South Africa’s Middle Class a New Target for Retailers

Soweto Mall

A rainbow nation of shoppers poured through the racks of fashion giant Zara’s brand new store, its first in South Africa, where the Spanish chain hopes to tap an increasingly diverse middle class.

With deliveries from Spain twice a week, the low-price retailer opened the store in November in a posh shopping mall in South Africa’s commercial hub, Johannesburg, where officials are already smiling over the response.

“This is a country with a very significant potential for us,” said Victor Herrero, a representative of the parent company Inditex, the world’s biggest fashion retailer. “There are 50 million people, and a middle class that’s growing.”

“There are many South Africans who travel, and who already know the brand. They have been to our stores in Europe or the United States,” he said.

Zara’s entry to the South African market follows the huge US chain Walmart’s 16.5 billion rand ($2 billion, 1.5 billion euro) takeover of Massmart, a South African retailer with nine wholesale and retail chains with 288 stores in 14 African countries.

Both are counting on the growing middle class, as more and more black South Africans overcome apartheid-era economic barriers and join the consumer culture.

On the continent overall, a third of the population can now be considered middle class due in part to firm economic growth, more jobs and a developing private sector over the last two decades, according to the African Development Bank.

These 313 million Africans, living above the poverty line but not among the wealthy, are considered a key factor in helping countries boost base growth more on domestic demand and less on exports, an AfDB report said.

The more stable African middle class — which spends four to 20 dollars a day — now “is more or less the size of the middle class in India or China”, counting some 120 million people, the report added.

In South Africa, Zara’s store illustrates the trend, with a clientele that is much more diverse than would have been the case a decade ago.

“I came here because I know Zara by reputation,” said Sibongile Mazibuko, an accountant who travelled the 35 kilometres (20 miles) from Soweto to check out the new racks.

“I am proud they chose to come to South Africa, it shows that our country is finally becoming a country like the others,” she said.

Mazibuko’s life is a South African success story, 17 years after the end of white-minority rule and the barriers that prevented blacks from participating in the formal economy.

About 39 percent of South Africans live below the poverty line, fixed at 419 rands ($53, 38 euros) a month. Overall unemployment is mired at around 25 percent, but for the white population, it is closer to six percent.

But over the last decade, the government’s Black Economic Empowerment programme has helped foster a growing middle class. About three to four million people — or 10 percent of the black population – are now considered middle class.

While the exact estimates vary, experts agree the number is growing and nearing the size of the total white population of 4.5 million, meaning South Africa has doubled the size of its consumer class.

That makes a big new market of people who shop in malls, read magazines… and rack up debts.

Parts of Soweto are now at the forefront of South African fashion.

“Soweto shows the future of what all townships will look like,” said Njabulo Ngcobo of the marketing department at the University of Cape Town, pointing to the new shopping centres and the satellite dishes that dot the roofs.

“These new state-of-the-art malls in townships have brought a lot of shops” that were never there before, he said.

“These shifts mean that marketers and business people have to grasp what is happening in South Africa now,” said John Simpson, director of the marketing department.

Zara has its eye on other South African cities, including Cape Town and Durban, said Herrero.

“We shouldn’t limit ourselves to Johannesburg,” he said, but did not mention a township among the store’s targets.