McDonald's to Bugaboo gain from South Africa's black middle class

South African malls are abuzz with the growing middle class. (Delwyn Verasamy, M&G)

South African malls are abuzz with the growing middle class. (Delwyn Verasamy, M&G)

Ntombi Shabalala arrives at the Design Quarter mall in an affluent suburb of Johannesburg in her Hyundai ix35 SUV, wearing red suit pants, a black jacket and black boots. Gesturing to a waiter with a manicured French-tip fingernail, she orders a fresh-squeezed carrot juice.

She’s come a long way since 1998, when she moved to Johannesburg four years after South Africa held its first all- race elections. Then, Shabalala shared a one-bedroom apartment in Hillbrow, in a crime-ridden area that often had power and water outages.
Her two daughters stayed at home with an aunt. Her income came from selling food from a trailer on the street—a fitting beginning for someone who became a store manager at McDonald’s South African division.


“I am now able to chase the good life, in the right direction, investing for the future,” Shabalala, 39, said last month. “Through my job, it’s taken me from nowhere to being able to be the woman I am today.”


Shabalala is a member of South Africa’s growing black middle class, 4.2-million people strong last year and double what it was in 2004, according to a study released by the University of Cape Town’s Unilever Institute of Strategic Marketing on May 8. The country now has more middle-class blacks than white, and the group spends more annually as well. The newly affluent are moving from townships and the countryside to formerly whites-only suburbs, boosting the revenue of companies from car retailers to supermarkets. Woolworths, Capitec Bank and McDonald’s are among those providing management jobs for people such as Shabalala.


Power housing
Since 1994, national income per capita has climbed 40%, access to power has risen to more than 80% of the population from 50% and more than 3-million houses have been built, Finance Minister Pravin Gordhan said on May 21.


Of a population of 53-million people, the number of black South Africans classified as the middle class rose from 1.7-million in 2004, the study showed. To be classified as middle class, respondents had to meet at least two criteria. These included having a household income of between R15 000 rand and R50 000, owning a car, being employed in a white-collar job and owning or renting a home for more than R4 000 a month in a city or town.


The middle class is visible at Johannesburg’s Sandton City, the southern Hemisphere’s biggest shopping mall, where high-heeled shoppers carry bags from Forever New and Young Designer’s Emporium, new mothers push infants in Bugaboo strollers and young, black men with skinny jeans try on Italian shoes.


Power shopping
“We have to do better than our parents and grandparents did,” said Zanele Motaung, 24, who works in the accounts department of state power utility Eskom , as she shopped for tops at a Truworths outlet. As she spoke, her younger sister, Mpho, glanced at her iPhone and carried a pair of shoes she’d tried on.

Zanele, who moved to Johannesburg from the eastern agricultural town of Standerton in 2007, earned her college degree with the help of a scholarship from Eskom. Mpho is studying accounting at the University of Johannesburg.

While South Africa’s middle class is growing, the unemployment rate of 25.2% is the highest of more than 30 emerging-market nations tracked by Bloomberg. Income inequality has widened since 1994, with 35% of the population living on less than $51 a month. The Gini coefficient, a measure of inequality in which a reading of zero means society is totally equal, worsened to 0.63 in 2009 compared with 0.59 in 1993, according to the World Bank.


Township Protests
South Africa had a record 173 protests by township residents last year over a lack of housing and basic services, according to Johannesburg-based research group Municipal IQ.

“A successful middle class brings more stability, economic growth and less socio-political risk,” Elna Moolman, a Johannesburg-based economist at Macquarie Group, said in an interview. “Dissatisfaction grows when people are left behind.”


Still, the lure of the expanding middle class has attracted retailers ranging from Inditex SA’s Zara to Topshop. Wal-Mart bought Johannesburg-based retailer Massmart Holdings two years ago as it looked for a foothold in the region. Burger King opened its first outlet in South Africa on May 9 in Cape Town, following the 1995 arrival of bigger rival McDonald’s.


Food Preparation
“For any economy to survive it needs a strong middle class and in South Africa it’s growing, cash-rich and willing to spend,” Jaye Sinclair, chief executive officer of Burger King South Africa, said in an interview from Cape Town. “The middle class will be the saviour for South Africa down the line, not exports.”

Burger King plans to open about 12 branches in South Africa next year as it seeks to tap into the country’s R1.9-billion a year fast-food market, Sinclair said.


It was McDonald’s that gave Ntombi Shabalala the path to the middle class. After being hired in 1998, she received training on how to prepare food and clean the work stations. She was paid R368 every two weeks, coming into work on her days off for a free meal. Within five years, she’d been promoted three times, quadrupled her salary, opened a savings account and bought her first car.


Two Houses
Shabala now owns two houses in Cosmo City, northwest of Johannesburg, one a two-story home she lives in. The other is a house she used to live in and now has enlarged, paid off and rents out for R10 000 a month.

She and her teacher-husband earn R36 000 a month from their full-time jobs. She doesn’t feel as if she’s “arrived,” and plans to buy a McDonald’s franchise in the next five years. Her daughters joined her in Johannesburg in 2004. The older, now 21, works in a call center and the other, 17, is in school. She also has two younger daughters, aged 14 months and eight years.


“I am motivated by my children,” said Shabalala. “I don’t want them to grow up the way I did. There was a lot of poverty where I grew up. If I can get to where I have, anyone can.”


Smiling, she got up from her chair, picked up her handbag and headed off to meet her personal trainer at a nearby gym. – Bloomberg

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