Africa’s Middle Class
Is it worth our attention?
In recent years there has been an increasing amount of literature published on Africa’s “emerging middle class”. The Standard Bank estimates that, in 2014, 11% of Nigeria’s population could be classified as middle class, while the Mckinsey Global Institute excitedly announces that private consumption is increasing, “offering promising business opportunities in a range of consumer-facing industries”. They predict that, between 2015 and 2025, 11% of East Africa’s households will move from earning less than $5,000 to earning $5,000 to $20,000 a year.
The middle class can have significant effects on a region’s political landscape.
Africa’s middle class is growing, that is for sure. And a growing middle class can have significant positive impacts on a region’s macroeconomic prosperity. The growth of a middle class implies greater wealth and financial stability amongst the population and such an implication can only be good news. What’s more, the Global Wealth Report states that the middle class can have significant effects on a region’s political landscape by leading new political movements, and is crucial to the arrival of “new consumption trends”. Such trends in turn fuel business and trade, stimulating employment and economic prosperity.
With so many blog posts and reports hailing the arrival of Africa’s new middle class, an Asia-esq new dawn for the world’s largest continent might appear to be on the cards. Yet several things need to be said before we all get too excited. The wealth of literature on the subject often fails to make clear the limitations attached to the growth of Africa’s middle class.
How big is it really?
A survey from the University of Cape Town of 7,500 Africans revealed an interesting analysis of the continent’s socioeconomic make-up. The researchers landed on a set of conditions that define the middle class in Africa: “1) earn over $4 per day; 2) have disposable income; 3) are employed, run a business or studying; 4) made it to secondary school; and 5) are not earning more than $70 per day.” According to this criteria, they estimated a population of 100 million middle class citizens living in Sub-Saharan Africa, excluding South Africa.
The survey also found, however, that 58% of middle class families and households did not have indoor running water. Only 43% have a fridge or freezer. 45% attest to not being able to afford much besides food and clothing. The report suggested that home lives were labour intensive and 43% of middle class households were financially vulnerable. According to the Globalist, less than a third of Sub-Saharan Africans have regular access to electrical power.
Only a small minority of Africans enjoy what Central Europeans might consider a comfortable middle class lifestyle.
There are clear problems inherent to this research project. What the survey reveals is that a definition of the middle class cannot be boiled down to factors like ‘middle class income’, employment and education (or, if it can, much higher income levels are necessary). These factors fail to reveal the full picture, disguising the fact that only a small minority of Africans enjoy what Central Europeans might consider a comfortable middle class lifestyle. What’s more, the University of Cape Town’s survey was conducted exclusively in cities, where middle class populations are more commonplace. Access to education is wider and there are higher paying job opportunities.
Many other hopeful analyses, such as that of the African Development Bank (AfDB) which puts Africa’s middle class at 34% of the population, use baffling criteria. The AfDB defines the middle class as adults with a daily consumption of $2-$20. Given that $2 is the poverty line, it is clear that no one with this consumption level can even be considered lower middle class, and the AfDB itself admits that the $2-$4 segment is extremely vulnerable and can easily fall back into poverty.
Realism
According to The Economist, more conservative criteria exist. The Pew Research Centre defined the middle class as those earning $10-$20 a day. By this measure, Africa’s middle class does not exceed 6% of the population.
The Global Wealth Report (GWR) identifies a problem with defining the middle class in terms of actual consumption or income. Doing so fails to take into account financial vulnerability. It might be true that a consumption level of $7 a day may permit an adult to stay healthy and happy in Africa. However, if they are unable to save and gain wealth, they are vulnerable. Loss of employment, or even retirement, could see them plummet into poverty without appropriate state institutions to help them survive.
Africa’s middle class grew by only 0.4% between 2000 and 2015.
According to the GWR, a more accurate analysis defines the middle class in terms of wealth. It is the possession of a certain level of wealth that allows an individual to both consume healthily and maintain financial security. The GWR creates an overview of the global middle class by adjusting wealth levels according to the world’s various financial climates. It then arrives at a definition of the middle class according to wealth for each region.
The findings are not as inspiring as much of the literature tends to make out. Just 3.3% of Africa’s population (including the more affluent North and South Africa) are judged to be middle class. 3.5% are judged to be middle class or above. This is, predictably, lower than in any other continent by some margin.
Furthermore, Africa’s middle class grew by only 0.4% between 2000 and 2015, indicating slow progress where wealth creation is concerned.
The elephants in the room: poverty and inequality
The problem is not just that reports of Africa’s middle class are often hyperbolic or downright inaccurate. Beyond that, there is a moral issue at play.
Placing emphasis on Africa’s middle class is misleading. Western news sources hailing the arrival of this new income-bracket implies a comparison with the middle class that we see in more ‘developed’ economies. Yet the kind of easy-living consumer class present in countries like Australia and the United Kingdom simply doesn’t exist for the most part in Africa.
Even for the minority enjoying relative financial stability, Africa’s economic landscape remains difficult. Businesses struggle to get off the ground with little access to credit and life at home presents problems: power cuts are a frequent occurrence and access to running water is lacking.
The discourse surrounding Africa’s middle class also distracts from the stark reality that poverty is still widespread. The Nigerian National Bureau of Statistics (NBS) estimates in its most recent survey that 112 million Nigerians are living below the poverty line. That equates to 67% of the country’s population.
Between 2000 and 2014, the number of Africans with a net worth of over $1m increased by 145%.
Clearly, massive poverty levels warrant our attention more than the growth of a tiny middle class. So too does the level of inequality in Africa where, in 2008, 100,000 people had a net worth of $800 billion — 60% of the continent’s GDP. Between 2000 and 2014, the number of Africans with a net worth of over $1m increased by 145%. Meanwhile, median wealth per adult in Africa barely increased over the same period and has been steadily declining since 2010.
Africa faces enormous economic struggles. While there is encouraging economic growth across much of the continent, our attention should not be diverted away from extremely high levels of poverty. Our attention should be on creating wealth and jobs for those at the bottom of the pyramid.
Originally published at FiftyFor.
