Africa’s Growing Middle Class

Africa Growing Middle Class
Africa’s growing consumer class offers huge potential

AFRICANGLOBE – Simon Kaheru takes out his smartphone to photograph his breakfast and send the image to his wife. On his plate is a reworking of the Ugandan street snack known as “the Rolex”, a chapatti rolled with egg and vegetables. This Rolex, stuffed with avocado and served up at a trendy cafe popular with young Ugandans, costs much more than the standard type sold at roadside kiosks. “It’s an aspirational Rolex,” quips Simon, a sharp-suited journalist turned social-media entrepreneur. “A Rolex for the new middle class.”

Across Kampala, in a more ramshackle quarter of the city, Faisal is also beginning his working day. Faisal was a teenager when he left his village to look for opportunity in the capital. Now in his early 30s, he is proud of how far he has come. He has a relatively stable job as a driver, with an income that means his family can afford a fridge, a TV and other electronic goods in their modest home. All of his dreams are invested in his children; their education is a priority. “If they have a good education their lives will be much easier than mine,” he says. “That’s what I always tell them.”

Two years ago the African Development Bank estimated that Africa’s middle class reached nearly 350 million in 2010, amounting to a third of the continent’s population, or about the same size as its Chinese and Indian counterparts. That figure compares with about 126 million, or 27 per cent, of the population in 1980. But the much-debated study defined the middle class as people whose daily spending ranges from $2 to $20, a band so broad it includes both Simon and Faisal, though the realities of their daily lives are very different.

The bank divided its definition of middle class into three categories: those spending between $10 and $20 a day; those spending between $4 and $10 a day; and a more vulnerable “floating” class that could tumble back into poverty, spending between $2 and $4 a day. The bank says about 60 per cent of Africa’s middle class falls into the last category.

Earlier this year Citi’s Africa economist, David Cowan, challenged the buzz surrounding the idea that Africa has a growing middle class created by a swell of people moving out of poverty into formal employment while developing the skills needed to transform their economies. “I don’t believe that there is an African middle class,” he said. “There is an emerging wealthy elite in Africa and a strong consumer group, which is growing quite steadily,” with, ideally, $5,000-$7,000 of disposable income a year, which is $14-$19 a day.

That expanding pool of consumers, a diverse range that includes traders, cattle-ranchers, tech developers, accountants, teachers, hairdressers and taxi drivers, is helping to power Africa’s economic boom. In April the World Bank said consumer spending accounted for more than 60 per cent of Africa’s buoyant growth.

Multinational companies are now looking to Africa, seeing a lucrative new market for mobile phones, cars, electronics, clothing and food, among other products, in addition to financial services and entertainment, as millions across the continent aspire not just to escape poverty but also to become prosperous.

This is happening as global demand for African commodities, fuelled by China in particular, has boosted growth and investment in badly needed infrastructure. The World Bank forecasts that foreign direct investment in Africa will reach $54 billion by 2015, up from $37.7 billion in 2012.

Some of that interest is coming from Ireland. At the recent Africa-Ireland Economic Forum at UCD Michael Smurfit Graduate Business School, Minister for Foreign Affairs and Trade Eamon Gilmore spoke about the opportunities presented by Africa’s economic rise and its burgeoning middle class. Ireland, he argued, must move away from a donor-recipient relationship with Africa towards one of partnership and collaboration.

According to the Irish Exporters Association, exports of Irish goods and services to Africa reached €2.7 billion last year, an increase of 200 per cent since 2009. The association expects that figure to rise to €24 billion by 2020.

 

By: Mary Fitzgerald