Black advancement: hype outstrips reality

Summary - The expectations of South Africans today are turbulent, to say the least. Our newspapers are saturated with reports of empowerment deals, new wealth and new opportunities, raising expectations for some but painfully reminding others that the opportunities may be closed to them.

South African readers are frequently entertained by accounts of a burgeoning, sometimes an “exploding” black middle class. We also read of stupefying bonuses paid to senior corporate executives. News of wealth, and easy new wealth in particular, pervades our media.

At the same time the media also carry news of crippling black poverty at the lower levels of income.

One of my own national opinion surveys last year showed that people at large see the system as being hugely biased in favour of the rich, the well connected and the well educated. The broad consensus among most South Africans of all colours seemed to be that the future belonged to their better-off compatriots and that the poor would twist in the wind.

Amid all the hype about exploding wealth and burgeoning middle classes, or about deepening poverty, reality suffers.

One of the largest annual measures of income and other socio-economic patterns is provided by the All Media Products Surveys (AMPS) of the South African Advertising Research Foundation, using very large and fully representative samples of 25 000, twice yearly. The purpose of these surveys is generally to estimate readership patterns and to relate them to basic social and economic characteristics, including household income per month.

The AMPS surveys do indeed show that there has been dramatic change in the income shares of different races since our first open democratic elections in 1994.

In the period from 1993 to 2002, Africans increased their share of the top 10 per cent of household income dramatically, from under 10 per cent just before 1994 to 23 per cent in the second half of 2002. Coloured people also increased their share slightly, whereas the white share fell sharply from nearly 80 per cent to some 63 per cent. Indians retained their share.

Very significantly, however, the rate of change slowed dramatically after 2002. Coloured people continued to advance but the shares of all other groups remained static, and may even have fallen very slightly among Africans. This stalling of progress has occurred at the very time that talk of black economic empowerment and employment equity has been intensifying. Why is this?

Employment for Africans in the public service reached a point of saturation after 2000 and hence the greatest single source of new income ceased to expand. The private sector has also rationalised its labour utilisation, limiting its employment uptake to the upper echelons of skilled categories. The affirmative action bonanza has passed.

Between 2002 and 2004 the effects of inflation are fairly slight, and roughly equal for all race categories. A very tiny super elite of empowerment beneficiaries may well be expanding massively but this is confined to a few dozen individuals and does not affect the basic patterns.

The most meaningful trends and shifts are:

· A slight but significant decline in African poverty is occurring, due largely to the expansion of social grants.

· There is a modest but significant expansion of the numbers of Africans in the “not so poor” category of R1 400 to R4 000 per month.

· Abject or severe poverty among coloured people is roughly half of what it is among Africans.

· Abject or severe poverty affects less than 10 per cent of Indians and less than 5 per cent of whites.

· The “lower middle class” among Africans (R4 000 — R12 000 per month) has not expanded over the two years.

· A barely discernable expansion of the more wealthy categories among Africans has occurred.

· The expansion of the categories of relative wealth of R12 000 and more per month has been more rapid among coloured people, Indians and even among whites than it has been among Africans.

These results tell us that most of the stereotypes and loose impressions about a burgeoning new middle class floating around in popular debate are generally gross exaggerations. The reality is rather bad news for those who are committed to rapid or quick fix transformation.

The really good news is that deep poverty is not increasing as many people fear. The extension of social grants has indeed stopped the socio-economic rot at the lower levels of livelihoods.

However, the ongoing celebration of “empowerment” and with it, quick and easy wealth, may have serious implications. Revolutions of rising expectations have the potential to tear societies apart. The recent concern expressed in government about elite empowerment comes not a moment too soon. But government itself has to think about the contradictions within its own policies.

Happiness is substantially composed of rewards in relation to expectations. Expectations are complex, but are significantly shaped among other things by perceptions of the rewards that are seen to be available, and those that others are seen to be getting. These perceptions can create both excitement and frustration.

The expectations of South Africans today are turbulent, to say the least. Our newspapers are well nigh saturated with reports of empowerment deals, new wealth and new opportunities, raising expectations for some but painfully reminding others that the opportunities may be closed to them. The Sunday Times of 17 July carried a banner headline “SA’s wealth explosion — number of dollar millionaires skyrockets to 37 000 (from 25 000 in 2002)”. Further down the page the economist Tony Twine gave one obvious explanation, namely that the rise in the value of the Rand since 2002 had largely created the “explosion”. But how many people read that far? Headlines create perceptions, in this case the perception of a massive increase in stupendous wealth.

Virtually every week the papers also carry reports of mouth-watering empowerment deals, often with pictures of self-satisfied-looking beneficiaries whose clothing matches the promise of great wealth to come. Articles and adverts have begun to appear on how best to structure empowerment financing without pain, risk or sacrifice by anyone, except of course thousands of bewildered small shareholders.

Less frequently, but often enough, South African readers are entertained by accounts of a burgeoning, sometimes also an “exploding” black middle class. Jacob Dlamini, political editor of Business Day, for example, seems to be under the firm impression that the black middle class is experiencing “stunning growth” (Business Day, 19 July 2005). We also read of stupefying bonuses paid to senior corporate executives whose contributions and talents we have to take on trust. News of wealth, and easy new wealth in particular, pervades our media.

From time to time there is what appears to be statistical confirmation, much of it very partial or problematic to better-informed readers. A very prominent recent example was a graph published in the Financial Mail of 28 January1 purporting to show that the African share of high income exceeding R30 000 per month had risen from 25 per cent in 2001 to 31 per cent in 2004, with a growth rate of nearly 13 per cent per annum. Similarly, the African share of middle incomes of between R10 000 and R30 000 per month was presented as 42 per cent, compared with 44 per cent for whites. The source of the information was given as WEFA, the Labour Force Surveys and an Old Mutual team analysis. These impressive sources lent credibility to the claim that the African share of middle and upper middle income was already almost equal to that of whites and catching up fast. After scouring relevant statistical sources I could find no confirmation of such dramatic progress among African middle and high-income earners. Nevertheless, the graphs have been widely noted in marketing circles.

Very often all this news of black economic progress creates optimism or anticipation, and raises expectations. But among those who for a whole variety of reasons feel that all the new prosperity and wealth will elude them, it can create frustration, anger, or worse still, the inclination to rip off the system in some way or another.

At the same time the media also carry news of crippling black poverty at the lower levels of income. Some reports claim that abject poverty and deprivation is deepening, largely as a consequence of unemployment and Aids, but occasionally, because of the dreaded march of global capitalism. Here again the frequent publicity given to the condition of the poor helps to bring anger and frustration to the surface, reinforcing feelings of victimisation and the inclination to protest. Whether this is good or bad can be debated at length, and social protest does democracy no harm. That assumes, however, that governments and politicians will resist the temptation to resort to quick fix populist correctives.

The news of expanding new wealth and grinding poverty is such an established part of our daily or weekly media diet, that I was not entirely surprised last year when one of my own national opinion surveys showed that people at large see the system as being hugely biased in favour of the rich, the well-connected and the well educated. I asked the survey sample the simple question: “Who has benefited most from government policies over the past five years?”. The spontaneous replies showed that only 14 per cent of South Africans felt that the government had favoured the poor, while 65 per cent of Africans and well over 70 per cent among others felt that rich, black businessmen, well educated blacks, officials and politicians and their cronies were the main beneficiaries of government policies. The broad consensus among most South Africans of all colours seemed to be that the future belonged to their better-off compatriots and that the poor would twist in the wind.

Amid all the hype about exploding wealth and burgeoning middle classes, or about deepening poverty, reality suffers. Socio-economic patterns are very hard to change and when they do change it is often very slowly. Reliable evidence confirms this. One of the largest annual measures of income and other socio-economic patterns is provided by the All Media Products Surveys (AMPS) of the South African Advertising Research Foundation, using very large and fully representative samples of 25 000, twice yearly. The purpose of these surveys is generally to estimate readership patterns and to relate them to basic social and economic characteristics, including household income per month.

The AMPS surveys do indeed show that there has been dramatic change in the income shares of different races since our first open democratic elections in 1994. Due to changes in the value of money it is difficult to compare income categories over time, and a more reliable method is to inspect the racial shares of the top 10 per cent of overall incomes for different years. Using the household income distributions for late 1993, 2002 and 2004, the AMPS surveys show the following changes in the shares of such income among the different race groups: see table one.

In the period from 1993 to 2002, Africans increased their share of the top 10 per cent of household income dramatically, from under 10 per cent just before 1994 to 23 per cent in the second half of 2002. Coloured people also increased their share slightly, whereas the white share fell sharply from nearly 80 per cent to some 63 per cent. Indians retained their share. These results are similar to those of Andrew Whiteford and Dirk van Seventer2, which showed that by 1996 the white share of the top 10 per cent of incomes had already fallen to 65 per cent.

Very significantly, however, the table shows that the rate of change slowed dramatically after 2002. Coloured people continued to advance but the shares of all other groups remained static, and may even have fallen very slightly among Africans. This stalling of progress has occurred at the very time that talk of black economic empowerment and employment equity has been intensifying. Why is this?

Firstly, employment for Africans in the public service reached a point of saturation after 2000 and hence the greatest single source of new income ceased to expand. The private sector has also rationalised its labour utilisation, limiting its employment uptake to the upper echelons of skilled categories, hence inadvertently supporting white, coloured and Indian high-level employment. What this shows very broadly is that, aside from a tiny minority of empowerment beneficiaries, market demand for skills will tend to determine the shape of income distributions from now on. The affirmative action bonanza has passed.

More detail on the income distributions according to race for 2002 and 2004 are given in table two. This table presents strictly comparable results on household income for the second halves of 2002 and 2004.

Between 2002 and 2004 the effects of inflation are fairly slight, and roughly equal for all race categories. What the results show is that words like “explosion” and “booming” are very inappropriate in describing our changing middle class and other socio-economic realities at the present time. A very tiny super elite of empowerment beneficiaries may well be expanding massively but this is confined to a few dozen individuals and does not affect the more basic patterns.

The most meaningful trends and shifts in table two are:

A slight but significant decline in African poverty is occurring (the two lowest categories of income in the table) due very largely to the expansion of social grants.

There is a modest but significant expansion of the numbers of Africans in the “not so poor” category of R1 400 to R4 000 per month.

Abject or severe poverty among coloured people is roughly half of what it is among Africans and it was reduced over the period.

Abject or severe poverty affects less than 10 per cent of Indians and less than 5 per cent of whites, and it is hardly changing at all among whites and is diminishing among Indians.

Surprisingly, the “lower middle class” among Africans (R4 000 — R12 000 per month) has not expanded over the two years. This static situation is very substantially due to factors already mentioned, namely that employment in the civil service and the private sectors is not expanding at earlier rates. As we know private business employment has also suffered losses due to retrenchments.

A barely discernable expansion of the more wealthy categories among Africans has occurred. The proportions of Africans with household incomes above R12 000 per month has risen from 1,6 per cent to 1,9 per cent of all Africans — hardly an explosion!

The expansion of the categories of relative wealth of R12 000 and more per month has been more rapid among coloured people, Indians and even among whites than it has been among Africans.
Doubtless, the effects of empowerment and employment equity among Africans will become more apparent over the next three years but even then, these effects will never repeat the dramatic changes that took place between 1994 and 2000. Social transformation is very much the political equivalent of changing the course of a super-tanker, a necessarily slow and incremental process. Throughout history, leaders who have dreamt of reshaping their societies have had to learn and relearn this painful lesson.

What does all this tell us about so-called racial inequality? The evidence in table two shows that whites and to a lesser extent Indians still enjoy considerable socio-economic advantage. They are both dominantly middle class communities.

At the same time, however, there are very large economic overlaps between the races today, particularly in the income categories R1 400 to R12 000, indicating very widely shared circumstances.

The middle and upper middle classes are still largely white but no longer overwhelmingly so. Grossing up the percentages in table two to represent population numbers shows that of approximately 1,4 million people in what we may call the “middle-middle” class (R12 000 to R20 000 household income per month) some 62 to 63 per cent are white. This means that almost four out of ten South Africans in the “solid” middle class are no longer white.

Whites have a greater relative advantage in what one might call the “upper middle” class (R20 000 per month and more) in which they account for nearly three-quarters of the class composition (74 per cent).

Concluding comment

What all these results tell us is that most of the stereotypes and loose impressions about a burgeoning new middle class floating around in popular debate are generally gross exaggerations. Class breakdowns and associated trends are far more complex than the media hype allows for. The reality is rather bad news for those who are committed to rapid or quick fix transformation. Africans are making progress but it is slower than most people think.

The really good news is that deep poverty is not increasing as many people fear. As a matter of fact, the extension of social grants has indeed stopped the socio-economic rot at the lower levels of livelihoods. The more important questions now are whether or not our levels of welfare are sustainable and what the wider consequences of dependency on state handouts may be.

A key lesson in the evidence is that after the catch-up surge of change in the late nineties, general increases in prosperity are determined more by market forces than by social and political engineering. The only miracles are being provided by the large corporations that, with goading by government, are now competing with each other to empower emerging business elites that are so small that they make hardly any impact on demographic realities and the fabric of society at large.

The statistical effects within the population may be small but the effects on expectations may not be small at all. When hundreds of officials in departments like home affairs and other state agencies are known to be or suspected to be on the take, one has to ask questions about the climate of ethics and expectations in the society. Obviously this is a complex and convoluted area but among the many factors at play, the ongoing celebration of “empowerment” and with it, quick and easy wealth, cannot be discounted. Revolutions of rising expectations have the potential to tear societies apart. The recent concerns expressed in government about elite empowerment comes not a moment too soon. But government itself has to think about the contradictions within its own policies.

Endnotes
1 Financial Mail, 28 January 2005, page 20.
2 Whiteford, Andrew and van Seventer, Dirk, quoted in South African Institute of Race Relations, Fast Facts, no 6, June 2000.

The top ten per cent of overall household income (Table one)

Racial breakdown of the top ten per cent of overall household income for late 1993, 2002 and 2004: source AMPS surveys

Distributions of individuals according to household income categories (Table two)

Distributions of individuals according to household income categories and race: late 2002 and late 2004. (Source AMPS surveys, representative stratified probability samples, size 25 000 each)