In September
South Africa is a nation perpetually grappling with the shadows of its past. Despite decades of democratic rule, the economic ecosystem remains entrenched in patterns of inequality, a legacy of colonial and apartheid systems. Recent assertions by the department of employment and labour paint a grim picture — 62.1% of senior management jobs in the private sector are still occupied by white people.
This statistic is a symptom of a deeply saturated economy that continues to disadvantage historically oppressed people, cementing South Africa’s unenviable position as one of the most unequal societies in the Southern Africa Customs Union.
The concept of the “missing middle” is more than an economic anomaly, it is a sociological burden that stifles potential and perpetuates cycles of poverty. The World Bank’s 2022 Southern Africa Customs Union report highlights this, contending that inequality of opportunity accounts for almost half (47.7%) of the overall inequality in consumption per capita, with race contributing a significant 38.9% to this disparity.
This isn’t just about income gaps; it’s about systemic barriers that prevent a majority of the population from opportunities necessary for upward mobility and economic participation. The missing middle represents those individuals and small businesses that are too established for micro-financing but too small or risky for traditional commercial loans, creating a chasm in the financial landscape that impedes growth and innovation.
Moreover, education, enshrined as a constitutional right, paradoxically becomes a chasm rather than a bridge for many. While access to education is theoretically available, the quality and relevance of that education, coupled with a constrained labour market and soaring unemployment rates, create a vicious cycle. Differences in educational attainment account for a substantial portion of the inequality in outcomes, yet for those caught in the missing middle, individuals who struggle to afford tertiary education but do not qualify for financial aid, the promise of education remains largely unfulfilled.
Furthermore, the demographic, often comprising talented and ambitious young people, is left in economic limbo, unable to leverage their potential. The stringent financial criteria for tertiary education, often determined by a means test, inadvertently exclude a significant portion of deserving students. These are the students who are neither wealthy enough to self-fund their studies nor poor enough to qualify for state-sponsored assistance, falling squarely into the missing middle of the educational funding system. This gap not only deprives individuals of opportunities but also starves the economy of skilled labour and innovative minds.
The solution, therefore, must be multifaceted, both addressing the structural inequalities and fostering new avenues for economic inclusion. A vibrant culture of entrepreneurship, for instance, needs to take centre stage. Africa, with its burgeoning youth population, holds the potential to unlock more than $3 trillion in consumer spending.
This will require a proactive effort to cultivate entrepreneurial spirit among South Africa’s youth, enabling them to tap into the continent’s rapidly expanding consumer base. This means moving beyond the traditional job-seeking mindset and actively encouraging young people to become job creators.
The alarming unemployment rates across the region, often reaching 30% and soaring to 40 to 60% among youth, underscore the urgency. Much of this is “second-generation unemployment”, where even parents lack formal economic opportunities, perpetuating a cycle of disadvantage. Small and medium-sized enterprises are the undisputed engines of job creation, providing 80 to 90% of employment.
Empowering them to thrive is paramount to closing the missing middle. Yet, the financial ecosystem often fails them, placing them in a precarious position between microfinance and large-scale banking — too substantial for micro-loans, yet too risky or small for traditional banks. This critical capital gap stifles growth and innovation, preventing promising ventures from scaling up and creating the much-needed jobs.
To truly unlock this potential, a nuanced understanding of informal sector realities, systemic inequalities and cultural contexts is essential. Financiers must move beyond conventional models, promoting flexible lending solutions such as unsecured, cash flow-linked repayments that align with the operational realities of SMEs. This will not only foster investment in early-stage businesses but also catalyse a broader entrepreneurial ecosystem. Governments, in collaboration with the private sector, must convene forums to co-design these innovative financial instruments and dismantle operational friction.
Furthermore, there is a pressing need to bridge the gap between the current educational curriculum and the demands of the modern job market. Digital literacy and future-oriented skills must be integrated into the education system to ensure graduates are not only knowledgeable but also employable and adaptable in a rapidly evolving global economy. Africa, with its young workforce, has a unique opportunity to become a leading exporter of digital services talent globally, but this requires deliberate investment in skills development at scale.
The state bears a responsibility to cultivate a culture where entrepreneurship is a viable path. It must empower the youth to create solutions to pressing problems, instilling in them the confidence to take calculated risks and build their own futures. This involves creating supportive regulatory environments, providing mentorship and ensuring access to resources that nurture innovation.
Only through such concerted and collaborative efforts — from reforming education and fostering entrepreneurship to reimagining financial models and embracing digital transformation — can Southern Africa bridge its missing middle and forge a more equitable and prosperous future for all its citizens.
Ashley Nyiko Mabasa is the executive manager in the office of the deputy minister of Mineral and Petroleum Resources, co-chair of the Brics Youth Council and a board member at Charlotte Maxeke Hospital.
Phomolo Khitsane is an attorney and notary of the High Court of South Africa.