[Opinion] SA’s middle class taking strain

Trying to define who makes up the middle class has always been a difficult exercise for economists, political commentators and social scientists. 

What is generally agreed is that the size and the dynamics of South Africa’s middle class is a telling indicator of the country’s success in overcoming the legacy of its past and in establishing the foundation for future growth and prosperity.

For this reason, measuring and tracking the performance of the middle class is indispensable to determining the country’s socio-economic state of health, and its prospects.

And the indications are not promising.

As South Africa runs out of money as a result of mismanagement, corruption and multi-billion rand bail-outs to failing state-owned enterprises, and fails to embark on the policy reforms needed to reassure investors and thus attract the investment needed to grow the economy and create jobs, the middle class has been under increasing pressure to foot the bill through increased taxes.

The strain is showing.  

The Centre for Risk Analysis (CRA) at the Institute of Race Relations published a report in 2015 that sough to determine the size and scope of the middle class by isolating factors that could be regarded as being highly indicative of a middle class lifestyle in a South African context. 

The first indicator was the number of houses owned but not yet paid off to a bank or financial institution. While South Africa boasts a high level of homes owned and fully paid off, this is mostly due to state-subsidised housing. The more reliable measure of middle class status, however, is the number of people who own a house, but are still paying it off, as this indicates that they can afford to service a bond.

The CRA determined that another reliable indicator is private medical care. As most of South Africa’s state hospitals lack sufficient resources, funding and qualified staff, the bulk of middle- to high-income South Africans invest in private healthcare.

Finally, tertiary education is a significant measure – and the most effective way to ensure employability in South Africa. It is expensive, however, and, thus, access to tertiary education can be interpreted as an indicator of the scale of the middle class.

Comparing the latest statistics with those captured in 2015 tells the story of a South African middle class coming under increasing pressure.

In 2014, 8.5% of houses were owned but not yet paid off as a proportion of all households. By 2018, the figure had declined to 6.7%.

In 2014, 17.8% of all South Africans had medical aid. By last year, the figure had dropped to 16.3%. 

On the final indicator, for education, there is a slight improvement, from 11.7% of the total population older than 20 having a matric and a post-school qualification, to 12.0%.

What is evident from these three indicators is that, far from flourishing, the South African middle class is under great strain.

This is further illustrated by the increasing number of middle- to high-income earners struggling to pay of their debts, as revealed in Old Mutual’s latest Savings and Investments Monitor report. 

Given that South Africa’s success depends on its ability to grow and nurture its middle class – whose citizens play a vital political, economic and social role in society – the picture emerging from the latest statistics is worrying.

Original article here.