Poverty engulfing SA’s white middle class

The white middle class struggling
The white middle class struggling

It was not only the poor who were hard hit last year. As many as 116000 “financially comfortable” households have fallen on bad times.

Slowing economic growth and rising unemployment hit many a household classified as “anchored well”, shifting them into the more vulnerable category, “drifting”, Momentum’s Household Financial Wellness Index showed yesterday.

An economist at Unisa’s Personal Finance Research Unit, Johann van Tonder, said the Momentum data showed that even skilled people with “high-net worth” and a formal-sector job were not immune to deteriorating economic conditions.

Households classified as “anchored well” are not necessarily high-income earners. But they have a stable standard of living.

Bernadene de Clercq, head of the Unisa research unit, said that many of the “anchored well” were pensioners but could sustain their lifestyle.

About three-quarters of South Africans said they we re facing financial challenges, according to the index, which sampled more than 3500 households in different income groups and geographical areas.

The rising cost of living – higher prices for electricity, food and fuel – and the high level of indebtedness have been gnawing away at disposable incomes.

This is despite the interest rate being lowered to an historic low in July last year. The repo rate is now at 5%, prime at 8.5%.

Slowing economic growth has hit both shacks and comfortable suburban homes.

The index revealed a decline in the average “financial wellness” score of households from 65.23 points in 2011 to 64.77 points last year.

“Though the change seems marginal, on a net basis it translates into over 276000 households moving to a weaker financial wellness category,” said Van Tonder.

Last year, economic growth was 2.5%, compared with 3.5% in 2011. Lower growth hurts employment and also makes it tougher for entrepreneurs to turn a profit.

About 80000 jobs were created last year, which was about a quarter as many as in the previous year, according to Van Tonder.

Last year, the number of unemployed people increased four times faster than in 2011.

“These factors combined to adversely affect many households’ income-earning capability, their ability to finance expenses, their capacity to accumulate wealth and to improve their dwellings, and their prospects of acquiring a better education or improved skills,” said Van Tonder.

Only 15000 households rose to a higher financial wellness category.

The outlook is not good.

Most economists, the Reserve Bank and the International Monetary Fund have reined in their growth forecasts this year. The current consensus is that the economy will grow by only about 2% after the first quarter surprised on the downside, showing growth of only 0.9%.

The middle class have resorted to the courts – challenging, among other things, e-tolling. – timeslive.co.za