AFRICANGLOBE – The rise in Africa’s middle class has been over-hyped in recent years, but it is still a genuine phenomenon that is generating huge commercial and political opportunities, a new study says.
The analysis released on Tuesday by Standard Bank, a South African bank with operations across Africa, estimates that the African middle class has tripled in size over the past 14 years – and the boom is gathering speed.
The study analyzed 11 of the biggest economies in the region, accounting for about half of Africa’s population and GDP. Those economies have grown tenfold since 2000, reaching a collective GDP of more than $1-trillion today, compared with a growth of just 25 per cent between 1990 and 2000.
Using a more rigorous definition of “middle class,” the study concludes that earlier estimates were much exaggerated. But it still finds dramatic growth, from about 4.6 million households in 2000 to almost 15 million households today in the 11 focal countries, if the middle class and lower-middle-class categories are both included.
Over the next 15 years, this growth will continue to gain momentum, and a further 25 million households will become middle class and lower-middle-class households in those 11 countries, the study forecasts.
It says Nigeria is by far the biggest source of the new middle class in Africa, while several East African countries are lagging.
By 2030, there will be 12 million middle-class households in Nigeria alone, the study predicts.
“There is an undeniable and powerful rise in income across many of Africa’s key frontier economies, allowing the formation and strengthening of a substantial middle class,” the report says.
In addition to the business opportunities, this trend is also providing strong support for the “maturing” of political and economic institutions, potentially creating a “cycle of social, political and commercial gain,” it says.
The growth and size of Africa’s middle class has not been “adequately measured” until now, according to Standard Bank senior political economist Simon Freemantle, who wrote the report.
A landmark report in 2011 by the African Development Bank, which triggered years of debate and media attention, concluded that 300 million Africans were middle class.
But this estimate was highly inflated because it included millions of Africans who earn just $2 to $20 per day, Standard Bank concluded.
“In fact, such individuals would still be exceptionally vulnerable to various economic shocks, and prone to losing their middle-income status,” Mr. Freemantle said.
He opted for a more nuanced measure of living standards, based on a South Africa model and translated into equivalents for other countries. Households that consume more than $15 a day were considered to be lower middle class or middle class.
Most of these families are urban, headed by people with full-time or part-time jobs. More than 95 per cent own televisions, and they often shop at formal grocery stores or supermarkets, rather than informal markets.
Despite the rise in the middle class, 86 per cent of households in the 11 focal countries are still low-income, although this figure will decline to 75 per cent by 2030, the report said.
The 11 countries in the study are Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda and Zambia.
By 2030, the households in these 11 countries will be contributing $820-billion in annual consumption, the report says.
“While the scale of Africa’s middle class ascent has, we believe, been somewhat exaggerated in line with the at times breathless ‘Africa Rising’ narrative, there is still plenty of scope for measured optimism,” Mr. Freemantle said in a statement.
“Reliable and proven data should, if anything, spur more interest in the continent’s consumer potential.”
By: Geoffrey York