Tracking growing Gauteng black wealth through LSMs

The most widely used marketing segmentation tool in SA, the SU-LSM cuts across race and other outmoded techniques of categorising people, and instead groups people according to their living standards, using criteria such as degree of urbanisation, access to services and ownership of cars and major appliances. It divides the population into 10 groups, with the lowest group, SU-LSM 1 having the lowest living standards, and SU-LSM 10 having the highest. Income is not included in determining these groups, because SAARF has found that income is not stable as a wealth indicator - if a person loses his or her job, he or she often loses income overnight.

Better differentiation

Two decades ago, only 13 variables were used to determine people's living standards. As society has developed, so has the LSM. Today, the SU-LSM relies on 29 variables, and has two additional top-end groups compared to the early LSM, to allow for better differentiation amongst the wealthy. Having a computer at home, a DVD player, and a DStv subscription are some of the new variables used by the SU-LSM to divide up society.

SAARF's SU-LSMs show that the standard of living for Gauteng's black population has improved dramatically since 2001. The percentage of black Gautengers classified as SU-LSM 4 for instance, has fallen from 21.6% in 2001 to 9.4% in 2007. Likewise SU-LSM 5 has declined, from 25.9% to 17.3% while SU-LSM 6 increased from 24.9% to 32.1%.

The upper middle classes have grown significantly. In 2001, only 8.6% of blacks living in Gauteng fell into SU-LSM 7. Today, 16% are in this grouping. SU-LSM 8 has grown from 4.6% to 8.7%, up 89%, while SU-LSM 9 has expanded from 1.5% to 6.7%, up by an astounding 347%. There is still much growth to be done in SU-LSM 10, although this grouping grew by 214% from 0.7% to 2.2%.

The SU-LSM, however, isn't the only source of information on AMPS which can assist in tracking the history of the developing wealth of Gauteng's black community. It is also possible to cross-reference the LSM data with other demographics and information collected in AMPS to find out how this market has developed in other areas.

Income has grown substantially

Income, for instance, has grown substantially since the start of the new millennium. In 2001, 3.3% of Gauteng's black households earned between R10 000 and R15 999 a month. Today, 13.5% fall into this bracket. The top earning households have also mushroomed, with 8% of Gauteng's black households earning more than R16 000 a month, up 471% from only 1.4% seven years ago.

Other indicators which can be taken as proxies for wealth have also grown substantially since the new millennium. One such indicator is people's reading of magazines and newspapers. Five years ago, 36.6% of Gauteng's black population read a daily newspaper, a figure which has since grown to 54.6%. Magazine readership amongst this market has risen from 40.0% to 45.4% over the same period. A look at a title such as Business Day, positioned at the upper end of the market, shows that just over 56% of its black, Gauteng readers were in SU-LSM 8-10 in 2003, while today almost 65% are in this wealth bracket.

Data from AMPS

To these indicators of increasing wealth, one can also add the following data taken from AMPS:

• Vehicle ownership is up, from almost 11% in AMPS 2001, to just over 15% in the latest release.
  
• Only about 0.2% of black Gautengers in SU-LSM 4-5 had a DVD player in 2002. Today, 28.9% do. Just over 3% of SU-LSM 6-8s had DVDs, compared to 71.4% currently.
  
• AMPS 2001 saw 1.4% of SU-LSM 4-5 buying jewellery - that figure is 4.8% today, according to AMPS 2007B. In SU-LSM 6-8, 4.2% of people bought jewellery, now up to 7.8%.
  
• AMPS also has information on banking, insurance and financial behaviour. Thus, the growing wealth of black people in SU-LSM 8 is seen in the rise in the use of credit cards, which more than doubled from 2% in AMPS 2001, to 4.1% in AMPS 2007B.

“The clear and substantial progress which has been made by the black community, not limited to Gauteng, has been achieved in a relatively short time,” says SAARF CEO, Dr Paul Haupt. “Many of these changes have been nothing short of astounding. In the print media arena for instance, there is virtually not a single title left that can still be described as a ‘white' publication. The percentage of black readership in many titles is a very clear indication of the fundamental change which has taken place in South African society.”

The Top 5 radio stations listened to by black, middle to upper class Gautengers

(AMPS 2007B)

The Top 5 TV channels viewed by black, middle to upper class Gautengers

(AMPS 2007B)

The Top 5 brands purchased by black, middle to upper class Gautengers

(AMPS 2007B)