Over the past decade, consumption in Africa grew more than in India or Brazil; by 2015, 100 million households are expected to have an annual income greater than US$3,000. During a session at the recent World Economic Forum on Africa, held in Addis Ababa, experts discussed how the continent’s emerging middle class will transform economies and societies. Here are the highlights from the session.[hidepost=9][/hidepost]
A lack of data and an accepted definition of the African middle class make it difficult to assess how big it actually is. There is no doubt, though, that it is burgeoning and changing the face of urban areas on the continent. It seems to number between 200 million and 400 million people, or around 100 million households, depending on various “guesstimates”.
Income levels are put at anything from $4 a day to $20 a day. The middle class in the US, for example, is bracketed at a much higher income level than the middle class in Ethiopia, where some commentators say it earns $200 to $400 a month. The Nigerian government estimates that the country has 67 million people, or 40% of the population, in its middle class. Many of these will be at a very different level from the “black diamond”, highly aspirational and high-spending phenomenon in South Africa.
Rwanda’s middle class is categorised as the one million people, or 12% of the population, who have been lifted from base poverty in the past decade and a half through government-driven initiatives. Clare Akamanzi, chief operating officer of the Rwanda Development Bank, said this group of people is defined by having personal independence through disposable income and dignity as a result of not being dependent on aid. A significant number of rural people have achieved middle class status as a result of the state’s “One Cow per Family” initiative, in which families were donated cows for dairy purposes, had to donate the first calf to another needy family, but could keep the second offspring. Thousands of families have lifted themselves into the entrepreneurial space from this single cow starting point.
Tenbite Ermias, head of sub-Saharan Africa at Boston Consulting Group, noted that the middle class is far from homogenous and should be thought of in segments. He postulated dividing it into “strivers” – people recently emerged from poverty and buying packaged and branded essential goods for the first time – and “spenders” – people who are more consumer savvy and use disposable income on things such as cars and technological goods. Even within these divides there are differences, with spenders not slavishly following brands but looking for content-rich value propositions.
Sylvester Chauke, chief architect of DNA Brand Architects, said elements within the middle class are not only preoccupied with spending money but also seek life fulfilment on a sophisticated, “emotional health” level. This aspiration has created “an energy around changing the continent”.
However, potential problems lurk. For one, increased aspirational purchasing by this newly enriched and empowered sector carries the potential for overspending and significant numbers of people becoming over-geared in their personal lives. The virtues of savings, on both personal and national economic levels, might be forgotten and abandoned in the rush to buy. Ermias believes more affluent people tend to think more about family welfare and the future of their children and this will moderate their behaviour. He described it as an “internal barometer” for financial matters. In South Africa, this threat has been recognised and the Consumer Protection Act is intended to not only protect people from unscrupulous merchants but also from their own financial profligacy.
Another potential hazard is a loss of “values” in the pursuit of wealth and extravagant consumerism. However, some panel members said education and more sophisticated working environments also tend to inculcate worthy values and moderate behaviour. Success in life makes people more society-oriented and less selfish.
The middle class tends to be a critical group, not only about service levels in commerce and government, but also on a political policy level. Productive use can be made by governments of this critical, discerning characteristic – by actively engaging it rather than leaving it to snipe from the sidelines via social media.