Spending Pattern Of The Middle Class In Africa

In recent times, scholars and enthusiasts alike have gushed about a persistently emerging concept known as ‘Rising Africa’. It is instructive to note that this concept mainly refers to the middle- class category of Africans.

The middle class is quite a controversial one however as different stakeholders have disagreed on what exactly constitutes this group. For an attempt, the African Development Bank conducted the middle of the pyramid report in 2011.

In this novel report, the African Development Bank referred to the middle class as ‘individuals who have a yearly income above $4000 (this translates to a per capita expenditure which ranges between $2 and $20 daily).

The World bank on the other hand has adopted a broad definition of the middle class by describing them as those individuals with daily income between $12 to $15.

While using income and expenditure might seem like a fair, unbiased, and objective way of defining the middle class, it however fails to take into account inflationary fluctuations that might occur from time to time as well as business emergencies and health vulnerabilities.

A data consulting firm called Fraym in a recent report it published opted for a different route while trying to define the middle class. Fraym opted to use educational levels and assets ownerships as the categories for defining Africa’s consumer class as these standards are less likely to be affected by seasonal income variations.

In its report, Fraym argues that shifts in spending and consuming trends based on local activities such as planting seasons provide a strictly monetary-based differentiation which might have higher error rates.

As a way of assets measure, mobile phones, refrigerators, computers, automobiles, and televisions were the metrics used. For example, owning a car might just increase the frequency of household consumption. Owning a refrigerator on the other hand ensures that a larger volume of food can be bought.

According to Fraym, there is a middle- class population of 330 million persons in Africa. Nigeria, Egypt, Morocco, Algeria, and South Africa make up roughly about two-third of the total African middle-class population. This makes up for up to 229 million people.

These five countries are referred to as the ‘power five’ because they account for over 60% of the total transactional value of the middle class in Africa every single year.

The rest of the continent is made up of roughly only 17 million middle- class individuals found in other smaller countries. It is thus no surprise that when compared to the ‘power five’, these smaller countries have far more limited chances for consumer-facing investors and industries given the size of the nature of their small and segregated markets.

This figure notwithstanding, however, the expenditure of the middle class in Africa has continued to dramatically increase over the years. Middle- class expenditure in Africa crossed the $1trillion mark in 2010.

Last year saw this already huge figure increase to over $1.6 trillion. Experts and other stakeholders have predicted that this figure still has massive room for growth.

The McKinsey Global Institute has predicted that this figure will reach $2.5 trillion by the year 2025.

They have likewise postulated that this massive increase will be chiefly driven by population explosion in Africa. Many believe that by the year 2050, Africa will have experienced an increase in population by over 1.5 billion persons.

Also, rural to urban migration is continually on the increase due to desired access to better living standards/conditions and better economic opportunities. Due to this, African governments have already started undertaking actions to spend over $100 billion to cater for this migration by building top-notch modern cities to provide such opportunities and living conditions.

The road is not entirely bump free however as drastically increased consumption changes and lifestyle changes seem to come at a great cost.

Rise of fast food outlets has seen a spike in obesity levels, there is the risk of poor nutrition and fake/substandard products are always on the increase which puts the population at risk.

The middle class is the driver of the African economy. They need to be given more attention however as mismanagement of their needs can lead to potentially disastrous outcomes for Africa as a continent.

 

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