Africa’s quickly expanding middle class is an often extolled virtue of the continent and even more often mentioned reason for investing in the world’s (current) greatest investment opportunity. Average economic growth for Africa since 2000 has been around 5% a year, while the average inflation rate fell to 8% from an earlier high of 22%. This growth in combination with all sorts of other changes (social, political and in some cases even geographic) has meant that income levels on the continent have improved. The African Development Bank in 2010 estimated the size of the middle class to be 313 million people (34% of the total population), an impressive increase from the 1980s figure of 111 million (26% of the total population). By 2060 it is estimated that Africa will be home to a middle class of 1.1 billion (42% of the total population). The continent’s combined consumer spending is forecast to reach $1,4 trillion by 2020, up from $860 billion in 2008, and this means that currently 1 in every 10 Africans is a ‘solvent consumer’, one who can afford the latest smartphones, newest computers and dinners at the trendiest restaurants. The growth of the middle class has been so rapid in South Africa, Tunisia, Egypt and Morocco that domestic consumption became the largest contributor to growth in recent years.
All very impressive figures on the surface, however when you break this figure of 313 million it does lose its lustre a little…
‘Middle class’ is defined by the World Bank as those who spend between US$2 – 20 a day, and this range is based on the cost of living on the continent again based on calculations by the World Bank. I’m not sure about you but I’m certainly not happy with living off US$2 a day as an acceptable standard for our people. When you break down this rather large range we end up with 3 classes: a floating class earning US$2 – 4 a day and in danger of falling back into the ‘poor’ classification, a lower middle class earning US$4 – 10 a day and upper middle class earning US$10 – 20 a day.
Most of our middle class citizens sit in the floating class and while could afford a TV, fridge, cellphone or washing machine, could not afford all of these. So where am I going with this – this is supposed to be a blog about ‘Believing in Africa’ not doom and glooming it. Well the good news is that despite the size and nature of our middle class being oversold and under analysed in much media globally there is a (growing) proportion of the population with access to a disposable income. And yes, these people are buying fridges and TV’s and even dishwashers! They are attracting retailers from all over the world to meet our ever growing demand for the newest and most advanced products available. This is good news, not only for the retailers, but for local economies as a whole, who do still benefit even when the retailer base is out of country, never mind the quickly growing local industry also getting in on this action. If nothing else it is a pretty good measure of the number who are simply (or barely) surviving vs. those that earn above a mere subsistence level.
The really good news for me though is what else this means, because with an increasing middle class also comes increasing social changes. Middle class citizens globally are seen to make changes in their social, work, health, education decisions and investments as they move from poor to middle class. Middle class citizens have access to better and more education, health care, telecommunications and infrastructural resources such as electricity. Middle class citizens have access to banking services and loans which can help them to increase their economic standing. They are more informed and concerned about political happenings, human rights and quality of public services. Middle class citizens are much more likely to send their children to tertiary education institutions. All this comes with or perhaps as a result of having well-paid and most importantly steady jobs or even success in running their own business.
Even better news is that these are self-perpetuating changes that spread at an exponential rate. This means the greatest advantage of this growing middle class is its potential to increase its own size and positive influence on the rest of the economy simply by existing. When citizens can move beyond focusing simply on surviving our continent’s true potential can be released, and this I believe is the key to true and sustained development for our continent.
Africa Brains. 2011. ‘Africa’s new Engine: Middle-class consumers to drive prosperity’ http://bit.ly/wiM9eP
Essoungou, A. 2011. ‘Foreign investors eye African consumers’ http://bit.ly.yC6GNH
Hendrik, C. 2011. ‘Africa’s burgeoning middle class: The rise of the plebeians’ http://bit.ly/zhehkV
Provorst, C. 2011. ‘Africa’s burgeoning middle class brings hope to a continent’ http://bit.ly/y8G4RC
Ncube et al. 2011. ‘The Middle of the Pyramid: Dynamics of the middle class in Africa’ African Development Bank Publication
The China Post. 2012. ‘Africa’s middle class is growing but still vulnerable’ http://bit.ly/AtNx2s
The Economist. 2011. ‘Pleased to be bourgeois’ http://econ.st/x2ih6o