Africa’s middle class shrinks a little

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The middle class in Africa may be smaller than previously indicated, a new report suggests.

It debunks a 2011 study by the African Development Bank (AfDB) that indicated more than 300 million people on the continent could be considered “middle class”.

Speaking at the release of a new report called “Understanding Africa’s Middle Class”, Simon Freemantle, senior political economist at Standard Bank, said this would translate to roughly one in three Africans in the middle class.

However, the methodology underpinning the AfDB report is problematic since it suggested anyone with daily per capita consumption of between $4-$20 (R42-R213) was middle class.

A consumer or an individual with per capital consumption of $2-$3 a day is nowhere near what one could consider being middle class, Freemantle said.

The growth in Africa’s middle class is a significant attraction for many companies looking to invest, but this growth does not merely offer a new rising consumer base companies can sell products to.

It suggests that, in specific African markets, prosperity is finding its way into the broader population, bringing with it a host of political and social spin-offs impacting on consumer spending patterns and investment opportunities.

Collectively, the 11 countries reviewed had a gross domestic product (GDP) of around $120 billion in 2000.

This is estimated to grow to more than a $1 trillion by the end of the year, which represents between 75%-80% of the GDP of sub-Saharan-Africa (excluding South Africa), Freemantle said.

The countries included Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda and Zambia.

These countries are fast-growing and are the main targets of South Africa’s corporate expansion.

Using the Living Standards Measure (LSM) as a frame of reference, the new report segmented households in these countries into four consumption bands – Low Income, consuming less than $15 a day; Lower Middle Income, consuming $15-$23 daily; Middle Class, consuming $230-$115 a day; and Upper Middle Class, consuming more than $115 a day.

According to the report, the 11 countries had a total of:

> 1.4 million lower-middle-class and 1 million middle-class households in 1990;

> 3 million lower-middle and 1.6 million middle-class households in 2000; and

> Almost 15 million households in these two categories combined.

The combined middle-class and lower-middle-class households are expected to rise to more than 40 million by 2030.

The report highlights that a considerable number of consumers still lived on or below the poverty line (those with a daily income of $2 or less).

“In total, of the almost 110 million households in the 11 focal countries, 94 million (86%) fall within the low-income band,” the report states.

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