By definition, overcoming SA’s notoriously profound inequality requires that we grow the middle class. But what does that actually mean? “Middle class” is not a technical economics term, and in SA as in most countries the comfortable lifestyle portrayed in most TV shows is only available to the very wealthy.
It helps to analyse the differences between broad classes defined by SA’s actual income distribution. In line with Gabriel Palma’s approach, the poorest 50% of households — almost 9-million families — can be compared with the “middle class”, comprising the next poorest 40% (7-million), and the richest 10% (1.7-million). The analysis helps understand what it would mean for the poorest households to approach middle-class living conditions, above all by vastly increasing their economic opportunities.
In 2020 the median middle-class household lived on R9,000 a month; the poorest 50% on R2,000; the richest 10% on R45,000. As in most other upper-middle-income economies, most middle-class households in SA earn only about twice the international poverty line, and the poorest survive on far less.
World Bank data show that the SA middle class gets about 40% of all household income, compared to 50% in peer economies. The poorest households in SA have 10%, or half as much as their peers abroad. While SA’s rich capture half of all household income, their foreign equivalents get around a third.
The marginalised lag unusually far behind the middle class because of SA’s extraordinary joblessness and low levels of business ownership, both aggravated by the Covid-19 downturn. Middle-class households typically live off stable formal employment and small business ownership. They differ from the rich mostly because they have lower-level jobs and smaller enterprises. In the poorest 50%, however, only half of all households have any earned income at all. The rest subsist on social grants and family support.
Extraordinarily low levels of business ownership largely explain this astonishing reality. In other upper-middle-income countries 20% of all employed people work in their own enterprises, largely family farms. In SA, the figure is only one in 10. The deficit results from the destruction of African enterprise, and especially farming, under apartheid. Explicitly racist policies deprived families not only of assets but also of market networks, experience and business sites. As a result, most could not recover even after the abolition of overtly discriminatory laws.
Given limited jobs, networking and formal qualifications largely determine who gets employment. In 2020 40% of middle-class household heads had matric or more. In the poorest 50%, the figure was only 30%, and it was 80% for the richest households. Again, apartheid systems still largely shape access to quality education, entrenching historic privilege while leaving SA behind peer economies.
The International Labour Organization finds that even for younger adults aged 25 to 34, in SA only half have secondary or advanced qualifications, compared to three quarters in upper-middle-income countries (China is not in the data set).
It doesn’t help that apartheid stranded the poorest families far from economic centres. The metros hold 55% of the middle class and 60% of the richest 10%, but only 35% of the poorest households.
Meanwhile, government services still largely align with class and apartheid residential classifications. Wealthy suburbs have incomparably better roads, electricity, water and schools than formal townships, where gravel roads, interrupted services and inadequate staffing and buildings prevail. But both middle and upper-class areas fare better than the informal settlements and historic labour-sending regions with the poorest families.
The realities of class in SA point to two overriding priorities for building greater equality: improving education in working-class areas and growing small formal businesses on a mass scale. To succeed, policymakers have to profoundly disrupt inherited systems. That means they have to face up to the trade-offs between maintaining existing centres of excellence and stepped-up support for the risky innovations needed to build the middle class.
• Makgetla is a senior researcher with Trade & Industrial Policy Strategies.
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