Has South Africa’s Fast-Growing Black Middle Class Hit A Speed Bump?

South Africa’s black middle class now exceeds the white middle class in size — mainly due to government affirmative action — but there are signs of a slowdown, according to a BusinessTech report.

Two in 10 South Africans at most enjoy a middle-class living standard – and in reality, it’s closer to one in 10, according a new report from the South African Institute of Race Relations.

In 2012, the country’s black middle class numbered about 4.2 million people, the U.N. reported.

The U.N.’s figures were based on research conducted by the University of Cape Town’s Unilever Institute of Strategic Marketing which found that the country’s black middle class had more than doubled, from 1.7-million in 2004, to 4.2-million in 2012, according to BusinessTech.

The institute reported on the size, growth and future expansion of South Africa’s middle class.

It defined a middle class household as one that spends — as opposed to earns — more than 10,000 rand ($785.25 US) per month, according to radio station 702.

The African Development Bank said in a report at the end of 2014 that South Africa’s black middle class had surpassed the white middle class, due mainly to government affirmative action policies.

“Despite the small size of this middle class, there has been considerable growth in the black middle class, which has approached the size of the white middle class,” the report said.

The black middle class has increased in size by more than 40 percent since 1996, but the first-generation black middle class is vulnerable to a slowdown in economic growth, according to Gabriela Mackay, a research analyst at the South African Institute of Race Relations.

“About 10 percent of South Africans are solidly middle class,” Mackey said in an interview on 702.

To avoid stagnation in the growth in the black middle class, South Africa’s economy needs to grow by at least 5 percent per year, Mackey said.

South Africa’s annual gross domestic product fell to 1.5 percent in 2014 — the weakest performance since the global financial crisis — but is expected to rebound to 2 percent in 2015, according to AfricanEconomicOutlook.

Economic growth is recovering in South Africa, reflecting stronger world trade and past depreciation of the rand. However, ongoing electricity shortages are slowing the economy, according to the Organisation for Economic Co-operation and Development (OECD).

Rapidly rising interest rates could make the black middle class vulnerable to losing their status, the Institute for Race Relations reported. A depressed domestic economic environment would also put the brakes on significant future middle class expansion.

Source: AFK Insider

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