institute took a quantitative approach, using household income level: a household is middle class if it does not have to rely on any form of government assistance or subsidies, which applies to households with a monthly income of more than R22 000. However, the study also acknowledged other characteristics of the middle class generally: a high level of education and skills, a solid work ethic, and a strong sense of identification with this group.
The study was conducted over a year. It surveyed more than 1 900 middle-class households and included input from over 300 interviews. The research was infused by engagement with marketing experts as well as input from radio station Kaya FM, which targets this sector.
Just one caveat here, which was emphasised at the presentation: middle-class does not mean “middle” when looking at South Africa’s population as a whole: while the black middle class as defined by the institute outnumbers the white middle class, the majority of the population is poor and overwhelmingly black. Inequality still reigns, unfortunately.
But the tone of the presentation was remarkably positive. A few things stood out for me:
The importance of education. Paul Egan, managing consultant at the institute, and report co-author, said education – particularly tertiary education – was a driving factor in improving economic outcomes. “The correlation between economic outcomes and education is very strong (in terms of previously disadvantaged breaking into the middle class). 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.”
A large proportion is still first-generation middle-class. Most black middle-class adults were born into poor families and through education and hard work were able to break out of poverty. These people have a very different perspective on life than people who are born into the middle class, and whose middle-class roots go back a number of generations. Their aspirations are partly driven by a fear of falling back into poverty, with many just one or two pay cheques away from doing so.
However, the research found that the black middle class has matured over the last 15 years, with more and more second-generation middle-class families emerging. A longer time spent in the middle class has had the benefit of strengthening financial decision making and creating a stronger long-term financial outlook.
Resilience in the face of adversity. Zandile Makhoba, lead specialist: insights and development at Liberty, said an indicator of being middle-class was that you were able to weather a storm. Such a storm came in the form of Covid-19, and South Africa’s black middle class showed surprising resilience. However, finances were currently a major source of stress (above crime). The pandemic did create fear about “slipping back into a place of uncertainty”. A worry was that, because many families were currently on fine margins, they were not saving.
“Black tax” is not a tax; it’s an honour. To a large extent, first-generation black middle-class workers do not support their parents and other family members because they have to or are expected to; it’s because they want to. They want to give back to the folk who made immense sacrifices in order for their children to have a good education and escape the cycle of poverty. They do it with a sense of pride, with the aim of uplifting the communities from which they emerged.
Expect a wave of black retirees. Dr James Lappeman, head of projects at the institute and report co-author said: “In the next 20 years we’re going to be seeing the first major wave of black middle class retiring. What this will look like is still open to interpretation, as research into black middle class retirement is still limited. However, the study's researchers noted that major shifts in this regard should be anticipated, and cautioned that companies should be careful to just copy and paste strategies from the past.”
Parts of the research findings will be made available to the public over the next few weeks. Go to www.libertyinstitute.uct.ac.za
PERSONAL FINANCE
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