More Power to the People

MSunday Times (Johannesburg)
February 12, 2006
Posted to the web February 14, 2006

By Marcia Klein

NEARLY every glowing statistic coming out of the SA economy - and there are many at the moment - is attributed to the growing wealth of the black middle class.

And, indeed, more and more black people are getting richer.

This phenomenon is considered one of the outstanding marks of success of political and economic transformation since 1994, but should be tempered with the knowledge that most black people remain poor.

Amps figures released by the SA Advertising & Research Foundation (Saarf) towards the end of last year provide the most up-to-date picture.

In the past 12 months another 421000 black adults have moved into the middle income bracket, a growth of 30%. These are people in LSM (Living Standards Measure) 7-9, those earning between about R6500 and R11800 a month. According to Saarf, blacks now account for around a third of SA's middle class.

There has also been strong growth in the number of blacks in the top LSMs, or higher classes, and a decline in the number of black people in lower LSMs, indicating that black people are moving up the wealth scale. The research shows an increase of more than 30% in the number of black people with a household income of R12000 or more. Similar increases were shown at various other income levels.

Our own Rich List, published towards the end of last year, said that there are seven black people among SA's 50 richest. There would have been none in 1994. Other research shows that the proportion of blacks in SA's top income bracket is now around 20% and that this group has different spending patterns from the middle class, spending on homes, luxury cars and leisure (including liquor and clothing). The middle class is buying consumer goods, particularly clothing, household goods and cars.

The increasingly affluent black population reflects the economic shifts of the past decade. But as we draw near to Finance Minister Trevor Manuel's 10th Budget, the extent to which this growth was aided by fiscal (or monetary) policy specifically is arguable. Various grants and lower taxation and interest rates have helped to increase disposable income.

The growing wealth of the black middle class is most evident in sales of consumer goods, financial services, property, motor cars and tourism.

Merrill Lynch economist Nazmeera Moola says although it is difficult to pinpoint what exactly constitutes the black middle class, there has generally been an increase in purchasing power.

At the lower end, this power has been stimulated on the budgetary side through increasing grants, specifically those for disability.

In the low to middle class there have been some tax cuts, but the growth in black spending "is more about increases in opportunities and skills", Moola says. This, in turn, has been aided by SA's general skills shortage and affirmative action.

A 2004 report by Moola says the growth in black spending has been driven by:

- The number of black employees in white-collar public-sector jobs in government departments and parastatals;

- The increase in employees in the private sector - facilitated by the jump in black students to 48% of university students by 2004; and

- The development of black business enterprises.

Empowerdex CEO Vuyo Jack says although lower tax rates have led to upward mobility and increased spending power, a major factor has been affirmative action, driven by employment equity and skills development regulations.

But Jack warns that the money is being spent on consumerism rather than investment as people do what they had not been able to, such as buying a nice car or going on holiday.

Jack's concern is that without a focus on investment, the massive spending boom may not be sustainable, and he says people need to build an asset base or net worth to support that consumption.

Jack argues that BEE deals have not really benefited a broad base, although it could be argued that dividends have been paid to broad-based groups, benefiting the middle class.

He also questions official figures on the black middle class, saying a salary of R6500 means little when an extended family is supported.

"The real middle class are those with income that enables them to build assets," he says.

He has similar concerns about statements on the wealth of black businesspeople, saying one needs to look at assets and claims against those assets. Some empowerment investors have been able to cash out but many still have huge debt.

Black spending patterns differ from those of whites largely because black people are gathering items they never had before. The spending on clothing as a proportion of household spending is also higher among blacks.

After black people have made up what has been referred to as their "asset deficits", it is expected that they will move on to investments.

The Merrill Lynch report showed that higher incomes and access to electricity were driving increased spending on furniture, fridges and appliances. And while black people historically bought at spaza shops, the middle class shops at supermarkets.

There are still relatively low levels of car ownership, so the propensity to spend is high. The new black middle class is alsounderpinning the continued boom in the property market, according to Merrill Lynch.

It says that in 2004, 35% of workers earning over R2500 did not have bank accounts largely because of high costs, financial illiteracy and a lack of trust. But the number of black people with savings accounts is growing.

Blacks are also increasingly borrowing from banks as they buy houses and cars.

Black households' contribution to total household expenditure was 46% last year, up from 36% in 1993.

Although the emerging black middle class is seen as one of the success stories of the democratic government, it is an oft-debated subject.

Saki Macozoma told a Black Management Forum (BMF) conference that "too many in the black middle class are absorbed in the fetish of conspicuous consumption and its attendant pathologies to bother about the direction of the country".

Jerry Vilakazi, former MD of the BMF, wrote last year of the black middle class, saying that "as investors they should strive to influence where their money goes, and demand to see change in the way their money is invested".

These criticisms imply further onuses on members of the black middle class over and above Jack's remark that they support extended families.

But with stable interest rates, the potential for further tax cuts due to higher revenue and a continued focus on grants and on the stimulation of small and medium businesses, all to be considered in this week's Budget, there is every reason to believe black spending power will continue to grow.
Copyright © 2006 Sunday Times. All rights reserved.

The Guardian EDITORIAL

Salute to Thabo Mbeki
AT a recent interview with the British Broadcasting Corporation (BBC) Thabo Mbeki, the South African President, is quoted to have declared in plain, unambiguous language that he is opposed to the extension of his tenure beyond the constitutionally allowed two terms.
He declared that he would not allow the allure of office and filthy lucre to push him to do what is unlawful, immoral and indefensible. Mr. Mbeki, by the declaration, has shown a redeeming face of Africa. He has put to shame the hordes of praise singers and sycophants who were prevailing on him to rule for as long as he pleases.
By this declaration, Mr. Mbeki has shown that he is a man of sterner stuff who would not allow selfish considerations to diminish his standing as a true democrat and indeed a beacon of hope in a continent that has suffered severe ruination in the hands of sit-tight leaders. Expatiating further, President Mbeki said he would not allow his party, the African National Congress (ANC) to use its more than two-thirds majority in parliament to railroad an amendment to his country's constitution such that will allow him to go for a third term.
President Mbeki, humble as ever, said that by 2009, he would have held high office in South Africa for a total of 15 years. He feels this is more than enough for one man; he is therefore clearly hoping for an infusion of new blood and ideas into the body politic of South Africa at the next election. It would be recalled that Mr. Nelson Mandela, the first president of post-apartheid South Africa, quit office after only one term, pleading age and the availability of capable lieutenants.
In contrast, many leaders in Africa see themselves as maximum rulers fully capable of reigning over their beleaguered people for as long as God will allow. These sit-tight leaders are to be found everywhere in Africa from Cape to Cairo. They apply every trick in the book, from bribery to intimidation, to perpetuate themselves in office. They stay so long in office that misgovernance even when not intended becomes an inescapable side-effect of their unending tenure.
Thus we see on the African continent a terrible tale of ignorance, hunger and disease. Where the rest of the world is moving forward, we see among the African nations retardation into greater squalor and wretchedness at the same time as their rulers and their friends pillory the resources of citizens in distress for fattened bank accounts abroad. This image of Africa is what Mbeki has set himself up to conquer.
Over the past decade, African rulers have drawn criticism both at home and abroad for seeking to extend their terms in office beyond their original mandate. Happily for the world and Africa, Mbeki has pointed the way to democracy, human dignity, consideration for others and maturity. He has unequivocally rejected a pernicious practice whose deleterious effects have stifled growth and poisoned the political atmosphere of Africa.
In Nigeria, speculation over whether President Olusegun Obasanjo would extend his tenure beyond 2007 has been rife. As in South Africa, the president's party, the Peoples Democratic Party (PDP) is capable of mustering a two-thirds majority through the National Assembly to effect a constitutional change. Unfortunately, the president has chosen to be taciturn about his political plans, leading many to believe that he indeed might opt for a third term.
As in South Africa, Nigeria is awash with even more praise singers and sycophants given the desperate and rapacious politics we play here. Whether Obasanjo will damn the sycophants and stand up for the constitution he swore to uphold is still a puzzle. His failure to say anything has dominated the entire political space to the extent that very little governance is going on right now.
In the light of these developments, many individuals and organisations have been calling on President Obasanjo to come clear about his intentions. The Conference of Nigerian Political Parties (CNPP) has called on him to emulate the noble deeds of Thabo Mbeki, reminding him that by 2007 he would have spent at least 18 years in high office. The West African Students Union (WASU) has joined the chorus of those calling for Obasanjo to go in 2007. The United States and the European Union have variously deprecated any attempt at an extension of the tenure of the administration. But more than this, as recent opinion polls show, average Nigerians have been declaring as loud as their feeble voices can carry them that they are opposed to the idea of a third term.
It is not known whether President Obasanjo will hearken to public opinion. We hope he does for the sake of his legacy and the Nigerian nation. The Nigerian union, if it can be so called, is a fractious amalgam. There is no knowing what will happen if the constitution is subjected to a traumatic jolt.
Suffice it to say, that every time some politician or military ruler had toyed with an extension of tenure in Nigeria, it has failed. In a nation of 130 million people, it seems inconceivable that a president cannot be found among them. President Obasanjo should be joining in the search for a successor.

Appeal for Ugandan election calm
Ugandan opposition leader Kizza Besigye has urged his supporters to exercise restraint after two of his supporters were shot dead on Wednesday.
President Yoweri Museveni's main rival in next week's elections said the violence was part of a military campaign to intimidate voters.
Uganda's police chief has apologised but also partly blamed opposition supporters for the incident.
Two men believed to be state security agents are being held by police.
In an interview with the BBC's Will Ross in Kampala, Dr Besigye called on his supporters "to use maximum restraint" and "to only do what is necessary to defend themselves".
The opposition leader has asked his supporters "not to retaliate" and "not to escalate the violence".
However, Dr Besigye believes that the authorities have been trying to frighten the country's voters ahead of next week's poll.
Wednesday shooting is "consistent with the terror campaign aimed at causing despondency within the population so that the population resigns and says we better keep Museveni or we get finished", he said.
Police say a state security agent fired after a crowd of opposition supporters attacked his car. The man was later arrested together with the driver of the car.
The incident happened in Kampala after supporters were celebrating the adjournment of Dr Besigye's treason trial until after next week's presidential poll.
Bitter fight
Dr Besigye's election campaign has been frequently interrupted by court appearances.
He is accused by the state of plotting a rebellion to overthrow the government, but he says the charges against him are politically motivated.
Compared to elections five years ago, the electoral campaigns have been relatively peaceful.
But our correspondent says Wednesday's shooting is likely to raise tension in an election which has been bitterly fought.
President Museveni, who came to power 20 years ago, is viewed as the favourite to win.
These are the first multiparty elections for 26 years, but have been marred by the controversy surrounding the arrest of President Museveni's rival.