I was on my way back from lunch today with a good friend and our conversation made me think of this thread... She works at one of the big consulting firms. Their business is SHOT... it has literally collapsed in SA and RoA and is being kept on life support from HQ in the states. Appetite and budget for big consulting firms to try random stuff is no longer there. Businesses are in a worse state than we realise. Massmart has some bigshot heavy-hitter coming from the states to 'fix it' (God help you if you work at Massmart... I know all about what this scenario means)
Why did it remind me of this? The Middle class is disappearing - if not to other countries, by virtue of misreported inflation and other factors pushing them into ever less disposable income if not debt and lower on the ladder. 1/2/3-series, A/C class and A3/4/5 are no longer affordable to middle class people and are not attractive to the 10%ers let alone 1%ers. Income can be an indicator but is not necessarily useful as a definition of wealth.
A middle class person can have a net worth of anywhere from R200K to R1.5M which is where a third of WORKING adults fall. Another 2 thirds of the population are UNDER R200K. There is 1% of the population >10M net worth and 5% are around R2M so that might give you an idea of the shape of the population.
This is NET WORTH - not income. Guys earn R1M/year and think they're rich... or that it is sustainable when we are in the environment we are in (and not just SA).
Remember if you are earning R1M (which most people are not), you are giving a bunch of that money right back to the government (R327K) and another 15% in VAT for a lot of what is left over because how else are 4.8M taxpayers (most earning under 350K themselves) supposed to support 47M people?
You then need to eat, drink, clothe yourself (hopefully), insure your life (because you need to give something to your creditors if you die - and hopefully there is some left for your family), insure your 'stuff' that is all rapidly depreciating anyway, pay school fees, get around (fuel, transport money etc), get your kids to school, nannies/domestics/au pairs and have shelter... this accounts for a ton of that balance. None of this goes towards building your net wealth except maybe the house... even then you might think you are living in a 2M house... but that 20K+ per month bond is really 18K+ worth of interest, property market is stagnant and you're only very slowly chipping away at it... You may have a 1M car... but that's worth 20% less immediately after leaving the showroom... and 50% less 3 years later (probably worse). You can see how even if you earn R1M in this hypothetical scenario, you will be damn lucky to get into the 5% let alone 1% (both of which are themselves moving targets) slowly chipping away year after year. 'Real' inflation and currency volatility are meanwhile laughing at even your best investments even if you get to investing (outside of very high risk things). This is why guys beg you to invest and save from an early age but we (myself included earlier in life) do the opposite.
This is why I say the middle class is disappearing (by definition) and the appetite amongst those remaining is greatly diminished. People who might have been OK losing 150K on a 300K car are suddenly not so cool with losing R350K on a 700K car. This is true whether you package it as a 'risk free rental' or as a 'scary balloon'.
So, for that 33% of the population called the middle class - studied to death by marketers, classified as black diamonds, the subject of many business school theses, multimillion rand studies by corporates and psychoanalysed in perhaps more detail than any other market in history... the market has resorted to the band aids and marketing tactics we see today in order to still get value out of them, because we all know that the middle class may look rich and act rich, but is 60-90 days away from literally being on the street.
ALL of these companies (and government for that matter) are so critically dependent on the 1-5% it is now hilarious... The pressure on them is becoming high enough that MANY are once again leaving in probably the 5th or 6th brain and wealth drain in the past couple of decades... the desperation is showing now with the proposed measures to extract tax from expats (spoiler: it won't work).
But hey, lets convince everyone they are rich, need to live a life of a certain calibre, 'deserve stuff' and that because something works for those 6% of people, its a good idea for a very wide band of 33% of the rest of the population so we can make sure German, Japanese, American and Korean companies can continue to meet sales numbers... :roflol:
