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Cablegate: South Africa's Black Middle Class: Growing Fast,

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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #0505/01 0711442
ZNR UUUUU ZZH
R 111442Z MAR 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3770
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS SECTION 01 OF 02 PRETORIA 000505

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON PGOV SF
SUBJECT: SOUTH AFRICA'S BLACK MIDDLE CLASS: GROWING FAST,
DISILLUSIONED, IN DEBT

1. (SBU) Summary: South Africa's black middle class is
growing rapidly, but definitions of "middle class" vary
widely and the group may be smaller than many assume. Middle
class blacks support the economic policies of Thabo Mbeki and
have a strong attachment to the ANC. However, they are not
active in ANC branches or in community organizations, and
they tend to be increasingly disillusioned about politicians.
They have taken on high levels of debt in order to "catch
up" with white peers. Few are entrepreneurs. Few have
social contact with white peers outside of the workplace.
The existence of a healthy black middle class will contribute
to the long-term stabilization and normalization of South
Africa. End Summary

-------------------------------
Who Are the Black Middle Class?
-------------------------------

2. (SBU) South Africa's black middle class is growing
rapidly and supports the economic policies of Thabo Mbeki,
but is not active in ANC branch politics, according to
Professor Lawrence Schlemmer, a retired sociologist and
Director of MarkData, a market research firm that conducts
surveys for private companies, government departments, and
political parties. Schlemmer recently met with Deputy
Economic Counselor, Economic Officer, and Economic Specialist
in Cape Town.

3. (SBU) According to Schlemmer, blacks are now 18-20
percent of what he called the "core middle class" of South
Africa. He defined this group as salaried professionals,
middle managers (including those in the public and parastatal
sectors), owners of capital- or knowledge-intensive small- or
medium-sized firms, and others in like occupations, earning
at least 12,000 rand (about $1,500) per month. As recently
as 2004, Africans were only 12 percent of the core middle
class, he said. While still small, the number of core middle
class blacks has exploded by almost 15 percent per year in
recent years.

4. (SBU) Schlemmer attributed the expansion of the black
core middle class to brisk economic growth and aggressive
affirmative action policies, especially in the public sector.
He warned, however, that growth would be slower in the
future, as government has already hit many of its affirmative
action targets, and skills deficits will make it harder for
employers to find qualified black candidates for core middle
class jobs.

---------------------------------
Lies, Damned Lies, and Statistics
---------------------------------

5. (U) Although the term "black middle class" is ubiquitous
in South African media and public discourse, it has no
standard definition. As defined by Schlemmer, the core
middle class had 1.6 million adult members of all races in
2003, and somewhat fewer than 2 million total members today.
If Schlemmer is right that 18-20 percent of this group is
black, then fewer than 400,000 blacks today qualify as core
middle class. In contrast, one widely-publicized estimate by
the UCT/Unilever Institute puts the size of the black middle
class at 2.6 million persons (out of a total adult black
population of about 25 million). However, this estimate has
been criticized as overly broad because it includes, for
example, college students and other potential members of the
middle class, as well as people who own middle class consumer
goods like microwave ovens. According to the market research
firm Market Tree Consultancy, the black middle class has
doubled in size since 2003 to over 3 million adults today
(out of a total middle class adult population of 7.5
million), but only if "middle class" includes persons earning
Qmillion), but only if "middle class" includes persons earning
at least 2,250 rand (about $300) per month. (Market Tree
also reports that 52 percent of blacks earning 8,000 rand
(about $1,000) or more per month are employed in the public
or parastatal sectors.) Using a different definition of
"middle income," Standard Bank estimates that the
"middle-income" proportion of black households grew from 15
percent of all black households in 2000 to 26 percent in
2006. All everyone agrees on is that the black middle class
has grown rapidly in the past 5 or 6 years, especially if the
term is used to include holders of lower-end jobs in
government, retail and the service sectors.

--------------------------------------------- --
The Political Profile of the Black Middle Class
--------------------------------------------- --

6. (SBU) A detailed 2005 survey (supplemented by follow up
research) showed that core middle class blacks are firmly
pro-Mbeki and endorse his approach to economics, Schlemmer

PRETORIA 00000505 002 OF 002


said. "They support empowerment. They support a private
economy. These are Mbeki's priorities, too," he said. At
the same time, Schlemmer found that these blacks are not
active in ANC branches or in local civil society
organizations. "They are just too preoccupied maintaining
their life styles" to be involved in community activities, he
explained.

7. (SBU) Schlemmer has also found that core middle class
blacks are increasingly disillusioned with politicians, whom
many see as incompetent or corrupt. "They think Mbeki made
mistakes on non-economic issues such as AIDS and Zimbabwe,"
he said. "They think it's incredible that (Health Minister)
Manto (Tshabalala-Msimang) has kept her job, in spite of her
views on AIDS and her personal scandals." Nevertheless, core
middle class blacks retain a "fervent" sentimental attachment
to the ANC and support the party at above-average levels.

8. (SBU) Schlemmer saw little or no possibility that core
middle class blacks would ever defect from the ANC to support
the white-dominated Democratic Alliance. "The DA just cannot
deliver empowerment," he said. In the long run, however, he
could see a "market" for two major black parties: a
pro-labor party and a party adopting Mbeki's positions on
economics.

------------------
Living on the Edge
------------------

9. (SBU) According to Schlemmer, middle class blacks are
insecure about their status and hence devote much energy and
money to "catching up" with their more-established white
peers. "They borrow money to buy cars. They borrow money to
buy garish furniture. They borrow money to buy flat-screen
TVs." As a result, middle-class blacks are heavily in debt
and have small net worths, he said. They feel vulnerable to
interest rate hikes and are anxious about downturns in the
economy. Knowing that many black university graduates
struggle to find jobs, they are anxious about the future of
their children. At the same time, blacks in the core middle
class expect rapid job promotions and they regularly hop from
job to job, taking advantage of the relative scarcity of
skilled blacks in an economy committed to affirmative action.

10. (SBU) Schlemmer's research found that the ranks of the
core black middle class include very few entrepreneurs -- and
what few there are fail in business at high rates. He
thought this situation would improve over time, as more
middle class blacks build up capital and social networks in
stable jobs, which they could then put to use in businesses
of their own. Sadly, his research shows that middle class
blacks have little social contact with whites outside of the
workplace. "Whites and blacks eat different food. They go
to different restaurants. They root for different sports
teams. They even drink different beer. There isn't much
common ground," he said.

-------
Comment
-------

11. (SBU) The emergence of black capitalists, managers, and
professionals is an epochal change in the social and
political landscape of South Africa. While many white South
Africans still complain bitterly about affirmative action and
racial transformation, the fact that growing numbers of
blacks have a personal stake in mainstream economics will
contribute to the country's long-term stability and
normalization. In fact, if the black middle class does grow
steadily and develops its own political identity, it may turn
out to be Thabo Mbeki's greatest legacy. But whether it can
mature fast enough to offset the discontent of millions of
rural and unemployed blacks who have seen only limited
Qrural and unemployed blacks who have seen only limited
economic pay offs from democracy is one of the major question
marks in South Africa's future.
BOST

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