Analysis: South Africa’s Black Middle Class
Marketers need to be on top of their game in South Africa, where characteristics of the dynamic black middle class are rapidly evolving, said John Simpson, director of the Unilever Institute at the University of Cape Town.
In 2003, South Africa’s black middle class numbered about 1.7 million people. Now it is more than 4-million strong and has more spending power than the white middle class which stagnated during the same period, according to a report in MoneyWeb.
Car ownership in South Africa’s black middle class has grown by 1.1 million vehicles since 2004 and market penetration is 46 percent compared to 80 percent in the white middle class.
“Contrary to what is believed, debt is under control in this group,” Simpson said. “They have adapted to credit and learned to manage it.” However the type of debt has changed. There is a decline in expensive debt like retail store cards and an increase in home ownership.
“This is a powerful force. The black middle class is on a journey,” Simpson said at the annual Consumer Goods Council summit. “They have an incredibly strong desire to achieve more and better things. The middle class in South Africa is essentially about lifestyle and aspiration.”
The significant growth in the black middle class over the past eight years requires new strategic thinking from business, he said, according to MoneyWeb.
The group is evolving and is far from homogenous. Simpson’s research divides South Africa’s black middle class into four layers.
The “forerunners” are the first group to reach the middle class. Their memories of the hardships they once faced are still intact and their fears of slipping back are real. “This group suffered hugely when the recession hit,” Simpson said.
But contrary to some reports, the recession did not wipe these new entrants out – far from it. They weathered the recession, suffered the learning curve and emerged a little wiser.
The “aspirants” have a household income of between R10,000 and R16,000 (about $1,000 to $1,600) per month and don’t qualify as middle class. But they are determined to get there and mimic the behavior of those in the middle class. “They are in a gap market. They have too much money for free houses but not enough for a bond,” Simpson said.
The “second wave” is a younger generation born into the middle class. “There are clear differences between those who born into the middle class and those who grew into it. They are better prepared and have more realistic expectations,” Simpson said. Educational choices are strategic. There is less focus on “any degree” of study and more on strategic study choices such as engineering and commerce. There is also less pressure from the extended family.
The “mafikizolos,” or those who have “recently arrived,” have overcome huge odds to get there. “They have often had some level of advantage such as education or a unique ability and are still on a steep learning curve,” Simpson said.
Without the black middle class, South Africa’s economic growth would be worse.
The white middle class likes to stay below the radar, he said. “The black middle class is expected to show their family and community that they have made it.”
Appearance is very important and external appearance, unsurprisingly, is linked to self confidence. “If I look good outside I feel like nothing can stand in my way,” one woman told university researchers.
Retail chains are trusted and malls are important gathering points. Favored brands include Woolworths and Pick ‘n Pay over Shoprite and FNB for banking. Five Roses tea bags are preferred over tea leaves and Kelloggs cornflakesover corn meal. These are seen as desirable while Lucky Star pilchards and other brands from the past are a no-no.
While 90 percent of the black middle class market speaks English, mother tongue languages remain important. Digital satellite TV penetration in this group has moved from 9 percent in 2004 to 62 percent in 2012 yet people use DStv to pick up South African broadcasting channels. “This is an important market that is not being treated well,” Simpson said.
There is increasing evidence of financial literacy in the black middle class and a deep determination to invest in children. “Education is an absolute priority; 60 percent of this group sends their children to model C schools (public schools but with high fees) or private schools and this number is likely to grow,” Simpson said.
The lines between suburbs and townships are becoming blurred as townships develop middle class areas. Locals joke about this, referring to Diepkloof Extention (a township extension added during apartheid) as Diepkloof expensive. While suburbs are viewed as more convenient, township connections remain strong among the black middle class and there is plenty of movement between the city and “home” – as evidenced by the weekend hum at the township carwash or butcheries like Mzoli’s in Gugulethu.
The market of the future is very clear, Simpson said. “This group is growing, it is massively aspirational and more confident than ever before.”
The Unilever Institute of Strategic Marketing is a nonprofit based at the University of Cape Town School of Management Studies. It is supported by Unilever South Africa. Unilever is an Anglo–Dutch multinational consumer goods company whose products include foods, beverages, cleaning agents and personal care products.