Results of a new study by the African Development Bank (AfDB) show that the continent’s middle class has increased in size and purchasing power. Robust economic growth over the past 20 years has helped to lift many households out of poverty and into the middle class.
In 2010, Africa’s middle class, defined as those with a daily expenditure of between US$4 and $20 a day, stood at just over 120 million, or 13.4% of the population. The report says that if remittances from Africans living abroad, which usually go to households with per capita income levels of less than $4 per day, are taken into account, a sizeable segment of the poor group is likely to move into the lower middle class category of $4 per day, thus making the estimate of 300 million for Africa’s middle class population more plausible.
North African countries have some of the largest middle classes on the continent. Tunisia ranks top with 45.6% of its population falling into the middle class category, followed by Gabon (37.8%), Egypt (31.6%), Botswana (29.3%) and Algeria (27.3%). At the bottom end, Liberia is the country with the smallest middle class – only 1.9% of its total population earns between $4 and $20 per day.
The study notes that there are a number of characteristics that differentiate Africa’s middle class from the poor and rich. Most of those belonging to the middle class do not derive income from farming and rural economic activities, and are more likely to have salaried jobs or to have small businesses. Africa’s middle class generally lives in urban centres or along the coast. They have fewer children than the poor and spend more on their offspring’s schooling and nutrition.
A strong middle class bodes well for Africa’s economic future. “The rise in class status is largely correlated with a rise in progressive values that are highly conducive to strong economic growth. In particular, the middle class are more likely to have values aligned with greater market competition and better governance, greater gender equality, more investment in higher education, science and technology than those of the poor,” says the report.
African countries looking to grow the size of the middle class need to boost investment in infrastructure. “Countries with much more developed infrastructure tend to have larger middle class populations,” notes the report. “This could be largely due to the fact that such countries have a more competitive economic environment that attracts investment and helps to create more stable employment and income-generating opportunities taken up by the middle class.”
Despite Africa’s growing middle class, income inequality on the continent remains very high. In 2008, about 100,000 Africans had a net worth of $800 billion, or about 60% of the continent’s gross domestic product (GDP).
The report says that with the right policies in place, Africa can continue and even accelerate the reduction of poverty over the next 20 years. Ethiopia, Nigeria and South Africa are expected to provide the largest numbers to the new middle class in the coming years.