SA’s maturing black middle class weathers the storm of Covid
There’s a paradox of ‘struggling but thriving’ among black households earning more than R22,000 a month, research finds, but their focus is shifting towards the goal of creating generational wealth. By
South Africa’s black middle class showed incredible resilience during Covid, and the impact on their finances during the pandemic was seemingly limited – with 70% saying they were not worse off financially.
This is according to a recent research report on the black middle class by the UCT Liberty Institute of Strategic Marketing.
About 10% of the black middle class say they have access to R100,000 or more to weather tough economic times, compared with 37% of the white middle class, says Zandile Makhoba, a consumer economist at the Liberty Institute.
However, even though there is evidence of resilience, finances are a major source of stress, with many households reporting challenges with mental health. Other areas of concern include their health, crime, their children’s future and not being able to support dependants.
“If we go from a household income of R22,000 and more, we find that the concentration of the black middle class is still very much at the beginning levels,” says Makhoba. “On average, looking at household income, there is a R16,000 difference between a black middle-class household and a white middle-class household.
“In terms of asset accumulation, there’s a good R3-million difference between the two middle-class racial groups, with R1.7-million for the black middle class compared to R4.5-million for the white middle class,” she says.
The pandemic created some fear about “slipping back into a place of uncertainty”.
One respondent said: “Coming from a disadvantaged background, the pandemic caused me so much anxiety as I was afraid to lose my job, and afraid I might go back to the financial state I grew up under.”
Makhoba says that, in the context of the South African economy, it would take only a small change for someone who has just entered the middle class to slip back.
Mpumi Radebe, also known as DJ Mamba of Mamba Productions, says the pandemic caused him to make big changes.
“When you are running a business and you are responsible for other people financially, it is a lot,” he says. “My wife also lost her job and I found myself having to move from a double-storey, four-bedroom house to couch-hopping and staying with friends.
“Covid made us realise tomorrow is not guaranteed and we had no choice but to let go of our education policies, life insurance, medical aid.
“Now, post-Covid, my income fluctuates and in a good month I earn R30,000, compared to some months during the pandemic where we were lucky if we made R5,000.”
The Liberty Institute study, conducted over one year and encompassing more than 1,900 middle-class households, defines the black middle class as households with an income of R22,000 a month and above. More than 300 interviews were conducted.
The report says the black middle class constitutes 3.4 million people, 7% of South Africa’s black African population – with spending power of R400-billion a year.
Dr James Lappeman, head of projects at the institute and co-author of the report, says one of the main challenges is the lack of a single narrative.
“If you look at the news headlines, for instance, it’s either a case of ‘the middle class struggling with debt’ or ‘middle class thriving’. One of our main findings was this idea of a paradox of struggling but thriving within the black middle class.”
The report found there had been a “maturation” of the black middle class over the past 15 years – with a new concerted focus on creating generational wealth.
There is now access to better education and the benefit of more time spent in the middle class, which has strengthened financial decision-making and created a stronger long-term financial outlook.
“We are now seeing more and more second-generation black middle-class families emerging… More children are being born middle class. So, the parenting experience is also different. There are also changes in identity,” Lappeman says.
Ten years ago, the term that was used to characterise the spending power and habits of this then-emerging class was “asset catchup” – when black people in post-apartheid South Africa still needed to buy the car or the house as they had not had the privilege of inheriting assets like their white counterparts. That has now shifted to a desire to create generational wealth – which wasn’t seen 10 to 15 years ago.
Travel wasn’t a strong part of the narrative 10 to 15 years ago, either, but researchers say this was increasingly noticed.
Report co-author Paul Egan, managing consultant at the institute, says tertiary education was a catalyst for enhanced economic outcomes in the black middle class.
“The correlation between economic outcomes and education is very strong. Completing a tertiary qualification enhances outcomes significantly,” he says.
Looking ahead, Lappeman says the first major wave of the black middle class will be retiring in the next 20 years.
“Major shifts in this regard should be anticipated, and companies should be careful of simply using copy-and-paste strategies from the past when trying to meet the needs of this new emerging consumer,” he says.