Measuring the Black Diamonds

In the past 15 years there has been a “maturation” of the black middle class, with a new focus on creating generational wealth.

There is now access to better education and the benefit of a longer time spent in the middle class that has strengthened financial decision-making and created a stronger long-term financial outlook.

This is one of the findings in the University of Cape Town Liberty Institute of Strategic Marketing’s report on the economic state of SA’s black middle class. The outcomes will provide insights for brands wanting to better understand and increase their reach into this key demographic.

In terms of relationships with brands, there has been a marked swing to locally owned products and services with an expectation that they tell their own stories and develop their own narrative.

The black middle class is made up of about 3.4-million people, making up 7% of the black African population — with a spending power of R400bn a year.

The study says this group has shown resilience, particularly during Covid. The impact on their finances over the past two years was seemingly limited, with 70% of respondents saying they were not worse off financially because of the pandemic.

Even though there is evidence of resilience, finances were still a major source of stress, with many households reporting challenges with mental health. Other areas of concern included their health, crime, their children’s future and not being able to support dependants financially.

James Lappeman, head of projects at the institute and report co-author, says: “We are now seeing more and more second-generation black middle-class families emerging and the narrative has shifted to wanting to create generational wealth, which wasn’t seen 10 to 15 years ago.”

It has been more than 15 years since the institute conducted its first study into this consumer segment, where the term “black diamonds” was coined. The latest incarnation was conducted over a year with a survey of more than 1,900 middle-class households.

The report defines this consumer segment as households with an income of R22,000 a month and above.

Paul Egan, managing consultant at the institute and report co-author, says tertiary education is noted as a key catalyst for enhanced economic outcomes in the black middle class.

“The correlation between economic outcomes and education is very strong. There will always be unemployed university graduates, but as a proportion of the unemployed, they are relatively small.”

Of particular significance is that the future of education is female. The report found that 58% of students in SA universities are women and 42% are men.

Brands wanting to connect with the black middle class, notes the report, need to understand that it is rooted in identity. Brands also have to anticipate needs and create surprising but familiar experiences. Companies should be careful about just copying and pasting strategies from the past.

The group is brand-conscious and penny-smart. Music and family are important and there is a propensity towards indulgence and celebrating life. But in a time when load-shedding is having a debilitating effect on lives and the economy, the black middle class lists power supply, unemployment and political instability as top concerns.

Looking to the future, the study’s researchers say they see the continued growth of the black middle class, not only growing in confidence but also owning their own narrative a lot more.

Lappeman says: “In the next 20 years we’re going to be seeing the first major wave of black middle class retiring. What this will look like is still open to interpretation.”

This piece originally appeared in the Financial Mail.