Black middle class defies easy definition
June 24, 2007
By Tonny Mafu
Johannesburg - Despite acknowledging the emergence of a black middle class, researchers still differ on the definition, size and economic factors behind the trend, raising questions about the existence of this group.
Carel van Aardt, a professor at Unisa's Bureau of Market Research, said the definition of middle class was problematic.
Citing the case of black diamonds - middle-class black people characterised by higher credit worth and spending - he said some of the constituents of this segment could not afford to buy some of the items attributed to the group.
In their recent surveys, the University of Cape Town Unilever Institute (UCTUI) and TNS Research Surveys say they found that the number of black diamonds has increased from 2 million in 2005 to 2.6 million this year. The research tanks define this group as wealthy or salaried in "suitable" occupations, creditworthy and well educated.
According to UCTUI and TNS, black diamonds' annual spending power increased by almost 30 percent from R130 billion in 2005 to R180 billion early this year.
According to Van Aardt, a black diamond class should be made up of individuals within the Living Standards Measurement category of 8, 9 or 10 and would require an income of at least R300 000 a year.
It would also be appropriate to determine the black middle-class trend by studying households, because an individual might earn a high salary but have extended family obligations.
However, Sihaam Nieftagodien and Servaas van der Berg, in a study for the Bureau for Economic Research (BER), have found that most research of South African consumption patterns has been driven by marketing needs, rather than by the need for economic understanding of factors that influence consumption behaviour.
BER analysis found "evidence of a unique process that is under way in a part of black society, where households and individuals are moving into the middle class and starting to establish themselves there", they say.
The consumption behaviour of these individuals differs from that of the well-entrenched white middle class, which the study uses as a benchmark.
Nieftagodien and Van der Berg say they found that black middle-class behaviour was a reflection of not only income levels but the asset deficit that most black people still experience as a result of South Africa's history.
Consumption patterns for black people joining the middle class would have to go through asset accumulation, delaying spending on typical middle-class goods and services, says the BER study.
There are, however, differences within the black middle class itself, with a more established subgroup that is still small but has accumulated assets and consumed goods and services that feature in the consumption basket of the white middle classes.
UCTUI and TNS found that about 36 percent of black diamonds fall under the established group, with the potential to spend up to R87 billion a year. This segment has relatively stable lives.
An essay by Khehla Shubane, the chief executive at BusinessMap Foundation, and Colin Reddy, the head of black economic empowerment (BEE) at the research firm, attributes the emergence of the black middle class to the wealth effect of BEE.
While the acquisition of shares in firms by black investors under BEE deals does not lead to immediate ownership, since such transactions depend on the share performance, the process triggers a wealth effect.
According to Shubane and Reddy, this has emboldened some black people and "pushed them to act as if they were wealthy already".
The strong performance of the equities market, which has risen 250 percent since 2003 (as measured by the JSE all share index) may have given momentum to the emergence of a black middle class.
This growth is also expected to have benefited BEE groups that entered into deals in 2002 or earlier.
But Shubane and Reddy say it is not only share acquisition that has propelled black people into the middle class. Preferential procurement, employment equity and skills development also helped.
Preferential procurement has supported black-owned companies, especially from well-established firms such as Anglo American, SABMiller and the National Empowerment Fund.
Spending on black suppliers has risen, with listed companies allocating more for this purpose. Anglo American is reported to have spent R11.4 billion for the past financial year, with subsidiary De Beers allocating R1.4 billion.
On the other hand, employment equity created a black middle class relatively quickly, as income generated by those in management positions is immediate, say Shubane and Reddy.
Meanwhile, forecasts by Markinor show that the middle-income part of the South African population will become broader. This R3 000 to R13 999 income category will rise to about 25 percent of those earning an income, from 18 percent in 1996.
This is attributed to higher economic growth rates, higher levels of employment creation and better education levels.
|
|
