A new report by Standard Bank reveals the disparity between South Africa’s wealthy, and poor when it comes to their spending habits.
For the lowest income earners, it’s all about necessity, while the more fortunate are able to fork out on luxury items.
The bank notes that 62.3% of households fall within the poorest income bracket – below R86,000 per annum, while middle income groups (R86,001 – R1.48 million per annum) comprise a combined 26.4% of South African households.
The wealthiest households in South Africa only account for 1.2% (R1.48 million – R2.36 million+ per annum).
Standard Bank puts the annual income classification of the South African consumer at:
|Annual income||Monthly income||Classification|
|R0 – R19,000||R0 – R1,583||Lowest|
|R19,001 – R86,000||R1,584 – R7,167||Second lowest|
|R86,001 – R197,000||R7,168 – R16,417||Low emerging middle|
|R197,001 – R400,000||R16,418 – R33,333||Emerging middle|
|R400,001 – R688,000||R33,334 – R57,333||Lower middle|
|R688,001 – R1,481,000||R57,334 – R123,417||Upper middle|
|R1,481,001 -R2,360,000||R123,418 – R196,667||Upper income/Emerging affluent|
Low income groups:
- Allocate large percentage’s of their budgets to food (29%-34%), exposing them to high levels of food inflation.
- Transport expenditure is the second dominant item in the basket. It comprises between 11%-12% of this groups budget.
- On average, very little is spent on education (1.5%).
- Contribution expenditure is also low (less than 1%). This means that some of these households might not have access to medical aid, insurance or a private pension.
Middle income groups:
- Allocate 7%-18% of their budgets to food. This is at least 10% lower than the low income group. There is an exposure to high food inflation but not as much as the two low income groups.
- Transport expenditure comprises between 15%-19% of this groups budget. Therefore this group will also be affected mostly by an increase in the fuel levy, and currency weakness.
- On average, this group spends between 2%-4% on education. This is significantly higher than the low income group.
- Expenditure on contributions is also higher for this group compared to the low income group. This means that these households have better access to medical aid and insurance. Total contributions expenditure is between 16% and 30% for these households.
Upper income groups:
- Largest spend is on transport (30.1%). This include the purchases of new vehicles. This could also highlight access to more expensive modes of transport such as airlines, because of affordability. If one excludes petrol, transport expenditure increases the further one climbs up the income brackets.
- Health expenditure is 6.7% of budget. The higher allocation to health highlights the fact that a higher income earners can prioritize health. If the proposed tariff on pharmaceutical products is approved this would have a relatively bigger affect on upper income groups.
- Housing, water, electricity and gas make up 4.3% of the upper income budget. Furniture and household equipment purchases are also quite strong in this category at close to 6%.
- There is an 8.8% budget allocation to recreational activities. This is the highest of any income group.