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Reality check

5th September 2014

By: Terence Creamer

Creamer Media Editor

  

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The shift in the conversation about Africa’s prospects – from utter desperation to breathless exuberance – has been at once dramatic and generally appreciated across the continent. However, unless expectations are properly managed, this exaggerated swing in sentiment has the potential to cause as much harm as good.

For that reason, a new report into the expansion of the middle class in 11 key sub-Saharan African countries is a timely addition to the discussion, as its empirically based optimism is held in check by some sobering analysis.

To be sure, Standard Bank’s ‘Understanding Africa’s middle class’ report confirms that the middle class in Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda and Zambia has expanded materially over the past 14 years – to around 15-million households, from fewer than five-million in 2000.

But it also cautions that, by far, the majority (over 85%, in fact) of the 110-million households across the surveyed countries remain firmly within the low-income band, making them vulnerable to economic shocks.

Using South Africa’s Living Standards Measure (LSM) methodology, the bank’s middle-class estimate is also considerably lower than the 350-million Africans estimated to be middle class in a 2011 study by the African Development Bank. In addition, it shows that the most profound consumption shifts were occurring at the ‘base of the pyramid’, or in the low-income bands covering LSM 1 to LSM 4, which is where businesses would need to tailor their offerings – consumption in this band is below $5 500 a year.

Nevertheless, Standard Bank political economist Simon Freemantle stresses that the performance remains broadly supportive of the Africa Rising narrative.

For instance, between 2000 and 2014, Nigeria’s middle class swelled by 600%, to 4.1-million households, or 11% of the total population. Some six-million new middle-class households, with the average household comprising around five people, have been added in the surveyed countries over the period, compared with only one-million between 1990 and 2000.

In addition, the report estimates that a further 14-million middle-class households will be added across the countries by 2030 – triple the current number. “Including lower-middle-class households, the overall number swells to over 40-million households by 2030,” Freemantle says, while acknowledging that this base case is built on assumptions that are highly sensitive to political, economic and social developments.

That said, despite the undeniable rise in income across many of Africa’s key frontier economies, the scale of Africa’s middle-class ascent has, in Freemantle’s view, been exaggerated.

For example, in the East African countries surveyed, there are still uniformly high shares of low-income households as a share of total households across the region – 99% in Ethiopia, 97% in Tanzania, 96% in Uganda and 92% in Kenya.

Freemantle says the report aims to offer a more accurate depiction of the size of the middle class, without under- mining optimism about the continent’s advance. “In pro- viding a more definitively 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.”

Edited by Terence Creamer
Creamer Media Editor

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