The Middleclass Conspiracy.
In the recent past, a lot of reports have been released defining the African middle class. From the McKinsey report to the African Development Bank and most recently, Standard Bank. After reading through all of these, I still cannot get a clear picture of who the middle class really is.
Taking the Standard Bank definition that used the Living Standard Measure, (LSM) — a South African formula for calculating the middle class — two things stand out: 1) South Africa was not in the list of the 11 countries assessed; and that, 2) Some of the indicators used should not be a blanket one-size-fits-all measure for all countries.
This is comparing apples to oranges; both might look round but none is eaten like the other. A washing machine and dryer in South Africa might be a common phenomenon given the winter periods and white population while it means extreme wealth in Kenya. And 3 mobile phones in a Kenyan household might mean access to cheaper communication networks and mobile money while in Nigeria it means a third member of the household, most likely a child has a mobile phone. A lesson in context.
The report picks apart East African countries for not doing so well in the measure of becoming middle class economies but I believe that there are some things that have been ignored and especially culture and mineral wealth in these calculations.
So, who really is in the middle class?
A lot of reports looking at the middle class tend to look more at consumption than they do disposable income in relation to dependants. It is surprising that most of the people I spoke to, asking this question actually thought that the middle class is calculated depending on how much you earn not how much you spend.
Scenario. Imagine a married man with a stay at home wife with five kids, earning KES 140,000. Now imagine a single man earning KES 70,000 and living by himself. Who among the two has a higher spending power?
According to a lot of studies, it is the man that earns 140,000 simply because at the end of each day, he has to buy three packets of milk, a loaf of bread and a packet of flour. He pays school fees, rent and generally spends more per day than the person that earns half his salary but lives by himself and has no dependant and therefore less daily expenditure.
In the logical sense, if you were selling an expensive watch, the man that earns 70,000 is in a better position to buy it compared to the man that earns 140,000. Simple.
In my opinion, the economic class should be calculated bearing in mind how much people earn and how many people depend on that earning. The highest ranked individual should be the one with the highest likelihood to spend beyond basic and household needs given the number of dependents on their income. The KES 140,000 has 7 dependents (roughly 20,000 each assuming everyone spends the same amount per month) while the KES 70,000 has one dependent.
But in this measure, again, what happens to those people whose income is not documented and who do not need to have a car to get to work every morning because their work is in a farm within which they live and who do not need washing machines because they have adequate paid labor to do their laundry? Or the farmers, who do not need to spend a dollar a day on food because they grow their food and milk their cows and farm their maize. Would these be considered as middle class people or are they simply a segment of the population with a disregarded spending power that, if incorporated, would drastically redefine economic classes as we know them?
The economists would argue that the best sale of the middle class agenda is for manufacturers and service providers to know what they can sell to you and at what price.
In light of this, since one of the measures of a middle class population is their frequency in the supermarkets, what if Nakumatt were to set up shop right in the middle of Kericho County with all its tea estates and farmers, would these people then abandon their kiosks for the shopping mall experience? A lot of people in Kericho might not necessarily buy a lot of harpic since they primarily use pit latrines as opposed to flush toilets but could they potentially buy more gum boots since they are huge on tea farming?
According to Dr. Ndemo’s recent article in the daily, “probably the most successful people in Kenya or East Africa come from Rwathia, a small village in central Kenya that arguably controls almost 20% of Kenya’s GDP and 40% of the stock market…” From a Google map image of this village, the roads look paved and the roofs look tiled. What if someone built a TRM in Rwathia?
In my opinion, a lot of the studies that have been conducted are measuring urban middle class while ignoring the rural population that as much as is unbanked and undocumented, might potentially have a more promising spending future.
A friend once told me that if your father was a teacher in the 80s, you were in the middle class. Does having grown up in the village, and the fact that my father was a teacher change anything in these dynamics? We had a television set since about 1988 and I grew up with electricity. So did some of our neighbors in the village but does the fact that my village still heavily relies on kiosks for basic goods indicate that the middle class is yet to be born there?
Is it time we started focusing on some of the unbanked populations that might trust their mattresses more than banks but who have the potential to create a consumer class that is currently unmapped? I think so.