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Key marketing informationChanging the coal face of South African society is occurring in many communities, where formerly white areas are populated more and more by what is often collectively referred to as “black diamonds”.
More than 50 000 former township- and lower-income residents are moving into formerly white areas each year.
“Although this process has been slowed by the recession, it still represents one of the most fundamental changes seen in South African society", said Tony Clarke, managing director of Rawson Properties, in an interview with "Cape Argus".
"This is as radical a transformation as the overnight proliferation of urban dwellings in the diamond and gold rushes of the second half of the 19th century," he adds.
Quoting the Confederation of Black Business Organisations and Jabulani Sikhakhane of "Business Day", Clarke says the challenge is now to convert "black diamonds" (black people earning R100 000 to R300 000 a year) into homeowners rather than tenants.
Despite the current economic circumstances, says Clarke, the banks' apparent willingness to give 100% loans to the emerging middle class is a timely and welcome move.
"It is likely to revive what two years ago was becoming a strong demand for home ownership, and help the state foster the all-important savings culture which is crucial to the establishment of a stable society and to the economy," says Clarke. (Source: Cape Argus)
Slower in upper income suburbs
Ironically, the same transformation is not taking place in the higher income groups, as black diamonds seem to feel the effect of the recession.
According to Lew Geffen, chairperson of Sotheby’s International Realty in South Africa, the credit crunch over the past two years has caused the percentage of black homebuyers in Johannesburg’s middle and upper-income suburbs to drop dramatically.
It is therefore slowing the full integration of those areas, according to the website www.investnow.com.
"By 2007, at least 25% of our sales in areas such as Sandton, Killarney and Greenside were to newly wealthy black buyers, compared to less than 5% just after the first democratic election in 1994."
Now that number has dropped back sharply to around 15% – even though home prices are down and interest rates have been reduced.
The problem is not, says Geffen, that there is any lack of demand. According to the Unilever Institute of Strategic Marketing at the University of Cape Town, the number of black diamonds grew 15% from 2007 to 2008, and their spending power grew by a whopping 39%.
Their average earnings were also higher than those of middle-class whites for the first time. (Source: www.realestateweb.co.za)
Furthermore, one of the most frequently voiced aspirations of successful black entrepreneurs and recently empowered black executives and managers is to own a home in a sought-after suburb.
In recent years, there has also been a growing number of black buyers steadily working their way up from the lower income areas that were their original points of entry, into the ‘white' or suburban housing market to second and third homes in more upmarket locations.
However, sales to black diamonds were among those hardest hit by the credit crunch that followed the global economic collapse late last year.
Almost overnight, it became extremely difficult to obtain home loans, and absolutely impossible to get the 100% loans that many black diamond buyers require to finance their purchases. (Source: www.realestateweb.co.za)
Although they earn well, most have simply not had the time to build up large cash reserves or sufficient collateral to cover the large deposits the banks were asking for, so they were forced to drop their home-buying plans.
Now, even though the banks have begun to make 100% loans available again, and lower interest rates have boosted affordability, those plans are still being hamstrung by the fierce application of the provisions of the National Credit Act.
Consequently, while upmarket sales overall are showing a steady increase, the percentage of black buyers in this sector is not expected to grow significantly for at least 12 months. (Source: www.realestateweb.co.za).
Some staggering facts for marketers
In 2007, Rudo Maponga wrote a SAMRA (Southern African Marketing Research Association) award-winning paper titled "The Rolling Stones – Exploring the Job-Hopping Phenomenon Amongst Black Professionals in South Africa", which attracted considerable media attention. (Source: www.bizcommunity.com)
Maponga took to the stage as the last speaker at the 2009 Habari Media Digital Symposium, telling his audience that the black diamond segment accounts for 40% of the country's consumer spending power, currently estimated to be in the region of R250 billion.
That represents a staggering R70bn increase over 2007, which puts to rest the pessimistic predictions that this sector of society would “implode” due to debt pressure.
According to Maponga, it is essential for marketers to abandon the “one size fits all” approach to the black diamond group and come to understand that they have become segmented through rapid growth.
Members of the black diamond group could accurately be placed into the following four key categories:
• The mzansi youth, who are still living at home and studying towards their future (71% of mzansi youth are students, but surprisingly few plan to qualify as professionals, as their focus is more entrepreneurial);
• Start-me-ups, who are starting out in the working world and are in the process of accumulating key assets (over 80% are single and aim towards promotion to senior positions, while 92% of this section owns a mobile);
• Young families with young children (they account for almost 30% of black diamonds and are predominantly female – the majority are single parents, 40% are sole breadwinners and 30% still live with their parents and project their success through their children); and
• The established, who are the older, wealthier families (this segment accounts for over one million black diamonds and have the highest rate of property ownership – 66% are between the ages of 35 and 40 and married, while 85% have children at home).
“Black diamond women collectively have the strongest financial clout in the country right now, and are ignored at a marketer's peril,” says Maponga.
“Almost half of the women we interviewed said they earned over half of the household income, while over 80% said they were the main household decision-maker when it came to purchases.”
According to Maponga, 99% of black diamond women own mobiles, with two-thirds claiming they could not survive without them!
An encouraging 64% said the Internet was becoming more important in their lives. (Source: www.bizcommunity.com)
Over a third of the country's three million black diamonds now have Internet access, mostly through the workplace, while Internet cafés have become decidedly popular among the student segment.
Although lately the growth of this segment has slowed somewhat due to the economic downturn, it remains notably recession-resilient.
“It's a very stable middle class,” Maponga insists, explaining that within the black diamond group, the time for playing catch-up is over and they have begun to invest in the future in a sustainable manner.
About the concern that black diamonds may be in much debt, and that they have accessed their lifestyle through credit, Maponga is dismissive.
“We questioned respondents about whether they felt the strain of interest rates going up, but surprisingly only about 20% showed any concern. If credit were a problem, they'd have felt the pinch.” (Source: www.bizcommunity.com)
