Africa’s Middle Class

According to a recent Credit Suisse report, the African middle class is almost seventeen times smaller than had been previously thought. For at least a decade it has been conventional wisdom among investors that Africa’s middle class is growing, that the “lions are on the move” (McKinsey’s phrase), and that the continent is the next China for frontier market investors. In 2011, the African Development Bank’s (AFDB) paper, “The Middle Pyramid: Dynamics of the Middle Class in Africa,” had classified 313 million Africans as middle class, further supporting the optimistic narrative.

Now, however, the “rise of the African middle class” narrative is looking oversold. Rather than numbering 313 million, other research studies, notably those that inform the Credit Suisse Group’s “Annual Global Wealth Databook,” indicate the figure is nearer eighteen million. The food company Nestle’s Africa regional chief executive sums up the new pessimism: “We thought this would be the next Asia, but we have realized the middle class here in the region is extremely small and it is not really growing.”

So, how big really is the African middle class?

Part of the issue is defining “middle class.” In a press interview, Steve Kayizzi-Mugerwa, an author of the AFDB paper noted that his bank “took some effort to describe what it means by its definition of middle class. It was certainly not based on European or American norms.” In an interview with “Mail and Guardian Africa,” former AFDB President Donald Kaberuka said, “I think we are wasting too much time on the definition of the middle class and the cut-off point, it is a sterile debate.” The AFDB study measured income and consumption to determine middle class status, which it determined fell within a range of $2 to $20 per day. It then divided that range into three bands. It fully acknowledged that in the lower and largest band, middle class income and consumption was fragile, and that illness, job loss, or a variety of other factors could plunge a middle class individual or family back into the poor. They are particularly vulnerable to the current fall in commodity prices and contraction in China’s imports from Africa.

Other economists, notably Anthony Shorrocks, Jim Davies, and Rodrigo Lluberals focus on assets rather than income to determine the size of the middle class. That approach, they argue “breaks new ground by defining the middle class in terms of a wealth band rather than an income range.” They conclude that 14 percent of the world’s population is middle class, but only 3.3 percent of Africa’s 572 million adults – or 18.8 million. (This includes North Africa in their African statistics.) Of the African middle class as defined by assets, one quarter, or 4.3 million, live in South Africa. In Nigeria, only 922,000 of its 83.3 million adults are middle class, using this method of calculation. According to a “Mail and Guardian” table based on the “CreditSuisse Wealth Databook 2015,” 38.8 percent of the North American population is middle class, 33.1 percent of Europe’s, and 10.7 percent of China’s.

How to account for the continued and pervasive poverty in Africa following years of economic growth? There is a strong argument that it is primarily the African rich, even super-rich, that have been the primary beneficiaries. Based on the “CreditSuisse Wealth Data Book 2015,” as reported by the Mail and Guardian, the 3.2 percent of the population that is middle class accounts for 32.1 percent of Africa’s wealth. But the richest Africans, only 1.15 million adults or 0.2 percent of African adults, accounts for 30.6 percent of the continent’s wealth. That leaves the remaining 37 percent of the continent’s wealth for 96.6 percent of the continent’s population.