South Africa’s middle-class disaster

South Africa’s working class is now the fastest-growing segment in the country, with millions of households moving up from poverty or the working poor, but breaking into the middle class has become significantly more challenging.

A recent study conducted by the UCT Liberty Institute of Strategic Marketing, commissioned by Liberty and Standard Bank, found that 1.2 million households have entered the working class over the past decade.

This segment includes households with monthly incomes ranging from R8,000 to R22,000.

These households account for a quarter of South Africa’s population and primarily consist of individuals with some level of tertiary education.

Even with dual incomes, in some cases, their earnings remain below R22,000. Factors such as low economic growth, high debt levels, and limited resources impede their upward mobility.

“Formal education has helped many move towards the middle class, but the working class faces a highly unstable journey,” said Motlatsi Mkalala, Executive Head of Middle Market at Standard Bank.

“Retrenchments, short-term work contracts, or a breadwinner’s death can quickly push households back into poverty.”

Despite a combined annual spending power of R550 billion and the emergence of 300 new working-class households each day, per capita spending remains low.

Many individuals support extended family members and are spending more on essentials like food, particularly due to high inflation.

Commuting presents a significant challenge, with many people averaging two hours of travel each day. For some, this commuting time has doubled, along with their transportation costs.

Many resort to debt to manage these financial pressures. Consequently, only 34% of working-class consumers surveyed feel financially stable, compared to 69% of middle-class earners.

A recent DebtBusters survey found that, on average, South African consumers spend 68% of take-home pay to service debt, and how they spend the rest of their income depends on their income bracket.

South Africans with a take-home pay of between R5,000 and R20,000 spend around 13% of their income on transport and around 12% on water, electricity and rates.

Housing and food make up around 60% of this group’s spending.

This leaves very little room for this group to invest in necessities like insurance – including medical aid – and retirement.

In fact, those falling within these income brackets save an average of 0% of their income on retirement savings.

The way that people spent their retirement savings under the new two-pot retirement system also revealed the financial pressure that this group is facing.

A study by the Personal Finance Research Division of the Bureau of Market Research revealed that a significant portion of the R43.4 billion in claims processed from 1 September 2024 to 31 January 2025 was used to settle outstanding debt.

These withdrawals were spent on immediate consumption rather than savings. Despite the potential for additional liquidity to bolster financial security, the data showed that consumers did not prioritise long-term savings.

Worse yet, many used their savings to facilitate new credit purchases, particularly in the automotive sector.

In other words, this group, which already struggles with its debt obligations, used its retirement savings to take on even more credit, essentially putting itself in an even worse financial position.

“These challenges show the need for accessible tools that provide real-time insights into spending habits and help the working class make informed daily financial decisions,” Mkalala said.

He added that the research also highlighted the need for sustainable credit solutions to protect this segment from exploitative lending.

“The working class wants to get out of debt, own homes, and secure better futures for the next generation. However, many are forced to put these aspirations on hold due to unexpected life events.”