Measuring Africa’s middle class

 arbp_menu

Africa has experienced substantial growth in its middle class over the past 14 years, according to a study by Standard Bank of South Africa, the continent’s biggest lender.

The report looks at the size and growth of the middle class across 11 of Sub-Saharan Africa’s most vibrant economies. The report also takes a future view to 2030, identifying where the greatest income growth will be and how economies are maturing to offer more diverse potential for investors.

The report, entitled “Understanding Africa’s middle class”, found that there are 15m middle-class households in 11 of sub-Saharan Africa’s top economies this year, up from 4.6m in 2000 and 2.4m in 1990 – an increase of 230% over 14 years.

The 11 focus economies are: Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda and Zambia, which combined account for half Africa’s total GDP (75% if excluding South Africa) and half its population. However, of the total number of households across these focal economies, 86% of them remain within the broadly “low income” band. The report also found that the combined GDPs of the 11 measured economies had grown tenfold since 2000.

The study uses a proven methodology widely employed in South Africa, says the Pan-African News Agency. The report, based on the Living Standards Measure (LSM), gives investors to Africa data on which to base their investment decisions. In the past, the conventional wisdom was that as many as 300m Africans were categorised as ‘middle class’. The report points out that investors using an unquantifiable assumption might find individuals they had thought were middle class were in fact highly vulnerable to lose that status in any economic shock.

Standard Bank senior political economist Simon Freemantle, author of the report, says the prospective boom in middle class households – those earning between US$8,500 and US$42,000 a year – is also likely to be complemented by a swelling in the number of lower middle class households that earn between US$5,500 and US$8,500 annually. This will create an expanding consumer market for items such as vehicles, insurance policies, property and health products.

“Between 2014 and 2030, we expect an additional 14m middle-class households will be added across the 11 focal countries, tripling the current number. Including lower-middle-class households, the overall number swells to over 40m households by 2030, from around 15m today,” Freemantle says.

Nigeria, which is Africa’s biggest economy and has the largest African population, is leading the growth of new middle-class households with an estimated 7.6 million to be added in the next 16 years. Nigeria’s middle class grew by 600% between 2000 and 2014 giving the country 4.1 million middle-class households at present, 11% of its total population. Other countries expecting significant growth of the middle-class households by 2030, include Ghana (1.6m), Angola (1m) and Sudan (1m), according to the Standard Bank blog.

East Africa lagged other regions in the study, with more than 90 percent of households in Ethiopia, Tanzania, Uganda and Kenya defined as low-income, Bloomberg.com reported.

 

Subscribe to the Africa Research Bulletin today

 

%d bloggers like this: