CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­

Yet an­other es­ti­mate of the size of Africa’s mid­dle class was re­leased this week, point­edly un­der­min­ing the ex­ag­ger­ated hype cul­ti­vated by the African Devel­op­ment Bank.

The bank made waves in 2011 by as­sert­ing that a third of all Africans are mid­dle class, but its def­i­ni­tion of mid­dle class was wide.

Stan­dard Bank se­nior po­lit­i­cal econ­o­mist Si­mon Free­man­tle has tried to pro­duce a more “use­ful” es­ti­mate for 11 coun­tries us­ing a def­i­ni­tion of mid­dle class based on South African liv­ing stan­dard mea­sures (LSMs).

Th­ese are cat­e­gories cre­ated by the SA Au­di­ence Re­search Foun­da­tion and used to gauge the ad­ver­tis­ing value of me­dia prod­ucts like City Press.

What emerges is that the mid­dle class (roughly LSM 7 to 10) varies between 21% of the pop­u­la­tion in An­gola to ba­si­cally 0% in Ethiopia.

In ag­gre­gate, about 7% of the 11 coun­tries’ pop­u­la­tions can be con­sid­ered mid­dle class, and an­other 7% are lower mid­dle class.

In to­tal, that amounts to 15 mil­lion house­holds, of which half are in Nige­ria.

This stands in stark con­trast to the African Devel­op­ment Bank’s fig­ure of 34% for Africa as a whole.

The idea is to show how many po­ten­tial con­sumers of dif­fer­ent prod­ucts and ser­vices there might be in any given mar­ket

Nei­ther es­ti­mate uses the term ‘mid­dle class’ in a so­ci­o­log­i­cal or po­lit­i­cal sense.

In­stead, the idea is to show how many po­ten­tial con­sumers of dif­fer­ent prod­ucts and ser­vices there might be in any given mar­ket.

The mid­dle class LSMs would be as­so­ci­ated with the mar­ket for ex­pen­sive goods like tele­vi­sions or cars and fi­nan­cial ser­vices.

The dif­fer­ence between Free­man­tle and the devel­op­ment bank’s re­port is re­ally just the def­i­ni­tion.

The bank did ad­mit that the real mid­dle class is much smaller, and came up with an es­ti­mate of 13.4% of the African pop­u­la­tion, which echoes Free­man­tle’s up­per and lower mid­dle classes put to­gether.

That over­all to­tal doesn’t mean much, though. The most im­por­tant thing that emerges is how com­pletely in­com­pa­ra­ble the sit­u­a­tion is in dif­fer­ent African coun­tries.

Apart from Ethiopia, Uganda, Tan­za­nia, South Su­dan and Mozam­bique also have prac­ti­cally no mid­dle class at all, us­ing Stan­dard Banks’ def­i­ni­tion.

South Su­dan’s tiny mid­dle class con­sists vir­tu­ally en­tirely of mil­i­tary and aid or­gan­i­sa­tion em­ploy­ees, says Free­man­tle.

The same def­i­ni­tion would clas­sify al­most half of South Africa’s pop­u­la­tion as mid­dle or up­per mid­dle class, with about 27% be­ing low in­come (LSM 1-4).

The 11 coun­tries were cho­sen for a mix of their scale, growth rate and the amount of in­ter­est South African com­pa­nies have shown in them, Free­man­tle said at a me­dia briefing this week.

While his es­ti­mate un­der­mines the gen­er­ous num­bers of the devel­op­ment bank, he agrees that the mid­dle class is grow­ing rapidly.

The to­tal tally of mid­dle class house­holds in 2000 was 5 mil­lion, com­pared with 15 mil­lion now, says Free­man­tle.

Ex­trap­o­lat­ing to 2030, he es­ti­mates that the com­bined mid­dle class in the 11 coun­tries will grow to 40 mil­lion, mostly in Nige­ria.

The low-in­come pop­u­la­tions will, how­ever, also grow and still con­sti­tute the ma­jor­ity of peo­ple by 2030.

The pur­pose of the whole ex­er­cise is, how­ever, to gauge how big the con­sumer mar­kets in th­ese coun­tries are and will be­come.

Just be­cause a siz­able group fit­ting into an LSM ex­ists, does not mean com­pa­nies can as­sume they are the same kind of con­sumer as their South African equiv­a­lents, says Free­man­tle.

While South Africa’s re­tail is al­most com­pletely for­malised and cen­tred on malls, 90% or more of Nige­rian re­tail takes place in in­for­mal mar­kets, which re­quires a dif­fer­ent ap­proach.

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