Buying In : the rise of a middle class in Africa

source : Wall Street Journal

According to the African Development Bank Group, the middle class now accounts for  nearly 34% of the total population, which represents 313 millions people. It's a great uptick (more than 60%) since the beginning of the last decade, but major improvements remain to be done to enlarge further this group and include more the too many people that remain standing at the bottom of the pyramid.

Expanding from the data of the African Development Group, the Wall Street Journal contends that      A New Class of Consumers Grows in Africa.

"Sustained economic growth in Africa has produced for the first time a broad middle class, one that cuts across the continent and is on par with the size of the middle classes in the billion-person emerging markets of China and India. The rise of a middle class in the world's poorest continent is a dramatic marker for the global economy. At a time when the U.S., Europe and Japan are struggling to grow, Africa is beginning to beckon as a consumer of what other nations produce, thanks in part to a young population more upwardly mobile than ever before."

If we look closely at the numbers presented, middle class is defined by people living with a revenue ranging from $2 to $20 per day. With the exchange rate, that makes a disposable income ranging from XAF  (CFA Francs) 1,000 to XAF 10,000 per day that equate to a monthly income of XAF 30,000-300, 000. It's relatively little, but it's enough to generate demand for laptops, cars, brand new smartphones, private schools etc... Therefore one can observe an afflux to the last frontier of  multinationals telecoms and retailers alike. These companies have diverse market entries strategies, ranging from direct presence like Vodaphone or Yum Brands (KFC), Microsoft or Google or through buying stakes in local companies like Wal-mart. Another upside of this new trend is the impact this new demand has on growth in return.

"These new consumers are credited with cushioning Africa from the recent global economic crisis. The International Monetary Fund projects that sub-Saharan Africa, a collection of 47 countries, will grow 5.5% this year and 6% in 2012"

But the picture is not so rosy, forasmuch as the vast majority of Africans do not have access to these goods and poverty remains prevalent. Disparities also persist : not all countries could be properly documented (Equatorial Guinea is a notable exception amongst others), consumption habits are not the same in Kampala or in Timbuktu, in subsaharan Africa for example, only Gabon has more than 60% of its population belonging to the middle-class cushion, compared to the average 34% for the rest of the continent.

"About 100,000 of the richest Africans had a collective net worth totaling 60% of the continent's gross domestic product, according to the report, citing 2008 figures."

Unfortunately the last frontier still carries some risks that are the corollary of big benefits than could be reaped from this relatively untapped market. "A series of violent elections in some of the continent's biggest markets, for instance, threatens to reverse nascent economic gains for millions of Africans."

To mitigate the possible adverse impacts at the very moment when we can see the light at the end of the tunnel, every government across the continent must address aggressively these issues by crafting policies that re-assure citizens and foreign investors alike, that create transparency and open markets even further, that nurture a climate of confidence for business. That is both an absolute necessity and an imperative.

Last, to sustain the trend and not have it subsume in yet another step backward, this new "wealth" needs to be spread even more uniformly. Let us all aspire and strive to make it happen for the greater good of the vast majority. Remember the words that I shared with you in the previous post "our aspirations are our possibilities."

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