Magazine article New African

The Rising Middle Class, and Yes It Matters

Magazine article New African

The Rising Middle Class, and Yes It Matters

Article excerpt

Quantifying the size of Africa's middle class--the growth of which is one of the defining characteristics of the overarching "Africa Rising" narrative--is not an easy thing to do, Tom Jackson explains.

According to the African Development Bank (AfDB), as far back as 2011 there were already 313 million people--or 34 per cent of the continent's total population--that could be referred to as middle class.

Yet at the same time, other parties see it differently. According to Standard Bank, only 15 million households in the 11 largest Sub-Saharan African economies fall into the bracket. Consultancy firm EIU Canback agrees there has been growth, but not as much as many think, suggesting that the African middle class rose to 6.2 per cent of the continent's population in 2014, up from 4.4 per cent in 2004.

The disparities in estimates arise from differences in defining what exactly "middle class" is. The AfDB defines it as people spending between $2 and $20 per day, and has a separate category for "stable middle class"--which it said stood at 123 million people in 2011. Income, wealth, and consumption can all be used to establish class.

Yet despite the disparities in exactly how big it is, all observers including the AfDB and Standard Bank--remain convinced Africa's consumer market is burgeoning, and bringing with it increased opportunities for businesses on the continent. Investor George Soros says the growth of the continent's middle class is one of the only economic bright spots across the world currently.

The size of the opportunity has not been lost on international companies. Accommodation booking platform Airbnb, which rents out rooms or whole properties online, is scaling up its operations in the region, having already seen sizeable growth. It has more than doubled listings and seen user numbers increase by 145 per cent over the last year.

Airbnb is following a path already mapped out by taxi-hailing giant Uber, which has rapidly established an African presence in eight cities--Cape Town, Durban, Johannesburg, Pretoria, Nairobi, Cairo, Casablanca and Lagos. Samantha Allenberg, communications associate for Africa at Uber, says the company believes there is great potential given the growth of the continent's middle class.

"We are changing the way people think about getting around, we are changing the way people connect with the people in their cities. In Africa we have partnered with a significant number of drivers and provided them with the tools to build their own small businesses. We have enabled thousands of work opportunities across Africa and believe we can enable thousands more in the coming years," she said.

This international interest in Africa is only set to increase as the middle class--however we define it--continues to grow. The AfDB says there will be 1.1 billion middle class Africans by 2060, while the McKinsey Global Institute thinks African consumer spending will hit $1.4 trillion by as soon as 2020.

Angel investor Eric Osiakwan said this continuing growth offers international companies a market that was previously very small, and where before they would have had to scale much faster.

"The middle class has an unquenchable taste for technology innovation but we have seen this now at the bottom of the pyramid markets especially, because in their case it is providing a livelihood," he said. "So as technology lifts people out of poverty into the middle class we would see an expansion that pulls in a level of momentum that would generate a tipping point effect somewhere in the 21st century."

What the middle class really wants

It is not just large international companies that are set to benefit from the growth of the continent's middle class. Arielle Sandor is chief executive officer of Kenyan jobs platform Duma Works, and says it has opened up new opportunities for smaller, more local businesses too. …

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