Black diamonds make South Africa shine

According to the University of Cape Town (UCT) Unilever Institute of Strategic Marketing, the black middle class has increased in size from 1.7 million in 2004 to 4.2 million currently. The combined expenditure of the black middle class is estimated at a whopping R400 billion annually.

This figure has surpassed the combined spend of the 2.8 million white middle class adults, which is about R380 billion per year, R20 billion less than their black counterparts.

While this development has done very little to eliminate the country’s income inequality, it has had numerous positive effects for the South African economy.

For an economy like ours, which is comparatively weak on manufacturing, we have to spend in order to grow the economy. Without discounting the importance of saving, we have to really applaud this massive growth of the middle class.

The effects of real final consumption by black middle class households are pivotal for the economy. In fact, they are the backbone of the South African economy. Because of this additional R400 billion annual expenditure, factories were able to expand, firms have opened new plants, franchises have opened new outlets, and, more importantly, hundreds of thousands of jobs have been created. This is commendable indeed.

According to the Institute, four main factors are responsible for the rise in the middle class; 1) access to credit; 2) the growing number of black people completing tertiary education; 3) Black Economic empowerment; and, more importantly 4) the aspiration by an increasing number of black people to have a better and financially secure life.

So it is clear that the growth of the middle class did not occur by accident. It is a product of policy interventions by the ANC-led government together with progressive civil society groupings to bring about a better life for South Africans.

In order to ensure that the R400 billion annual spend benefits the black people more than it has, some concrete decisions must be made. Firstly, there is a need for a rise of the black entrepreneur, as opposed to the black tenderpreneur, to tap into this spending class.

Rather than wait in long queues to be employed by the white master, blacks must establish cooperatives or close corporations and, depending on their skills, talents and passions, identify opportunities to provide goods and services.  There is obviously huge money waiting to be spent out there.

Secondly, the black consumer must adopt a ‘patriotic’ spending culture. This means that when there are two outlets offering the same product or service, where one is operated by a black person and the other by a white person, the black consumer must show bias to the one owned by the black person.

This spending pattern is consistent with the Preferential Procurement Framework (PPF) of government. It is informed by what is referred to as necessary racism, which aims to transfer income and wealth to the previously dispossessed.

This is not an easy transition which can be completed overnight. The black person in South Africa is in a generational farce that makes him feel inferior. It is an ordinary black person’s aspiration that, after finishing school or varsity, he must seek employment.

And when he does venture into business, it is often the same one that is operated next door, thereby reducing potential for high profits.

The black person is also often convinced that a black product or service is inherently inferior. These myths must be destroyed if we are to defeat the imbalances of the past.

The black middle class, defined in the above study as a black adult, older than 16, and living in a household with a combined monthly income of between R16 000 and R50 000, also referred to as the ‘black diamonds’, are an indispensable part of the South African economy.

In fact, the study finds the black middle class as the biggest deal in the country’s economy.  No stable or growing economy can progress without a vibrant and thriving middle class.

In order for the spin offs of the growing middle class to reverse the economic deprivation realities of the past, it must make black business prosper.