The cost of being middle class in South Africa

 ·1 Sep 2022

Annual consumer inflation reached a 13-year high in South Africa, increasing to 7.8% in July, StatsSA data showed, leaving consumers in a vulnerable position financially amid soaring living costs.

Data from FNB estimates that it takes a mere five days for middle-income consumers in the country to spend up to 80% of their monthly salary.

This suggests that the average middle-income consumer, earning between R180,000 – R500,000 per annum, survives on 20% of their monthly salary for more than 20 days in a month.

In addition, salaried middle-income consumers with secured and unsecured credit spend, on average, 30% of their income on unsecured credit and 35% on secured credit, the lender said.

Putting a figure on the average profile of a middle-class person/family in South Africa is difficult, with economists and expert institutions attributing various factors to reach the magic number.

Working on economic averages – by no means a pointer to the middle class, but rather, a starting point – shows the average monthly earnings paid to employees in the formal non-agricultural sector was at around R23,500 in February – or R282,000 annually – the low-end of FNB’s suggested figure for a middle-income consumer in the country.

Earnings of around R500,000 annually equate to approximately R41,000 per month.

The latest salary data from the BankservAfrica Take-home Pay Index shows that the average salary paid to employees slipped to R14,340 in July.

Monthly costs

Buying a house is one of the biggest purchases you’ll make in your lifetime, while a vehicle is also likely to be a cost burden over an extended period of time. As a rule of thumb, you should be setting aside 30% of your salary for home loan repayments.

Ooba notes that the average bonded property in South Africa has climbed to around R1.43 million. With a 10% deposit, that amounts to a monthly repayment of R11,579 at an interest rate of 9%. For first-time buyers, that average price drops to around R1 million – R8,098 each month.

It must be noted that in many cases, middle-income families accrue wealth through a double income and share financial responsibilities, including a bond.

Vehicle financing company Wesbank recently noted that the average value of new cars financed in June was R352,208. Without a deposit, the estimated monthly repayment on that amount is R7,163 over a 72-month repayment term, and at an interest rate of 13%. With a 10% deposit, that number drops to R6,460.

Data from consumer credit reporting agency TransUnion shows that more people are dipping below the R300,000 in the second-hand market. Finance of between R250,000 and R300,000 would still see a monthly repayment fee of between R5,111 and R6,115, or even lower with a deposit.

Other substantial monthly living costs include education. Financial services firm Sanlam loosely puts the cost of education at the following:

  • Public school: R30,000 – R60,000 per year
  • Private schools: R100,000 – R200,000 per year; although new business models are making private education more affordable.

Curro, for example, claims an average annual tuition fee is R64,764. Its fees differ widely based on its numerous locations and offerings It can cost from around R6,000 pm/R73,000 – to in excess of R9,000 pm/ R108,000 annually as is the case of Curro Waterfall in Midrand.

Data from DebtBusters showed that stagnant incomes, coupled with rising inflation, meant that middle-class South Africans have 34% less purchasing power in 2022 compared to 2016. By adding petrol, electricity, levies, groceries, and medicine, to your monthly bill, one can see how a salary can disappear within days.

Medical aid is seen as a luxury in South Africa, with fewer than 20% of the population believed to be covered by a medical aid scheme, as is having a retirement vehicle. More than a third (35%) of middle-class South Africans are not putting any of their salary towards their retirement savings, a BusinessTech poll shows.

The poll of 2,702 readers showed that the majority of respondents (61%) are allocating 10% or less. By comparison, 23% of readers are putting away more than 20% of their salary every month towards retirement.

Here’s how much money South Africans are saving for retirement

Read: These income levels in South Africa owe the most debt

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