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Unprecedented first wave of middle-class black retirees in 20 years

Within the next 20 years, the first major wave of middle-class black pensioners in South Africa will hit the country – an unprecedented situation. Attitudes within this group vary between those who believe in retirement planning and those who do not. “If I can work, I will,” said a 37-year-old man, responding to a University of Cape Town (UCT) report on the black middle class.

The 2022 Black Middle Class Reportt was launched by the UCT Liberty Institute of Strategic Marketing on September 20. The institute is widely regarded as one of South Africa’s leading marketing think tanks, producing reports based on sound market research and widely used by leading companies to inform their strategy. The institute is backed by Liberty, one of Africa’s leading financial services companies.

The report brings together over a year of research and collaborative work and reflects the economic size and shape of this critical sector of the South African market. The study was first published 15 years ago; the first in South Africa’s fastest growing consumer segment.

Dr Siphiwe Dlamini, Director of the School of Management Studies at UCT. Photo Lerato Maduna.

Growth and influence

At the time, the term “Black Diamonds” encapsulated the emergence of an unprecedented black middle class after centuries of economic discrimination and exclusion.

The updated 2022 report reflects dramatic growth in the black middle class, eclipsing that of the white middle class. It reflects the significant and continued growth of the segment, the nuanced changes over the years, and the trends that are likely to influence and entrench the industry as a top consumer market in the future.

“The middle classes are truly the bulwark of full economic development and success.”

The concern with the middle class, black or white, as an economic sector is simply that a strong middle class equals a strong economy, said Martin Neethling, chief marketing officer of PepsiCo Sub-Saharan Africa.

“Perhaps we are losing sight of the fact that the middle classes are really the bulwark of full economic development and success. It’s fundamental for growth,” Neethling said during his launch introduction. “The purchasing power and influence they have strongly shaped the economy.”

And interestingly, the black middle class has also surpassed the white middle class in material growth.

Retirement in sight

During the first 20 years of democracy, the black middle class showed a massive “patrimonial catch-up”. According to the report, there is now a tangible shift from catching up on assets to preparing for retirement.

When it comes to retirement, while some respondents were already planning for the future, others feared they wouldn’t have enough.

“I’m really scared of being 65 and tired and not being able to retire because I can’t afford it,” said a 30-year-old respondent.

“What is that [retirement wave] will look like is open to interpretation because research on black middle-class retirement is still limited,” said Dr. James Lappeman, head of projects at the institute and co-author of the report.

However, Dr Lappeman said the study researchers noted that major changes in this regard should be anticipated and cautioned companies against “cut and paste strategies of the past”.

Martin Neethling, Marketing Director of PepsiCo Sub-Saharan Africa at the September 20 launch. Photo Lerato Maduna.

In the form of experience

It is also a difficult sector to define.

High levels of inequality in South Africa make it difficult to assess the defining parameters of the black middle class. However, the report puts this sector at 3.4 million people, or 7% of South Africa’s black African population. They represent a purchasing power of 400 billion rand per year.

In terms of income, the report considers households with an income of R22,000 per month and above.

The study surveyed over 1,700 middle-class households and conducted 140 interviews. The research was “infused” with contributions from marketing experts and research from black middle class champions Kaya FM. Participants in the first Black Diamond studies were re-surveyed to share how their experience of the middle class had been shaped over the past decade.

Locate a unique vantage point

Lappeman said one of the challenges was to establish a unique narrative about this sector.

” There are not any. If you look at the news headlines, it’s either ‘middle class struggling with debt’ or ‘middle class thriving’. One of the reasons for this report is that we haven’t seen enough nuance in the media about this segment. One of our key findings was this idea of ​​a paradox of struggling but thriving within the black middle class.

“If you have skills, you will improve your situation.”

“The middle class defines itself,” Neethling said. “The mistake people make is that we assume that income levels [and] social behaviors are similar for the middle class. But that’s not entirely true.

The report unequivocally shows that skills are the calling card of the middle class, especially the black middle class.

“If you have skills, you will improve your situation,” Neethling said. “If you have skills, you will get a better job; you are going to have a higher family income, even if on the supply side, the [necessary] the school is not created.

COVID-19 and backsliding

However, the effects of the COVID-19 pandemic have yet to completely cut through the system.

Lappeman said the black middle class has shown incredible resilience during the pandemic. However, it is the poorest market sector that has borne the brunt of unemployment. A multi-university CRAM National Income Dynamics Study in 2021 during the COVID-19 pandemic showed that 85% of wage and job losses occurred in households falling below the R22,000 income bracket.

“And while there have been fears of backsliding, the black middle class sector is different from what we first studied 15 years ago. The impact on their finances during the COVID pandemic -19 was apparently limited Seventy percent of the black middle class said they were not worse off financially as a result.

But that resilience has also been tested, Lappeman said. Finances were a major source of stress, with many households reporting mental health issues.

The UCT Liberty Institute of Strategic Marketing’s “Black Middle Class Report 2022” is an invaluable guide to this driving sector of the economy. Photo Lerato Maduna.

“Other areas of concern included their health, crime, the future of their children and the inability to support dependents financially. The pandemic has created some fear of falling back into a place of uncertainty. .

Building Blocks of Wealth Creation

The report also found that the sector has matured over the past 15 years and there is a concerted new focus on generational wealth creation.

“There is now access to better education and the advantage of spending more time in the middle class. It has strengthened financial decision-making and created better long-term financial prospects,” Lappeman said.

Paul Egan, management consultant at UCT Liberty Institute and co-author of the report, said education – particularly higher education – has emerged as a catalyst for better economic outcomes in the black middle class.

“The correlation between economic outcomes and education is very strong in terms of entry into the black middle class. Obtaining a graduate degree significantly improves the results. There will always be university graduates unemployed, but as a proportion of the unemployed they are relatively small.

own the story

Lappeman continued, “We are now seeing more and more second-generation middle-class black families emerging, more and more children being born into the middle class. So the parenting experience is also different. There are also identity changes.

This narrative has now shifted to wanting to create generational wealth.

The term used 10 years ago to characterize the purchasing power and habits of this then emerging class was “asset catch-up”. This was based on the idea that once endowed with financial resources, black people in post-apartheid South Africa still needed to buy the car or the house because they did not have the privilege of inheriting active like their white counterparts.

“That narrative has now shifted to wanting to create generational wealth — which wasn’t the case 10 to 15 years ago,” Lappeman said.

Travel was also not a major part of the narrative at the time, but the researchers say that’s where the sector is directing its money.

Another notable trend is the rise of women at the heart of these households, helping to create generational wealth, which is likely to become an increasingly important topic.

Looking to the future, the study’s researchers said they see the continued growth of the black middle class, not only becoming more confident, but “owning their narrative.”