South Africa's middle class faces mounting pressure despite GDP growth

South Africa's middle class is under attack with rising food prices, rates and taxes  and ever increasing municipal levies that are forcing middle income household to the brink.

While Stats SA revealed that Gross Domestic Product (GDP) grew by 0.8% in the second quarter of 2025, some economist said this is not necessarily good news for the middle class.

“For the middle class, I'm afraid this is not good news. And it's not good news because the population is growing at approximately 1.5%. An economy that's growing less than 1% is just not keeping up with population growth," said economist Dawie Roodt.

“So I'm afraid, no, this is just not good enough. It is slightly better than I've expected, but we need to make some serious changes to all sorts of things in the economy before we can get economy growing at a rate that will support population growth. So, yeah, better than expected, but still not good enough.”

Municipalities are relying more and more on middle income households  to fund budget shortfalls by increasing rates and taxes and introducing a range of levies. In Cape Town this amount to R4800 a year in levies, which ratepayer organisations have now taken the City to court for.

Sandra Dickson from activist group STOP COCT said the relentless increases in food, fuel, electricity, and municipal tariffs mean households don’t feel any relief, even though the economy grew by 0.8%.

"This is underlined by members of STOP COCT complaining daily how difficult it is to make ends meet and to pay bills. The uncomfortable truth is that while government points to GDP growth as “progress,” ordinary South Africans still face a rising cost of living that outpaces the real benefits of that growth.

"Slowly, the working class is eroded and the pain of the cost of living outstripping GDP growth is daily reality for most South Africans."

Roodt said the numbers were slightly better than expected but far from adequate. “0.8% is faster than what I've expected. I expected 0.6 or so. 0.8 is better. Right across the board pretty much. It doesn't mean strong growth going forward. We need much, much stronger than this before we can get much stronger growth.”

He added that while household consumption expenditure has been positive for some time, it masks deeper pressures. “Household consumption expenditure has always been positive for some time, which suggests that the households are under pressure, certainly, but are not as bad as we expected previously."

Lester September, deputy chairperson of the Greater Cape Town Civic Alliance (GCTCA), said the middle class is actually shrinking, because of unemployment that reduces households to only one income earner.

"We are seeing increasing levels of unemploymen and low labour absorption rates in Cape flats communities. Levels of financial stress are compounded where their savings fund sometimes more than even two households."

He said high net worth individuals are getting away by paying very little in taxes, if any at all.

"We proposed long time ago, that the City should provide support to low income, and lower middle income households, by supplying them with water  and rolling out solar panels, to reduce household costs while increasing savings."

He said  by not creating and promoting inner city and inner suburb affordable social housing, the City of Cape Town is looking after the interests of high income households resulting in fiscal leak, while taxing the shrinking middle class has the opposite effect on these households.

The Cost of Living Report, that was released this week pointed out that  rising food prices remain a key concern—particularly for the middle class. A recent report highlights how price stickiness and widening retail margins in essential food items are dampening the benefits of economic growth for ordinary consumers.

Key staples like eggs, chicken, brown bread, sunflower oil, and white maize meal continue to strain household budgets. Price stickiness where retail prices fail to adjust in line with declining production costs—has become increasingly evident. For example, egg prices are still rising, despite industry recovery, while maize meal prices jumped from R38.48 to R43.04 by May 2025, even though maize prices fell with the new harvest.

Sunflower oil prices at the retail level also continue to increase, despite a drop in producer prices, indicating poor cost pass-through. Although IQF chicken shows stable margins and pilchards reflect responsible pricing, brown bread’s farm-to-producer price spread reached 77%, above historical norms.

Chief Economist James Hodge emphasizes that the Cost of Living Report is vital for identifying underlying economic pressures and potential anti-competitive practices.

"Without improved price responsiveness, rising food costs risk slowing consumer demand and undermining broader economic recovery."

North West University Business School economist Professor Raymond Parsons cautioned that growth is still below what is needed to meet national targets.

“The challenge now is getting the economy up to the GNU’s growth target of 3% in the medium term. GDP growth is still expected to be only about 1% for 2025 as a whole and is not good enough for SA’s urgent socio-economic needs.”

Economist Ulricht Joubert  said growth in the economy is always positive for people and for the consumer in general.

"It is good for employment, it's good for income, it's good eventually for consumption expenditure if there is more income into the pockets of people.”

Joubert highlighted the role of household and government spending in supporting growth. “Household consumption accelerated to 0.8% quarter on quarter from 0.5% in the first quarter. Government consumption also added to the growth on the consumption side, and inventories increased, which contributed to the overall growth of the economy in the second quarter.”

Joubert said policy measures have particularly supported the middle class. “I think that we could see further cuts in interest rates, which should alleviate the pressure on the overall consumer, the average consumer, especially in the middle income group.”

tracy-lynn.ruiters@inl.co.za

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