Rise of the black middle class

2014-06-04 22:30

The rise of the black middle class in South Africa has been heralded by many as a blessing. This, they argue, is ‘an engine of the South African economy’ because of its strong purchasing power and contribution to the national coffers through taxes.  Others, such as Steven Friedman, warn of a looming danger.

In all the commentary and opinions that have made it to the public discourse on the issue, I am bamboozled by the dearth in analysing the fault line in this growth.

Everyday use of the term middle class conjures up images of families (or individuals) with a certain lifestyle or level of affluence as evidenced by their expenditure on food, clothing, furniture, cars, education, holidays, etc. as well as assets such as housing – but, at the same time, this term refers to people who are not considered rich or upper class in some sense.

A UCT study classified South Africa’s middle class as households earning between R15 000 and R50 000, with their own transport, a tertiary education, employment in a white-collar job and owning their home or spending more than R4 000 a month on rent.

Statistics South Africa uses indicators that would increase the size of the middle class even more: access to formal housing, electricity, indoor plumbing, a phone and the use of gas or electricity as a main cooking source.

In South Africa, thinking about what it means to be middle class is complicated by the low average and median levels of incomes and the very wide income gap. Households who have achieved a modest standard of living are actually near the top of the country’s income ladder.

Too often in discussions the middle class is synonymous with both the affluent and the very affluent. One such example is the well-known study of Black Diamonds by the UCT Unilever Institute of Strategic Marketing, which describes the emergence of the black middle class – which includes the top-earning black people – in post-Apartheid South Africa.

The striking feature is that the ‘middle class’ (as understood in everyday usage) is not in the middle of the income distribution. And those who are in the middle are not ‘middle class’ (in the sense of being above some minimum level of affluence).

The growing interest in understanding the black middle class in post-apartheid SA is a result of the socio-economic and political changes that resulted from the end of apartheid and the enactment of legislations to address past inequalities like affirmative action, and Broad Band Black Economic Empowerment.

With these changes SA saw for the first time an exponential growth in the black middle class from 1,7 million in 2004 to the current (2013) 4,2 million. Although this change has been recorded as positive by many it has nevertheless been accompanied by growing inequalities with South Africa’s gini coefficient, ‘increasing from 0.64 in 1995 to 0.72 in 2005’.

These increasing levels of inequality have been more intra-racial and they illustrate a shift from the historical inter-racial inequalities known for apartheid SA. This should not however be read to mean that racial inequality has been completely eroded, but that growing numbers of black people are in the middle class with a few more in the upper class.

With an official unemployment rate of close to 25% and a reputation as one of the world’s most unequal societies, South Africa faces unique challenges. Therefore; the growth of the middle class is an opportunity loaded with pitfalls.

One measure of a stable middle class is an improved spending and saving rates. The black middle class spends R400-billion annually, far more than the R323-billion spent by the historically wealthier white middle class.  

However, this spending pattern in South Africa is not coupled with a saving behaviour. The country has a savings rate of 16.5%, boosted by government and corporate savings, far less than China’s rate of 50% and India’s 30%.

Savings spurs growth in the economy by providing funding for fixed investment. A low savings rate hampers this growth, and makes it more expensive as funds must then be sourced internationally.

FNB research highlights this challenge. “Entry into the middle class means access to credit which allows for the pursuit of aspirational purchases. In many cases increased dissaving (debt) actually occurs among new entrants into the middle class.”

Increased spending power by the black middle class has caused an influx of fast-food outlets and, from that, new health challenges, such as obesity. By June 2013, fast-food giant McDonald’s operated 185 restaurants, and it was set to increase the number to 200 by the end of the year.

Burger King, another fast-food company, opened its first restaurant in 2013 and expects to open more in the future. Its chief executive officer, Jaye Sinclair, tells Bloomberg.com, the US business wire’s online publication, “The [spending of the] middle class will be the saviour for South Africa down the line, not exports.” 

But we should be worried because obesity results in premature deaths of the economically active citizens. Currently; over 80% of heart attacks occur in people before the age of 45 years. Other studies show that 39% of women and 10% of men in South Africa are obese already - meaning that their weights are greater than what is generally considered normal for their heights.

But that’s not a problem for the growing fitness sector. Gyms are opening throughout middle-class neighbourhoods.

With black middle-class families moving from townships to suburbs, housing construction, especially in new settlements, is expanding. The Financial Mail newspaper reports that there was a shortage of 600 000 housing units for the working class in 2013. The paper attributes the current backlog of about 100 000 housing units a year - and growing - to rapid urbanization, a reduction in the average family size and a fast-growing middle class.

Affordable neighbourhoods for middle-income earners in Johannesburg, and in Pretoria and Durban in the KwaZulu-Natal province are becoming overpopulated. The high demand for housing also puts a strain on services such as water and electricity.

During the winter, for example, the exploding demand for energy often causes power outages. Still, many development experts agree that the growth of the black middle class is good for South Africa. It strengthens Africa’s biggest economy and moves the country steadily towards a truly prosperous society.

Better days are indeed ahead for South Africa, says those who hail the rise of the black middle class.

However it is important that while we may celebrate this rise, millions of our people remain in poverty. A rising black middle class is promoting a growing belief among some black conservatives that problems of the disadvantaged are now rooted more in character or cultural problems, rather than race.

The high scale migration of the black middle class from townships gives credence to the “two economies theory”; where the affluent live across the poor. Take Durban for an example.

Townships of Inanda, Ntuzuma, KwaMashu and Phoenix overlook the affluent Umhlanga Ridge. Another example is found in Johannesburg where Alexandra Township overlooks Sandton.  

The metaphor of Two Economies is a short hand for socio-economic dualism: a dominant First Economy that is at the cutting edge, globally integrated and with a capacity to export manufactured goods, services and primary commodities. Alongside this economy is another that is marginalized, exists at the edges, consists of large numbers of the unemployed and the “unemployable”, and does not benefit from progress in the First Economy.

Another point that becomes clear is that as soon as they settle in their new environments they adopt elitist tendencies. The recent world economic crisis is a case in point. While the crisis affected everyone, the black middle class, in particular, chose to be silent observers and/or armchair critics. They attracted an unenviable title of being ‘elitist’.

They blamed the economic crisis on what they called a lack of leadership in society, which was adopted by the Democratic Alliance (DA) as part of its electioneering messages.

While the move to middle class has been heralded for crossing the racial boundaries; we know that the black middle class faces segregation to the same extent as the black poor. In fact, the black middle class is likely to face the most blatant racial discrimination, in that many in its ranks can actually afford to pay for housing in predominantly white areas.

Real estate agents and apartment managers can easily turn away poor black by simply quoting prohibitive home costs or high rents.

Racial segregation means that racial inequalities in employment, education, income, and wealth are inscribed in space. Previously white neighbourhoods benefit from the historically determined and contemporarily sustained edge that whites enjoy.

While many have heralded the rise of the black middle class in South Africa, it is clear that this rise has its own fault lines. More clearly is that the black middle class cannot express itself politically especially because their upward mobility is accompanied by self denialism.

While changes in its influence and aspirations seem likely, this hard-to-define group does not necessarily act in concert as a “class.”

A lot depends on the political options available, the depth of civil society, and the path taken by government. Those who have newly ascended economically and have tasted new freedoms will probably resist any moves that could take these away, and yet some would argue they will act to entrench themselves rather than open up the system that so far has brought them benefits.

I might suggest that the processes that advance a productive, free, competitive class should be reinforced in order that the middle class can continue renewing itself.


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