Black spending power on the up
3 December 2004
A rise in the spending power of black consumers is boosting key retail sectors. A recent report says motor vehicles, furniture, clothing, media, property and cellphone retailers are all benefiting from South Africa's booming "buppie" class.
The report by the Financial Mail follows earlier indications that there was measurable growth in the number of black middle class South Africans - a result of a combination of factors, including the government's black economic empowerment drive.
Now, "buppies" - black up-and-coming professional people - as well as the low-end of the black consumer market, are contributing strongly to a rapid rise in the profits and share values of companies in the retail sectors.
The Financial Mail predicts that the banking and insurance sectors are also likely to become the beneficiaries of black spending over the next three to four years.
Researchers argue that self-fulfilment, acceptance and status play a
big part in the spending patterns of black households - with a lot of money being spent on a limited number of luxury items.
This trend is typical of young medium- to high-income earners generally in South Africa, but research shows that "buppies" are more style-conscious that their white counterparts. The wealthiest 20% of black South Africans spend 3.5% of their household income on clothing, while whites spend 1.5%, the publication says.
Low-end clothing retailers like Jet and Ackermans have experienced 25% growth in sales since 2003, while mid-range retailers like Truworths and Edgars have enjoyed a 16-18% growth in sales.
In total, the black market spends R2.5-billion per annum on clothing, accounting for over 65% of the market. According to the Financial Mail, volume growth in the clothing retail sector has grown 15-25% over the past year.
It also reports that the wealthiest 20% of black consumers spend 0.86% of their income on appliances and 2% on
furniture, compared to 0.58% and 0.81% among whites. Luxury auto dealers report above-average sales among their black clientele.
Meanwhile, retailers are riding the new wave of luxury spenders. And it's all in a day's work for some, who see it as their job to meet the aspirations of the middle class dream.
"[They realize] their dreams are achievable, and our job is to ensure that we can meet their demands", David Sussman, chairman of furniture retailer JD Group, told the Financial Mail.
SouthAfrica.info reporter
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