The Middle Class in African countries : AfDB report

The size of Africa’s middle class tripled over the last 30 years to 313 million people, or more than 34% of the continent’s population, a new report by the African Development Bank (AfDB) revealed.

According to the report, the middle class had risen to 34.3% of the population in 2010, up from about 26.2% in 1980, 27% in 1990 and 27.2% in 2000.

The report ‘The Middle of the Pyramid: Dynamics of the Middle Class in Africa’, however, cautions that the overall middle class figure includes large numbers of a ‘floating class’ which is ‘vulnerable to slipping back into poverty in the event of some exogenous shocks’.

There are two ways of defining the middle class in terms of income. That is: in relative or absolute terms.

In relative terms, the middle class can be defined as those individuals or households that fall between the 20th and 80th percentile of the consumption distribution – in other words, all individuals except the 20 percent at the top and bottom – or all households which earn between 0.75 and 1.25 times median per capita income.

Using the absolute approach, the middle class is usually defined as individuals with annual income exceeding $3,900 in purchasing power parity (PPP) terms or with daily per capita expenditure between $2 to $4 and those with daily per capita expenditures between $6 and $10.

The middle class definition used in this report, however, is ‘an absolute definition of per capita daily consumption of $2-$20 in 2005 PPP US dollars’.

The report, then, divides the middle class into three sub-category.

The first sub-category is that of the “floating class” with per capita consumption levels of between $2-$4 per day. Individuals at this level of consumption, which is only slightly above the developing-world poverty line of $2 per person per day (the second poverty line) used in some studies, remain largely vulnerable to slipping back into poverty in the event of some exogenous shocks.

This category is crucial because it is a hinge between the poor and lower middle class category. This class is vulnerable and unstable, but it reflects the direction of change in population structure through time.

The second sub-category is that of the “lower-middle” class with per capita consumption levels of $4-$10 per day. This group lives above the subsistence level and is able to save and consume non essential goods.

The third sub-category is the “upper middle-class” with per capita consumption levels of $10-$20 per day.

Yet, the report notes that other factors come into play when defining who is middle class, saying: ‘other variables such as education, professions, aspirations, and lifestyle are also important features that help establish who is in the middle class’.

Africa - Population Distribution by Income, in 2010

Curiously, the largest middle class is found in the North African countries. The middle class comprises almost 90% of the population in Tunisia, 85% in Morocco and 80% in Egypt. No wonder some analyst suggested calling the recent political events in Tunisia and Egypt a ‘Middle Class Revolution’. [In fact, the size of the middle class is deemed a pre-requisite for successful democratization by several scholars. See: Are they ready for liberal democracy?]

Other countries with high percentages of the middle class include Gabon, Botswana, Namibia, Ghana, Cape Verde, Kenya and South Africa. Countries at the bottom end include Mozambique, Madagascar, Malawi, Rwanda, Burundi and Liberia. [See below the chart ‘Size of Middle Classes in Total Population in 2010’]

Ethiopia and countries in the Horn

The report indicates, based on 2008 data, that 21.5% of the Ethiopian population make up the middle class. Yet, more than half of which(or 13.2% of the population) earns between $2-$4 per day, thus is deemed a ‘floating class’. On the other hand, 5.3% and 3.0% in the lower middle class and upper middle class respectively.

Among other countries in the Horn of Africa, the report provides data for Kenya, Djibouti and Uganda.

According to the report, 18.7% of Ugandan population belongs to the middle class. Yet, more than half(10.6% of the population) belongs to the ‘floating class’.

The size of the middle class is larger in Kenya and Djibouti. But so is the floating class. 40.1% of Djibouti’s population comprises the middle class, yet a larger part of its(25.4% of the population) lies in the ‘floating class.’ The figures for the total middle class and the ‘floating class’ in Kenya are 44.9% and 28.1% respectively. [Se below the chart ‘Summary of Middle Class in Africa by sub-classes in 2008’]

The report does also provide insight into the characteristics of the middle class and factors that facilitates its growth. Read the excerpts at the bottom.

Africa - Size of Middle Classes in Total Population in 2010

Summary of Middle Class in Africa by sub-classes in 2008

[Excerpts from the report]

The Middle Class and Their Characteristics: A Profile

Consumption or income levels capture only one dimension of the middle class characteristics. Other variables such as education, professions, aspirations and lifestyle are also important features that help to establish who is in the middle class.

In terms of residence, middle class households tend to reside in bigger and more permanent dwellings equipped with modern amenities. In terms of asset ownership, the middle class is typically associated with the widespread ownership of major household durable goods such as refrigerators, telephones and automobiles. Middle class individuals are also much more likely to have salaried jobs and tend to have smaller family sizes.

There are a number of characteristics that differentiate Africa’s middle class from the poor and the rich. The vast majority of Africa’s middle class is likely not to derive its income from agricultural and rural economic activities. As such, they are less likely to be farmers or land owners or manual laborers. The middle class is more likely to have salaried jobs or to have small businesses. They tend not to rely entirely on public health services and seek more expensive medical care when ill. The middle class also tend to have fewer children than their poor counterparts and they spend more on the nutrition and schooling of their children. The middle class is also better educated, and more geographically concentrated in urban areas or along the coasts.

The rise in class status is largely correlated with a rise in progressive values that are highly conducive to strong economic growth. In particular, the middle class are more likely to have values aligned with greater market competition and better governance, greater gender equality, more investment in higher education, science and technology than those of the poor.

Human capital investment in education and health also rises as affluence increases. There is a high likelihood among the middle class to send their children to school. In countries where public schools are seen not to provide good education, private schools provide an alternative option especially for the middle and upper classes. School enrolments in private schools at preprimary, primary and secondary levels indicate noticeable high school enrolments in private schools in quite a number of countries, which may indicate the existence of a strong middle class in these countries.

The middle class is also more likely to seek better health care for themselves and their families than is the case for the poor.

The number of internet users, which can be used as a proxy for middle class lifestyles, has increased from about 4.5 million people in 2000 to 80.6 million people in 2008.

Subscription to fixed broadband internet is another indicator of interest that may be attributed to the middle class. At the continental level, the subscription has risen from 0.1 subscribers per 1,000 persons in 2003 to 4.1 subscribers per 1,000 persons in 2009.

Vehicle ownership is also associated with lifestyles of the middle class. Although data on vehicle ownership are very scanty across countries, trends for countries where data are available show an increase in vehicle ownership – an indication of more people attaining middle class status.

Factors Driving the Growth of the Middle Class

Economic growth is critical to both poverty reduction and the rise of the middle class, but reducing income inequality also plays a key role in the rise of a middle class.

Africa’s middle class is strongest in countries that have a robust and growing private sector as many middle class individuals tend to be local entrepreneurs. In a number of African countries, a new middle class has emerged due to opportunities offered by the private sector.

In addition to economic growth and reducing inequality, two other factors are central to the creation and sustenance of a middle class: (i) stable, secure, well-paid jobs with good benefits, and (ii) higher tertiary education. A large portion of the middle class has jobs providing stable incomes in comparison to the largely self-employed poor. The experience of fostering the creation of large middle classes in other countries, such as the United States, also underscores the importance of education in the process.

The enhancement of a country’s human resources through greater access to education and improved healthcare show a positive correlation with the size of the middle class (Chart 16). Countries that have higher levels of educational attainment, improved health and human development in general tend to have larger middle class populations than those that do not. In particular, access to tertiary education displays a strong positive correlation to middle class growth.

Similarly, countries with much more developed infrastructure tend to have larger middle class populations. This could be largely due to the fact that such countries have a more competitive economic environment that attracts investment and helps to create more stable employment and income generating opportunities taken up by the middle class.

Africa’s emerging consumers are likely to assume the traditional role of the US and European middle classes as global consumers, and to play a key role in rebalancing the African economy. Consumer spending in Africa, primarily by the middle class, was surprisingly resilient during the recession. It reached an estimated $680 billion in annual expenditures in 2008 (based on per capita consumption of more than $2) – or nearly a quarter of Africa’s GDP based on 2008 purchasing power parity. Assuming consumption expenditure in Africa continues to grow at roughly the same rate as the past 20 years, by 2030 Africa will likely reach $2.2 trillion in annual expenditures and comprise about 3% of worldwide consumption.

The continued rise of Africa’s middle class will require governments to introduce policies that bolster the incomes of those already in the middle class, and social policies to expand the middle class, such as through greater spending on education and health. Over the next 20 years, with the appropriate middle-class friendly policies focused on human capital development and better jobs, Africa can continue and even accelerate the reduction of poverty and improvements in the living conditions of the population. Projections suggest that by 2030 much of Africa will have attained lower and middle class majorities. Ethiopia, Nigeria and South Africa are expected to provide the largest number of new middle class, and smaller countries will see faster or slower emergence depending on the absorption of their resource base and labor forces into higher value added supply chains.

Daniel Berhane

Daniel Berhane

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