HORSE SHOE, North Carolina — A continent infamous for its hunger-stricken population and rampant poverty, Africa is now making headlines for its emerging middle class. However, conflicting economic reports, particularly the most recent account issued by the Standard Bank Group, cause many to question this newfound optimism.
The 350 million Africans, which make up the middle class, caught international attention with McKinsey & Company’s “Lions on the move: The progress and potential of African economies,” released in June 2010. The report predicted that by 2020, 128 million households in Africa will make more than $5,000 a year.
The African Development Bank, better known as AfDB, then defined a bourgeois lifestyle as one in which daily consumption ranges from $2 to $20.
These reports, coupled with China’s increasing demand for African commodities, provided impetus for numerous global investments.
“It’s probably the fastest growing consumer class in the world, as a region,” Michael Lalor, director of Ernst & Young’s Africa Business Center in Johannesburg, said.
Multinational companies, producing anything from mobile phones to cars, are reaping the rewards as the African middle class undeniably grows. Still, Simon Freemantle, Standard Bank Group economist, prompts investors to perceive the continent’s economic boom less superficially.
Freemantle’s study, “Understanding Africa’s Middle Class,” provides a sense of realism in the midst of overzealous claims.
After analyzing the sub-Saharan countries of Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda and Zambia, the economist identified just over 15 million middle class households. The figure, significantly lower than those released by AfDB, suggests that the continent’s progress may be overblown.
“In providing a more definitely measured account of the continent’s consumer potential, this report, we hope, has added depth and inspiration to the reality of Africa’s ongoing development,” Freemantle said.
The pervasive nature of poverty was also exemplified by the report.
Though Nigeria is leading the way with only 65 percent of citizens living below the poverty line, East African countries such as Uganda, Ethiopia and Tanzania are slipping behind. Nearly 99 percent of households fall within the low-income bracket in Ethiopia — a “concerning” truth for Freemantle.
“Quite clearly, East African economies, which are experiencing some of the most rapid population growth rates in the world, are struggling to ensure the pace of income advance is commensurate with demographic change,” Freemantle’s report reads.
Analogously, Citigroup’s Africa economist David Cowan prefers to avoid the term “middle class” altogether when describing Africa, especially in relation to more developed continents such as Europe and Asia. Cowan claims Africa has a “huge consuming class,” one with a daily disposable income of $14 to $19.
“That’s a level at which people can really make consumer purchases,” he said.
Despite the misconceptions and contention surrounding Africa’s middle class, or lack thereof, all agree that steady gains in gross domestic product, better known as GDP, will aid the continent in future economic endeavors.
And as Freemantle’s report surmises, growth is undeniably happening.
“There is still plenty of scope for measured optimism regarding the size of the middle class in several key SSA [sub-Saharan Africa] economies,” he said.
– Lauren Stepp
Sources: African Press Organization, How We Made it in Africa, Reuters