Amid Covid-19 fallout, middle class continues to be SA’s golden goose

The middle class, made up of about 29% of South Africans, is doing well at handling the Covid-19 pandemic fallout, according to a new survey, as well as various indicators. 

The middle class, made up of the lower and upper middle classes, usually live in urban centres and are exposed to retailers that sell imported products. They are cost-conscious because their salaries are not as high as those of the middle class in many other nations.

Be that as it may, according to First National Bank, the average income for South Africa’s middle class had already recovered to levels seen before the government imposed a lockdown in late March 2020 in September last year, with retail and private banking customers who earn a monthly gross income of R10,000 to R60,000 regaining their financial position on par with levels of February 2020.

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BrandMapp survey

According to the latest BrandMapp consumer insights survey, which investigated how mid-to-top-income South Africans are dealing with the issues around the pandemic and lockdowns, it is not all doom and gloom for the middle class.

BrandMapp provides a look at the opinions of a mega-sample of 30,000 South Africans living in households with an income of R10,000+, representing 100% of the country’s tax-paying base and 80% of all consumer spend.

“When we look at the Treasury figures for 2020-2021, it shows that South Africa’s middle-class has been surprisingly resilient in the face of Covid-19 with less than 5% of the total 5 million-odd individual earners in the R10,000+ segment falling out of that tax bracket,” says Brandon de Kock, director of storytelling at BrandMapp.

“The worst pain was felt by people earning less than R10,000 per month and that is where the big job-losses have come from. This can be regarded as testimony to the stability and resourcefulness of our middle class: it has been bruised by the pandemic, but not broken.”

He says this is a good thing because those five million people are responsible for paying more than 90% of all personal tax.

Economist agrees that middle class suvived

Professor Jannie Rossouw from the Wits Business School agrees that the middle class survived the pandemic surprisingly well so far, but he points out that it is clear that people used debt to survive if household debt is considered.

However, he believes the survival of the middle class is a good thing from the perspective of tax collection.

ALSO READ: 1 in 2 South Africans drowning in debt

“Interest rates were also lower and considering debt service cost, you see that while interest decreased from 9.4% in 2019 to 8.5% in 2020, debt service cost has increased from 73.1% in 2019 to 77.1% in 2020, which is a considerable difference.”

According to the survey, only 13% of the respondents said they had lost “most of my income” due to lockdown and only 6% said they had lost their jobs. The good news is 75% of the people who lost their jobs are already back in the workforce and almost a third of them have started their own businesses as entrepreneurs.

The age of the ‘slasher’ worker

De Kock ascribes it to the fact that they were privileged enough to be well-educated which is “definitely the boarding pass you need to travel middle class and up in this country”. He also points out that South African middle class workers have also become “slasher” workers, where people wear multiple hats when it comes to work, such as being an actor, writer and director.

He says that 63% of people said in 2019 they had no sources of income besides their main jobs. At the beginning of lockdown, this changed to 59% and now, a year later, it dropped to 54%.

“If you look at the people reporting that they now have their own small business, are involved in other economic activities, have a home industry or a second job different from their main work, 35% of middle-class South Africans are today’s real slashers.”

ALSO READ: 5.8% of SA population contributing 92% personal tax

Other insights

Other insights are:

• Almost 50% of South Africans working alone love their work, but as their businesses grow, there is a steady decline in how much people love how they make a living, with only 29% working in big corporations liking their jobs
• Every year, respondents say they feel better off financially compared to two years ago, with 41% feeling better off in 2021 and 40% feeling worse off
• Almost half of the retired segment are feeling worse off and only 20% better off
• households face two significant challenges, namely to assist family and friends and cope with a reduction in salary income
• Two distinct groups were approached by family and friends for financial assistance, with the first group having enough resources to assist without any direct additional financial strain and the second group having to adjust to help their family and friends
• The middle class also reorganised and changed their spending behaviour by increasing their online shopping, cutting back on their expenditure and reviewing their financial goals, which led to new consumption patterns and less spending on luxuries
• They also partnered with professional financial advisers to assist with reviewing their financial goals
• They had to access some savings and investments
• People who experienced financial pressure due to a salary reduction dealt with it by reorganising their spending pattern, such as changing their preferred stores updating their budgets, cutting back on luxuries and managing their debts
• Households’ interest in certain financial activities increased once they realised that they were facing an event beyond their control and that they might not have provided for sufficiently
• For the same reasons and fear of the possible negative impact Covid-19 might have, interest in insurance in general increased
• Interest in saving and investments also increased up to level 3 of the lockdown.