Rapidly growing but still small, the black middle class is steadily spreading its spending influence and finding itself socially, research released over the past year shows. A new report, Lost in Transformation South Africa’s Emerging African Middle Class?, prepared for the Centre for Development and Enterprise (CDE) by Professor Lawrence Schlemmer, attempts to capture the economic and social nuances of South Africans.
In late 2003, there were 1,6-million people who represented household income of R12 000 or more. Of these, 81% were white with blacks — coloureds, Indians and Africans — making up the remaining 19%, or 320 000 people. Africans made up 8,6% of this group. Schlemmer also found that the core African middle class grew by 21% a year between 1993 and 2003, yet still only comprises 1% of the African adult population.
Last year, Merrill Lynch economists Nazmeera Moolla and Refilwe Moloto published research into the aspiring noveau riche. Citing research from Stellenbosch University, they found that black households comprised 36% of the top 15% by income in 2000, up from 22% in 1995.
In the CDE study, Schlemmer estimates that 135 000 Africans in the core middle class will have grown to 916 000 by 2013. This represents more than 70% of the current number of middle class whites. Recent growth in the African middle class has been explosive. For instance, the 135 000 Africans in LSM9 and LSM10 had grown to 185 000, or by 37%, according to last year’s All Media Product Survey (Amps). Schlemmer notes that this growth rate, as well as that achieved between 1993 and 2003 cannot be sustained because of skills and education constraints, as well as the fact that transformation will slow down as targets set by the government and the private sector are achieved .
Wayne Preston, head of banking and operations at Investec Private Clients, told the Mail & Guardian that its business attracts a new class of “entrepreneurial blacks”. Although the company does not compile statistics by race, Preston estimates that 20% of its new clients are black. They use the full range of banking, but more interestingly, they often borrow to finance the growth of a business.
Eric Enslin, CEO of FNB Private Clients said that black South Africans who earn R750 000 or more already account for 30% of a market believed to have a revenue potential of R7-billion. This market is also made up of 74% business owners and 58% of it is younger than 45.
Moolla and Moloto described their spending on consumer goods as “rocketing”. This market was found to be fuelling a retail and property boom but disturbingly access to services such as insurance remained low.
The Merrill Lynch team found that areas that will benefit in the short term include building materials, the real estate and motor vehicle sectors.
Over the next five years, benefiting sectors show a marked shift. Short-term beneficiaries will continue to have a good time, and banks and insurance companies will enjoy growth, assuming they succeed in catering for their new clientele.
They warn of an “elephant in the room” or persisting inequality. They say that, although inter-racial inequality has declined, inequality among blacks has worsened. The number of people earning below R2 500 per month has grown from 10,1-million people in 2001 to 12-million last year, a situation which they say is “clearly unsustainable”.