Recession would hit black middle class hardest: IRR
With “unsecured credit levels…more than trebled and interest rates likely to rise”‚ an Institute of Race Relations (IRR) report on Tuesday said‚ “black consumers will be hit the hardest”. The IRR warned that “South African consumers are under growing economic pressure and that this may further dampen the country’s economic outlook”.As consumer spending accounts for up to 60% of gross domestic product‚ a tightening of belts will contribute to a financial downturn.“In recent years‚ confidence levels have fallen‚ now reaching decade-deep lows‚” an IRR statement said.“This is evident when one looks at the Consumer Confidence Index‚ which expresses consumer confidence as a net balance.“For example‚ at the peak of our growth boom‚ in the first quarter of 2007 when the economy grew at 6.7% the net balance was +23. Consumer confidence has since dropped significantly‚ and in 2015 the net balance for the first quarter was -4 as GDP grew by a mere 1.3%.”The IRR report found that:- “Lower-income groups tend to be more survivalist‚ and spend a relatively greater share of their income on necessities such as food and clothing while higher-income households have the space to devote more to items such as insurance‚ medical care‚ and savings”; and- There are “deep racial consumption inequalities despite the black middle class having risen to approximate the size of the white middle class - for example in 2014‚ 61% of white households spent more than R10000 per month compared to only 8% of black African households”.Complicating matters‚ the IRR said‚ was an “important finding related to credit extension”.IRR analyst Gerbrandt van Heerden said: “While secured lending levels have flattened out over recent years‚ unsecured credit levels have more than trebled.“In addition‚ previous IRR reports on the middle classes show that the black middle class is particularly exposed.“With interest rates likely to rise in the medium term in response to foreign rate hikes‚ the South African consumer will come under growing economic pressure‚ and black consumers will be hit the hardest.”..
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