Does the growing middle-market offer hope for SA's future?

Who are SA’s mid-to-top income earners? How do they feel? What do they do? And what kind of consumer choices are they making? Each year, consumer insights consultancy WhyFive aims to definitively answer these questions through its annual BrandMapp survey.

First launched in 2013, the BrandMapp survey reaches more than 30,000 people, making it the most independent, consistent and enduring review of the country’s taxpaying population.

“This is a group of about 13-million individuals earning R10,000 a month or more, who we typically describe as ‘mid-market and up’. They fit neatly into what has recently been tagged as the ‘South African consumer class’, which we've always believed to be a vital segment to understand,” says Brandon de Kock, director of storytelling for WhyFive. 

“We have to be hopeful that at some stage in the near future the political landscape will shift and allow us to fulfil our potential as a country, but we need to have some hope that there will be a large enough pool of talented, educated, invested South Africans to do the work required when and if that happens. In short, without a healthy and growing taxpayer engine to pull the economy along, we’re going to be in real trouble.”

It often feels as if nothing ever changes in our country, at least not for the better, but the past decade has seen an extraordinary shift in the size, shape and make-up of this group: the top 30% of households by income.

As De Kock says: “Amid all the current doom and gloom, it may come as a surprise, but the story of our middle market, as revealed by our BrandMapp data and all sorts of secondary sources over the past 10 years, is as much about resilience, agility and growth as it is about anxiety and stress. So maybe there is reason to hope?”

Here's what BrandMapp's insights reveal about the changing dynamics of SA's lucrative middle market over past decade:

Four million more middle-market, taxpaying adults

One of the striking changes over the past decade is that there are now 4-million more adults living in households with a monthly income of R10,000 or more, expanding the number of people living in the top 30% of households (the ones who took home R2.5-trillion out of the total R3-trillion earned in the formal sector last year).

“We are assailed with stories of South Africans with money leaving the country and dire warnings of a collapsing middle class. What these stories don’t account for is that right now every wealthy adult who immigrates or passes away looks like they’re being replaced by two newcomers to the high-income group,” says De Kock.

“Unless the official statistics are a complete fabrication, you don’t have to be a genius to work out that the demographics of the middle market are shifting — and the meaningful taxpaying base is actually growing.”

National Treasury data over the past five years reveals that the group of individuals responsible for paying 85% of personal income tax — the largest slice of the tax pie — is growing rapidly: it increased by 300,000 individuals in the past year alone.

In fact, according to Treasury, in the two years of post-Covid recovery, it is growing at a rate more than double that of the consumer price index (CPI).

“So maybe we’ve been looking at it all wrong,” says De Kock, “and maybe the much talked about ‘increasing tax burden on an ever-decreasing number of taxpayers’ is a good headline, but a poor reflection of reality.”

Higher education is the driver of middle-market growth

“One thing you can say definitively about SA’s middle market is that this is a segment that highly values education,” says De Kock, “Over the last 10 years, the percentage of adults in R10,000+ households who have a university degree has grown from 24% to 34%. And when we look at the top end — that group who's paying 85% of the taxes — 78% have some sort of tertiary education. 

“According to Stats SA, between 2010 and 2021, the number of working age adults with a tertiary qualification has increased by 1.2-million individuals, and those educated adults make up just 10% of the unemployed population. It seems clear that opening up greater access to tertiary studies is critical to expanding the middle market.”

Massive shifts in consumer behaviour

Across the world, tech-driven change has rapidly shaped consumer behaviours and SA’s middle market has wasted no time in keeping pace with global digital innovations.

“We forget that 10 years ago, Facebook had no competition. Since then, the middle market has jumped onto new platforms and taken up new devices,” says De Kock.

“The infographic below gives a snapshot of how much has changed in the way we go online, bank, shop and entertain ourselves. This highlights how important it is for the entire population to be able to access the internet and engage in the digital economy.

“What’s also striking is the speed of these changes. A decade ago, we didn’t even measure fibre connection. There was no Netflix or podcasts, no Uber, Airbnb or Checkers Sixty60.” 

New car sales show resilience

In 2014, 73% of mid-market adults owned cars vs just 65% in 2023 — and the same pattern holds for the top end. 

“There’s a ‘dual narrative’ here when it comes to assessing the resilience of the consumer class in SA,” says De Kock. “Though car ownership hasn’t kept pace with the shifting consumer landscape, according to the NaTIS Live Vehicle Population statistics, there were more than 6.2-million passenger cars on the roads in 2014. Now there are more than 7.7-million. That’s about 1.5-million new drivers in a decade. Multiply that by tyres, tins of oil and car washes and it represents a fairly substantial growth for the auto segment as a whole.”

“If new car sales are a measure of resilience, however, then we must compare the latest new passenger car sales statistics from the Naamsa," says De Kock. 

"Against all odds, unit sales for the past two years are at about the same level as they were before the global financial meltdown of 2018. Despite Eskom’s endless blackouts, periods of overwhelming unrest such as the October 2021 riots, and despite the Covid-19 pandemic, global supply chain failures, high inflation and war, new car sales up until May this year are a testimony to resilience.

"There are lots of possible reasons for this, but remember that the average new car loan, according to TransUnion, is over R380,000. You can’t buy a new car without ready cash or an approved loan. So, if everyone and everything is going down the drain, financially speaking, where on Earth is all this money coming from?”

For more information about the annual BrandMapp survey, and to download the 2023 edition, visit the WhyFive website.

This article was sponsored by WhyFive.