RECENTLY Nestle, the world’s biggest food company, cut 15% of its workforce in sub-Saharan Africa.
Cornel Krummenacher, its chief in the region, lit up quite a debate when he said, “We thought this would be the next Asia, but we have realised the middle class here in the region is extremely small and it is not really growing.”
It was the wake up call the sometimes euphoric view about the emergence of Africa’s middle class, that has been enthusiastically held up as a phenomenon of the region’s changing economic fortunes, needed.
So what do we know, and what don’t we about the African middle class? What is the substance, and what is the hype?
For starters, their spending habits, especially on consumables and luxuries, attracts a lot of attention and for good reason; they are – rightly so - unlike any other period in the continent’s history.
Nigeria’s oil-rich middle class is for example forecast to gulp down $1.5 billion of wine by 2017, unexpectedly propping up a global industry seen increasingly as on the wane.
Multinationals in such discretionary spaces report more enthusiasm for their products, and consequently new trends. Coca-Cola chief for EuroAsia and Africa Nathan Kalumbu told Mail & Guardian Africa during the early June World Economic Forum on Africa meeting in Cape Town, that choice is now a big factor in driving consumption trends.
“As people earn more money, they demand different products and as companies we need to be very sensitive to that dynamic. As African consumers are getting more and more wealthy, as they are getting more educated, they are demanding more and more choice.”
Coca Cola’s Kalumbu.
The debate over just who constitute the middle class has also been rather fierce, especially after the African Development Bank’s (AfDB) near-seminal (and some say conservative) 2011 report, and follow up surveys that placed a third of the continent’s 1.1 billion people in this category.
Such debates are distracting, Donald Kaberuka, the outgoing president of the bank told Mail & Guardian Africa last month.
A dynamic middle class that rises with the sea increases domestic demand, the diversity of the economy, the resilience of the economy, and they also stabilise the politics of a country as well.”
Measures of the African middle class are now moving towards chronicling their assets instead, rather than just their increased income and consumption.
What is not in doubt is the role of the middle class in realisation of the much-sought after inclusive growth, promoting institutional reform and democracy, and advancing social progress, innovation and entrepreneurial drive.
But it also not homogenous—country specific conditions such as ethnic fractures and size of government also affect it significantly.
Mail & Guardian Africa dug some more into this important class further, and came up with some interesting findings:
1: The role of education plays a major part in explaining the assets held by the African middle class. Studies find that the more educated you are, the more you are likely to be in the middle class, and to either remain there or transition into the upper class. This is why African governments are urged to expand education opportunities. There is a caveat of sorts however—this so-called “return” on education declines with the supply of more educated people. But it is still a nice problem to have.
2: Africa is renowned for its cultural diversity. But generally (though not strictly), countries that have more homogenous ethnic make-ups and consequently stronger social ties and capital tend to have a bigger middle class, helping explain the difference between Egypt and say, Ghana or Kenya.
3: There is often a link between governance and the middle class. More social goods such as education and health convey more numbers into the middle class. And more of the middle class help agitate for better governance.
But the AfDB’s most recent survey found that North and Central Africa, which rank in the lower rungs of international governance rankings, had the highest numbers of the middle class - Central Africa buoyed by Gabon’s middle income status, while the Republic of Congo isn’t doing too badly either. Southern Africa, often lauded for stable governments was third, while East Africa, now the fastest growing in the region, held the wooden spoon. Seemingly, nothing is quite clear-cut in Africa. Wealthy Nigerian village chiefs meet for breakfast below a painting of a polo match at Le Meridien Hotel in Port Harcourt: We ain’t seen nothing yet. (Photo/Jacob Silberberg/Getty Images).
4: In Egypt, where according to its new Demographic Health Survey, 9% of its 83.7 million people own a car, and 97% are connected to a satellite dish and have a refrigerator—among the kind of durable goods that often differentiate the middle class, the income inequality between the urban and rural households on newly-constituted wealth indices is considerable.
Some 90% of its urban population is found in the two highest wealth quintiles, (36% in the upper middle) compared to just 11% of its rural population.
It is a trend replicated elsewhere: In the Gambia, where less than one in four own a television set, 4% of the rural population falls in the upper middle class, compared to 36% of the urban population.
5: There is also a shift in international marketing focus to the younger middle class populations.
Young Africans under the age of 20 already account for half of the population of the continent, and those between 16-34 years account for nearly two-thirds of the continents billion-dollar worth of consumer spending, either directly or by influencing their already middle-class parents.
The potential is enormous: By 2050, Africa’s under-18 population will increase by two-thirds, reaching almost 1 billion by the middle of the century.
6: Nigeria, Africa’s largest economy and its most populous, is projected to hit its “economic sweet spot” in 2025, at which point significant numbers of its people will have begun earning more that US$10 a day, and the size of the resulting middle class is directly proportional to economic growth, though this could be hostage to external factors, such as volatile markets and commodity prices.
But the net result will be a complete shift in the balance of regional geopolitical power, and possibly birth the continent’s first proper “superpower”.
7: By 2050, an Africa that is “emergent” or better at baking and redistributing its wealth, as is currently happening in a host of Asian and Latin American countries, would have tripled its share of global GDP, allowing 1.4 billion Africans, or four times the current count, to join the middle class, and helping temper the social unrest of a burgeoning continental population—which by that year will double to 2.4 billion.