SA’s mysterious ‘middle class’

Justin Visagie, the director of economic planning and research for the Eastern Cape department of economic development, environmental affairs and tourism, says that progress has been far less than politicians are claiming. (supplied)

Justin Visagie, the director of economic planning and research for the Eastern Cape department of economic development, environmental affairs and tourism, says that progress has been far less than politicians are claiming. (supplied)

Billions of rand will be spent developing strategies for Africa in general and South Africa in particular, using data seeking to define a middle class that no longer exists as a viable social grouping with shared values, cultures and living standards.

Internationally, the concept of a middle class positioned in society between the rich and the lower working classes and the poor is becoming outmoded and largely irrelevant — except for politicians and others who manipulate social and economic data for their own ends.

The ease with which even the most authoritative available socioeconomic data can be distorted is demonstrated by the contrasting arguments that can be developed in assessing the success and failure of South Africa’s black economic empowerment (BEE) policies, a key issue in the upcoming general election.

After 20 years of democracy, the data appears so distorted, that there may not even be a definable middle class anymore and citizens may be identified as middle class even when they cannot afford a healthy diet or quality education for their children, do not have running water or toilet facilities, still live in shacks, and cannot even aspire to such internationally accepted definers of middle class as a professional qualification or ownership of a car or a house.

Modest progress
The quality of the economic and demographic data on which key decisions are made in Africa might improve slightly with International Monetary Fund plans to throw another $100-million at collecting more reliable information from the continent.

However, this will do little to resolve the many other issues that compromise the collection and interpretation of middle class demographics.

The size and growth of the black element in the middle class in South Africa has become a prime measure of our economic growth and development, making reliable data defining our middle class and tracking lifestyle changes essential.

How the middle class has performed since 1994 in a free market economy, from which genuine attempts are being made to eliminate racial and gender discrimination, will be a crucial platform forvoter judgment of the ANC in the next election.

The opinion of analysts constantly probing the quality of available statistics, such as Justin Visagie, the director of economic planning and research for the Eastern Cape department of economic development, environmental affairs and tourism, is that progress has been far less than politicians are claiming.

“In the affluent middle, there has been significant racial transformation and growth of the black middle class,” says Visagie. “However, households in the actual middle of the income spectrum have experienced the lowest income growth of all groups since 1993.”

Visagie recently presented an overview of the efforts to define and measure progress in South Africa’s middle class to the Economic Society of South Africa, in which he explored changes in the size, racial and gender profile of the middle class within the context of BEE. He concluded that affluent middle class growth was modest and only slightly ahead of population growth.

The World Bank defines a middle class consumer as earning between $2 and $13 (United States dollars) per day, while the African Development Bank has an upper limit of $20 per day.

These organisations calculate that there are about 300-million middle class Africans. But the size of South Africa’s middle class and its performance cannot be compared either to the rest of the continent or to international data for other developing markets.

South Africa’s figures are distorted particularly by the practice of adding the top earners — the upper class for most of the world — into the middle class category. About 3% of the population, the wealthiest population sector has enjoyed the biggest growth in earnings since 1994 and so grossly distorts the progress of our middle class.

Therefore, BEE statistics could reflect a disproportionate influence by the black diamonds, obscuring the role played in South Africa by rising crime and corruption.

Vulnerable lives
EY (formerly Ernst & Young) and other reputable companies have pointed out that about two-thirds of the continent’s African middle class earn only between $2 to $4 per day, way below the poverty line by international standards.

They are not consumers with acceptable middle class purchasing power. Only daily earnings of at least $13.70, according to global analysts such as Citibank, can define an emerging market middle class consumer able to start purchasing cars and other larger consumer durables.

Analysts also say that many of these people classed as middle class, in both Africa as a whole and in South Africa, are dragged into the middle class data by the way that being combined with the super-rich inflates their average earnings.

Further inaccuracies are introduced by not measuring properly the demographics in rural areas, by different weightings for the value of rentals received and paid, the now vast remission payments by migrant workers back to their extended families in South Africa, and many other factors.

Even relatively “simple” metrics, such as population growth among black people since 1994 and the loss of about a million white people from the middle class, are assessed differently between data sets, making it virtually impossible to compare like with like.

The African Development Bank’s quantification of Africa’s middle class as having a daily expenditure of between $4 and $20, is just more than 120-million (13.4%) of the continent’s population.

Taking remittances from Africans living abroad into account, tens of millions of poor people are boosted into official middle class data, probably doubling to a plausible estimate of 300-million in the African middle class.

About half of these live such vulnerable lives, that they drift in and out of middle class status due to life events such as illness, the birth of a child, or the loss of a job.

In casting our votes, deciding on investment policies, formulating political strategies and developing strategic infrastructure and marketing budgets, we cannot make reliable judgements on class-based statistics subject to such distortion.

It is questionable whether we want to continue using class definitions introduced by colonialists and incorporating outdated prejudices and concepts about society that are now irrelevant. Informed anecdotal evidence may tell us more than official statistics.

For instance, Deloitte reported recently that most of the true African middle class live in urban areas, hold salaried jobs or are small business owners, have fewer children than previous generations or than their contemporaries in rural areas, are increasingly technologically knowledgeable and enjoy more recreational time. They are culturally self-confident and politically assertive.

Political propaganda
Even when we use better definitions of the continent’s middle class, they must be viewed in the context of more than 60% of Africans surviving on under $2 a day.

Despite political propaganda, in reality many in the middle class are poor by global standards and do not have significant purchasing power nor the ability to pay taxes.

While there is some justification in the ANC claiming that the middle class is enjoying better lives and contributing to economic development, it is misleading to imply that BEE and other benefits of democracy have significantly reduced poverty when, for the majority of the so-called middle class, there has been a significant widening of the gap between the wealthiest and the poor.

The bottom line is that a disproportionate amount of the rewards of democracy and economic transformation have accrued to the super rich.

This article has been made possible by the Mail & Guardian's advertisers. Content and photographs were sourced independently by the M&G supplements editorial team, unless otherwise indicated. It forms part of a larger supplement