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TRANSCRIPT
Copyright © 2014 Eighty20
Lower LSM’s: facilitating survival priorities
November 2015
This presentation is incomplete without the accompanying oral commentary
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By way of introduction, Eighty20 is an analytics consulting company based in Cape Town
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Agenda
A closer look at LSM
Expenditure
According to AMPS 2014 there are 15.2 million households in South Africa. In 2014 just 6% of households were in LSM’s 1 or 2 and a further 19% were in LSM’s 3 or 4
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2014B Black Coloured Indian White
LSM 1-2 98% 2% 0%* 0%
LSM 3-4 98% 2% 0%* 0%*
LSM 5-6 90% 7% 1% 3%
LSM 7-8 64% 14% 4% 18%
LSM 9-10 36% 11% 8% 46%
TOTAL 78% 8% 2% 12%
LSM 1-2 LSM 9-10LSM 3-4 LSM 5-6 LSM 7-8
6% 19% 39% 21% 15%
2014
Thousands
Percentage
868 2,3603,1375,9882,883
Source: AMPS 2014B
HOUSEHOLDS
In 2004 around 2 million households were in LSM’s 1 or 2 (21% of households)
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LSM 1-2 LSM 9-10LSM 3-4 LSM 5-6 LSM 7-8
21% 28% 27% 12% 13%
2004
Thousands
Percentage
2,083 1,3211,1762,7372,825
2004 Black Coloured Indian White
LSM 1-2 98% 2% 0% 0%
LSM 3-4 96% 4% 0%* 0%*
LSM 5-6 78% 13% 3% 6%
LSM 7-8 35% 17% 9% 40%
LSM 9-10 9% 7% 6% 79%
TOTAL 73% 8% 3% 17%
Source: AMPS 2004
HOUSEHOLDS
By 2010 the number of households in LSM’s 1 or 2 had decreased to less than 1.5 million households (11% of households)
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LSM 1-2 LSM 9-10LSM 3-4 LSM 5-6 LSM 7-8
11% 23% 35% 17% 14%
2010
Thousands
Percentage
1,445 1,914 2,312 4,657 3,041
2010A Black Coloured Indian White
LSM 1-2 98% 1% 0% 0%*
LSM 3-4 97% 3% 0%* 0%*
LSM 5-6 86% 8% 1% 6%
LSM 7-8 50% 15% 5% 30%
LSM 9-10 24% 9% 8% 60%
TOTAL 74% 7% 2% 16%
Source: AMPS 2010B
HOUSEHOLDS
In 2014 less than 900 000 households were in LSM’s 1 or 2 (6% of households)
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2014B Black Coloured Indian White
LSM 1-2 98% 2% 0%* 0%
LSM 3-4 98% 2% 0%* 0%*
LSM 5-6 90% 7% 1% 3%
LSM 7-8 64% 14% 4% 18%
LSM 9-10 36% 11% 8% 46%
TOTAL 78% 8% 2% 12%
LSM 1-2 LSM 9-10LSM 3-4 LSM 5-6 LSM 7-8
6% 19% 39% 21% 15%
2014
Thousands
Percentage
868 2,3603,1375,9882,883
Source: AMPS 2014B
HOUSEHOLDS
Before we move on, what is a household? By and large household surveys define a household as a group of people who share a dwelling AND financial resources
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HOUSEHOLD COMPOSITION OF SOUTH AFRICAN HOUSEHOLDS: 2011 (13 112 216 Households)
EXTENDED FAMILY AND/OR NON-RELATED
41%
NUCLEAR FAMILY21%
ONE PERSON18%
COUPLENO KIDS
9%
Source: IES 2010/11
SINGLE PARENT
11%
23% 41% 8%7% 20%
Higher LSM households are more likely to be nuclear families, while lower LSMs are more likely to be extended families
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EXTENDED FAMILY AND/OR NON-RELATED
NUCLEAR FAMILY ONE PERSON COUPLENO KIDS
SINGLE PARENT
Source: IES 2010/11
44% 14% 24% 13% 5%
38% 29% 13% 9% 11%
46% 18% 17% 12% 7%
44%Nuclear Family:
10%
One Person:27%
Single Parent:13%
Couple, no kids:
7%
HOUSEHOLD COMPOSITION OF SOUTH AFRICAN HOUSEHOLDS BY LSM(13 112 216 Households)
LSM 9-10
LSM 7-8
LSM 5-6
LSM 3-4
LSM 1-2
Extended: Nuclear Family: One Person: Single Parent:
Couple, No Kids:
To understand the shifts in LSM it is useful to review the basis on which LSM is determined. The LSM is a Living Standard Measure developed by SAARF
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LS
M 1
Rural Phone-less
TV-less House-less
Purchase Two
For household
LSM 3
LUCKY BREAK!
You get a:
RDP House
Move to
LSM 4
For household
LS
M 5
Purchase Two
Get a hi-fi, a TV and DVD player. You made it to:
LSM 6
Get a
LOAN
Purchase household appliances
LSM 7
Employ a:
Do
me
sti
c
LSM 8 (low)
Eighty20’s
LSM
Board Game
the city
Build a shack
LSM 2
Hitch a ride to
Get a:
And a computer
LSM 9But don’t get robbed or you could end up in LSM 5 overnight!
Have a look at the LSM calculator on our website to find out which LSM you fall into. Scroll right to the bottom of the home page to find the LSM calculator
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http://www.eighty20.co.za/lsm-calculator/
The subsidy housing programme which provides free houses to qualifying recipients has had a major impact on living standards
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The number of households living in decent housing increased by over 3.5 million between 2001 and 2011. Over that time the private sector built around 660 000 units
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SHACK NOT IN BACKYARD
1.4 million 1.25 million
SHACK IN BACKYARD
460 000 710 000
TRADITIONAL DWELLING
1.65 million1.1 million
FORMAL DWELLING
7.2 million 10.7 million
Source: Census 2001, Census 2011, Stats SA Building Statistics. Note: Excludes ‘Formal other’ and other therefore will not sum to 100%Note: Formal dwelling: House/brick/concrete structure on a separate stand or yard, Town / cluster / semi-detached house, Flat or apartment* Includes residential buildings: dwelling houses < 80 m2, dwelling houses ≥ 80 m2 and flats/ townhouses completed 2001 - 2011
2001 2011
4%
12%
15%
64%
5%
9%
8%
74%
CAGR
4.5%
-1%
-3.7%
4.1%
3.5 MILLIONMORE HOUSEHOLDS LIVING IN DECENT
HOUSES
Housing formalisation impacts directly on access to services …
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Source: Census 2011 Statistical release – P0301.4 (Census 2001, Community Survey 2007, Census 2011)Note: CAGR - compound annual growth rateNote*: “What is the main type of toilet facility used by this household?” – Flush toilet (connected to sewerage system) or Flush toilet (with septic tank)
FLUSH TOILET*
8.7 million60%
7.2 million58%5.8 million
53%
2001 20112007
PIPED WATER (TAP) INSIDE DWELLING OR INSIDE YARD
6.9 million62%
8.7 million69%
10.6 million73%
ELECTRICITY USED FOR LIGHTING
7.8 million70%
10.0 million80%
12.2 million85%
2.9 MILLIONMORE HOUSEHOLDS
CAN FLUSH
3.7 MILLIONMORE HOUSEHOLDS
CAN WASH
4.4 MILLIONMORE HOUSEHOLDS
CAN SEE IN THE DARK
IMPROVEMENT FROM 2001
Housing formalisation has an impact on household expenditure
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Despite the expense of building and the increase in living costs almost everyone was happy to have a house and considered it an improvement over their previous living standard. The increase in expense was therefore traded off against the improvement in quality of life, including
physical and emotional aspects. - Housing the Household: Gender and Empowerment in South Africa, Sophie O. M-F. Mills, Thesis submitted for Ph.D., 2004, Department of Geography and Environment, London School of
Economics and Political Science
“You need something a bit nice in a house, it’s not like a shack” - Mali,
married, aged 47
“I think it will be cheaper after a year or two years, because I’m still doing the house, inside and outside.
Inside I like to put the face stone, also to put the ceiling, even change the stairs. I can build also on top of the kitchen, put a yard here.” - Roger, married, aged 36
LSM is also a function of the cost of durables. In many categories entry level products are increasingly affordable and access to credit has a material impact
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LSM 4
Free
LSM 5 LSM 6 LSM 7
Get a subsidised house if you live in a metro
2 Radios
2 Radios
2 Cell phones
DVD player
Hi-Fi Colour TV
Microwave
FreezerLaptop
Fridge freezer
Stove
2 Radios
2 Cell phones
DVD player
Hi-Fi
TOTAL COST OF APPLIANCES TO MOVE INTO HIGHER LSM GROUP
Note: Appliance prices from Game (05/08/2014): CD player R499; Cell phone R149; DVD player R279; Hi-Fi R499; Colour TV R899; Microwave R599; Freezer R2 099; Laptop R3 599; Fridge freezer R2 099; Stove and oven R1 989
R998 R2 973 R13 358
R 150 000
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Median monthly household
incomeR 1 100 R 1 400 R 1 500 R 2 400 R 7 900 R 12 200 R 30 700R 18 700R 4 000R 1 900
Source: IES (Income and Expenditure Survey) 2010/11Note: The line between the colours of the boxes indicates the median. The box comprises the middle 50% of households. The whiskers show the 1st and 99th percentile
R 125 000R 83 000
Mo
nth
ly h
ou
se
ho
ld in
co
me
MONTHLY HOUSEHOLD INCOME BY LSM(2011, nominal incomes)
IES data can be used to find the household income distribution across LSM categories
R 0
R 10,000
R 20,000
R 30,000
R 40,000
R 50,000
R 60,000
R 70,000
LSM 1 LSM 2 LSM 3 LSM 4 LSM 5 LSM 6 LSM 7 LSM 8 LSM 9 LSM 10
2014 Rands R 1 347 R 1 714 R 1 836 R 2 938 R 9 672 R 14 937 R 37 587R 22 895R 4 897R 2 326
However, household income is not the best indicator of income because of varying household sizes
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36%
15%
15%
17%
16%
33%
15%
15%
18%
19%
25%
14%
15%
19%
27%
CENSUS 2011CENSUS 2001CENSUS 1996
HOUSEHOLD SIZE
One
Two
Three
Four
Five or more
HH SIZE
“A household consists of a single person or a group of people who live together for at least four nights a week, who eat from the same pot and who share resources “ – Stats SA
Source: Census 2011; Statistics South Africa: Achieving a better life for all
A better measure is income per capita. According to the 2010/11 IES there are 13.1 million households in South Africa. Roughly one quarter have a per capita income of less than R20 per day
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HOUSEHOLDS IN SOUTH AFRICA: 2011
Source: IES 2010/11Note: Per capita income is calculated as household income divided by the number of people in the household. Children under 10 count as half a person. Income has been adjusted where regular expenditure exceeds income
Population (households)
Income per capita per day
[R20, R80)
R280 +
[R80, R280)
< R20
11%1.4 million
24%3.1 million
41%5.4 million
24%3.2 million
By overlaying LSM onto the income pyramid we can see that just under one in five households at the bottom of the pyramid are in LSM’s 6 or 7
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HOUSEHOLDS IN SOUTH AFRICA: 2011
Population (households)
Income per capita per day
[R20, R80)
R280 +
[R80, R280)
< R20
11%1.4 million
24%3.1 million
41%5.4 million
24%3.2 million
1 - 3 4 - 5 6 - 7 8 - 9 10
34% 48% 18%
18% 39% 37% 5%
6 22% 35% 28% 10%
4% 16% 38% 41%
LSM GROUP:
Source: IES 2010/11Note: Per capita income is calculated as household income divided by the number of people in the household. Children under 10 count as half a person. Income has been adjusted where regular expenditure exceeds income
1%
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Agenda
A closer look at LSM
Expenditure
10%
17%
21%
27%
22%
12%
15%
20%
19%
18%
40%
28%
13%
7%
16%
2%
3%
10%
13%
9%
4%
4%
7%
9%
7%
11%
9%
5%
3%
6%
2%
2%
4%
5%
4%
3%
4%
4%
4%
4%
1%
2%
4%
4%
3%
14%
15%
12%
10%
12%
Transport Housing, water, electricity, gas and other fuels
Food and non-alcoholic beverages Health
Insurance and other financial services n.e.c. Clothing and footwear
Recreation and culture Communication
Education Other*
The distribution of expenditure varies by income. Food accounts for 40% of total expenditure on average in BoPhouseholds. Clothing accounts for 11% of expenditure
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TOTAL
Source: IES 2010/11Note: Income has been adjusted where regular expenditure exceeds income. Excludes imputed rentals for housing; * Other includes: Restaurants and hotels, Personal care and effects, Social protection and other services n.e.c., Alcoholic beverages, tobacco and narcotics, Furnishings and household equipment, Other unclassified expenses; Note: Health includes medical insurance and medical aid contributions; Housing includes goods and services for routine household maintenance
R280+
[R80, R280)
< R20
DISTRIBUTION OF CONSUMPTION EXPENDITURE FOR ALL HOUSEHOLDS: 2011(By daily per capita income)
[R20, R80)
Households with a per capita income of less than R20 per month account for 14% of total expenditure on clothing in South Africa
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Remember Maslow?
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MASLOW’SHIERARCHY OF NEEDS
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Rather than a tale of greed, the history of luxury could more
accurately be read as a record of emotional trauma. It is the legacy of
those who have felt pressured by the disdain of others to add an
extraordinary amount to their bare selves in order to signal that they
too may lay a claim to love.
STATUS ANXIETY, ALAIN DE BOTTON
86%82%
70%
58%
51% 50%
43%
34% 33% 32%30% 29% 29% 28%
25%21% 21% 21% 19%
16%
9% 7%4%
While basic items dominate the food basket for the poor there is discretionary spend
Source: IES 2010/11; Excludes imputed rentals for housingNote: Income has been adjusted where regular expenditure exceeds incomeNote: ‘Baked treats’ include rusks, biscuits, crackers, cakes, tarts and other baked goods; ‘Sweets’ include toffees, glucose sweets, health bars and other sweets; ‘Salty snacks’ include potato crisps, cheese curls, corn chips, and popcorn
BOP HOUSEHOLDS IN SOUTH AFRICA: 2011(% of BoP households that have spent on certain items in the past year)
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Essentials Treats
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FAST FOOD: PERSONALLY BOUGHT FOOD FROM THIS OUTLET IN PAST 4 WEEKS(Adults 16+ in BoP)
Source: AMPS 2013B, Eighty20 analysis
Almost 40% of the BoP have purchased from KFC in the past month – significantly higher than any other fast food chain
KFC
McDonaldsWimpy
Chicken LickenHungry LionNandos
Pie CityKing Pie
38%
8%6%
5%3%
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The brand of maize meal that is consumed most often depends on household income. This is also the case for choice of potato chips or savoury snacks, but not for beer, bread and rice
<R20
[R20, R80)
[R20, R140)
[R140, R280)
R280+
BEER
WHICH ONE BRAND DO YOU CONSUME OR BUY MOST OFTEN?(Adults 16+, By daily per capita income)
BREAD RICE MAIZE MEAL POTATO CHIPS / SAVOURY SNACK
Source: AMPS 2013B, Eighty20 analysis
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“If we stop thinking of the poor as victims or as a burden and start recognising them as resilient and creative
entrepreneurs and value conscious consumers, a whole new world of opportunity will open up”
CK Prahalad