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New analysis by The Common Sense, using new car sales figures as a proxy for middle-class expansion, suggests that had South Africa maintained average economic growth of 5% a year from 2008 to today, its middle class could be roughly twice its current size.

Last month The Common Sense produced an estimate on the size of the South African middle class using data on medical aid coverage, home loans, and income taxpayers as proxies. That analysis suggested that around 15% of South Africa’s population qualified as broadly middle class. The three proxies essentially narrow in on the share of people who have a regular monthly income and access to formal financial services, and through those the creditworthiness to afford an expensive asset.

A similar proxy is new car sales because, again, the ability to buy a new car requires a formal monthly income, creditworthiness, and access to formal financial services. Tracking the number of new car sales in South Africa’s economy and projecting these based on historical growth rates is a useful way of estimating the expansion of the country’s middle class.

Between 1994 and 2007, South Africa’s rate of economic growth increased from 3% to 4% and then held at 5% for the final four years of that period. This sustained growth raised living standards and nearly doubled the number of people in employment. After 2008, however, the combined effects of the global financial crisis, the leftward lurch in government policy, and the state capture era saw economic growth slow sharply. Between 2008 and today the economy has averaged a growth rate of 1.1%.

One way to explore the implications of that is through new car sales. Purchasing a new vehicle is a significant discretionary expense that typically requires stable employment, access to credit, and confidence in future income. Given the extent of the debt incurred, such sales are also a useful means to get a sense of the expansion or otherwise of the middle classes. Put differently, the assumption can be made that only middle-class people buy new cars and the extent to which new cars are bought therefore tells you something about the size of the middle class.

Between 1994 and 2007, as the economy grew faster and faster, new car sales more than doubled, from roughly 200 000 to nearly 470 000 a year, before falling sharply in the wake of the global financial crisis. Sales never hit that high-water mark again, recovering to around 450 000 in 2014, and sit at around 400 000 a year today.

The Common Sense has previously produced projections of what would have happened in the South African economy had the rate of economic growth resumed its 5% trajectory in the aftermath of the 2008 financial crisis. Most emerging markets did recover their growth rates in the aftermath of the crisis and South Africa was one of very few exceptions that did not.

The Common Sense’s estimates, built around those 5% economic growth projections, are that new car sales might have reached about 870 000 by 2025, against the 422 000 actually sold. That projection is set out in the chart below.

The inference from the car sales data is that South Africa’s middle class, which roughly doubled in size between 1994 and 2008, would have doubled again between 2008 and today.