Ipsos study shows there are over 100 million middle class Africans who spend more than USD400 million a day.
By KAGENI MUSE
Who is the Kenyan middle class? Where do they live? Where do they shop or take their children to school? What do they drive? Do they even exist or are they just an overhyped trend by marketers eyeing a slice of the growing African market?
When we talk about the middle class in Kenya most people picture someone who is financially secure, owns a home in a secure gated estate, has two or three cars parked in the garage, takes holidays once in a while and whose children go to “group of schools.” We imagine them shopping with overloaded trolleys in malls and sipping exotic lattes at posh uptown joints as they catch up with business, friends and the latest trends in consumerism while peering over the latest iPhone or Samsung device.
Aggrey Oriwo, Ipsos East Africa Managing director notes that common notions about the African middle class is that they are financially secure and have good incomes, are educated, have access to services, own their homes and cars, live in small households and in comfort. He however notes that this is a wrong perception.
“We’ve been looking for middle class slightly above the middle class. One of the phone companies recently came up with a phone that’s truly middle class; it costs KSh 8,000. Any time you are looking for a phone that costs above KSh 20,000 you are affluent,” says Aggrey. “Most of our middle class are hustlers. They don’t depend on just one income. They don’t own houses,” he adds.
He blames this wrong definition of the middle class for the woes facing some multinationals that have scaled back their African operations or closed shop after overestimating demand growth by the middle class while going by the global definition.
Marks of a middle class
There are many definitions of the middle class. The Kenya National Bureau of Statistics puts middle class as a household that spends between KSh24,000 and KSh120,000 per month. The Institute of Economic Affairs (IEA) put the Kenyan middle class as those earning between KSh76,392 and KSh102, 429 in 2015. IEA found that there are about 272,569 middle class wage employees in Kenya, with another 74,337 wage employees taking home more than the middle class.
Homi Kharas, an economist with the World Bank, in 2011 defined the middle class as comprising households with per capita incomes between USD11 and USD110 per person per day. Martin Ravallion at the World Bank used a range of USD2 to USD13 purchasing power parity (PPP) prices. It is generally accepted that if you earn more than two dollars a day in a developing country, you have crossed the poverty line.
Others identify the middle class as the number of people whose income is between 25 per cent above and 25 per cent below the median income of the country, giving a statistical middle class of about 13 to 15 per cent of the global population, living on between USD4 and USD6.50 per day.
Nancy Birdsall of the Centre for Global Development argues that a sense of economic security is what makes someone middle class: “You’ve crossed the line when you no longer have to worry about falling back into poverty.”
Ipsos study on the African middle class says there are over 100 million middle class Africans who spend over USD400 million a day. “A dollar alone does not make a middle class,” says Aggrey. “A dollar is not the same everywhere,” he says pointing out the cost of a litre of petrol or beer varies widely across Africa affecting the cost of living.
According to the Ipsos study, the African middle class are employed, run a business or are in school and spend less than 75 per cent of their income on expenses such as rent, food and utilities. They have also made it past secondary school.
Aggrey points out various factors in favour of a growing African middle class, among them a growing population that offers a big market for local consumption, diaspora remittances that are a big boon to the continent, positive growth forecasts for a majority of countries like Cameroon, Ethiopia, Kenya and Ivory Coast and a high urbanization rate of 37 per cent that fosters a better quality of life.
Other factors are improved education and infrastructure. “The continent’s road network has grown by 7,500km a year over the decade. The new roads have a trickledown effect. There is still a key gap in infrastructure, making a huge opportunity for investment. However, there’s still a deficit in road density, water access, sanitation and electricity.”
Brenda Muse is the Sub-editor, Management Magazine