South Africa’s black middle class, which makes up 7% of the black population, has grown in confidence and is focused on creating financial security for future generations and retirement readiness.
This is according to The Black Middle-Class Report 2022 published by the University of Cape Town Liberty Institute of Strategic Marketing, which conducted the study over a year, with surveys of over 1 900 middle-class households and more than 300 interviews.
It found that 57% of the black middle class earn R22 000 per month in household income, while 31% earn R40 000.
Despite the onset of the Covid-19 pandemic, it found that the black middle class, with spending power of R400 billion per year, remained resilient, with 70% of respondents citing that they were not worse off financially as a result of the pandemic.
This is despite the subsequent rise in unemployment, inflation, uncertainty, and decreased demand across various sectors.
“The term used 10 years ago to characterise the spending power and habits of this then emerging class, was ‘asset catch-up’ – built on a notion that once financially resourced, black people in post-apartheid South Africa still needed to buy the car or house as they didn’t have the privilege of inheriting assets, as did their white counterparts,” says Dr James Lappeman, head of projects at the institute.
“That narrative has now shifted to wanting to create generational wealth, which wasn’t seen 10 to 15 years ago.”
However, the report also notes that only 10% of respondents indicated that they have over R100 000 in savings to cover unforeseen emergencies; 8% indicated that they have saved between R50 000 and R100 000; 16% between R10 000 and R20 000; and 21% between R5 000 and R10 000.
The bulk of respondents (32%) indicated that they had less than R5 000 in savings.
Multiple income streams
The report indicates that the idea of having multiple streams of income, including owning a business, has been on the rise since 2014 when 75% of the black middle class said they wanted to start their own businesses.
It says the ‘side hustle’ culture, strengthened by the Covid-19 pandemic and remote working, is also being driven by the desire to follow a passion, diversify income streams, grow wealth, and protect others.
As a 28-year-old respondent put it: “Covid opened a lot of doors for the middle class because our qualifications could be used internationally since work was done online.”
Black respondents were about 30% more likely to make monthly financial contributions to their parents, siblings and other family members – the so-called ‘Black Tax’ – than their white respondents.
Segment ‘growing, evolving’
Liberty’s chief marketing officer Thabang Ramogase says it is encouraging to see that the black middle class consumer segment is growing and evolving.
“What was true of the black middle class in 1994 changed in the 2000s and has even further shifted in 2022, which is why understanding this market holistically and what drives it is so vitally important,” he adds.
“A deep understanding of the nuances that drive these consumers’ ‘why’ will better inform our product designers and actuaries, to produce more compelling propositions that solve real problems.”
Lappeman adds that the first major wave of black middle-class constituents will be retiring in the next 20 years.
“What this will look like is still open to interpretation, as research into black middle-class retirement is still limited.”
He points out that the study’s researchers note that major shifts in this regard should however be anticipated, and caution that companies should be careful about just copy and pasting strategies from the past.
Listen to this SAfm Market Update with Moneyweb interview:
This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.