Africa’s mid­dle class hits a speed wob­ble

Finweek English Edition - - IN DEPTH -

Credit Suisse’s 2015 Global Wealth Re­port sug­gests Africa’s mid­dle class may not be as large as pre­vi­ous eco­nomic stud­ies sug­gest. Us­ing wealth rather than in­come alone to mea­sure the mid­dle class, the re­port says just 3.3% of Africans can be con­sid­ered mid­dle class, or about 19m peo­ple. Roughly a quar­ter of Africa’s mid­dle class lives in SA, ac­cord­ing to the bank. A pre­vi­ous 2011 study by African De­vel­op­ment Bank, based on in­come, put the mid­dle class at around 300m.

The African De­vel­op­ment Bank fig­ure has been ques­tioned be­cause of its loose in­ter­pre­ta­tion of mid­dle class, which the au­thors de­fine as any­one earn­ing be­tween $2 (R28) and $20 (R280) a day. On this ba­sis, more than a third of Africans could be con­sid­ered mid­dle class.

Though Africa’s wealth more than dou­bled to $1.63tr over the 15 years to 2015, the mid­dle class has re­mained surprisingly small due to the un­even distri­bu­tion of wealth.

An es­ti­mated 0.2% of Africa’s wealth­i­est con­trol more than 30% of the con­ti­nent’s wealth.

The study by Stan­dard Bank, (a bank that has op­er­a­tions across Africa) sug­gests that Africa’s mid­dle class has tripled in size over the past 14 years to 15m house­holds.

The study also used a cut-off of $15 (R210) to be con­sid­ered lower-mid­dle class or mid­dle class. Other stud­ies have used vastly dif­fer­ent mea­sures. Con­sult­ing group McKin­sey de­fines the mid­dle class as those spend­ing more than $20 000 (R280 000) a year, on which ba­sis it ac­counts for less than 2% of African house­holds, though it is ex­pected to con­trib­ute 40% of spend­ing-power growth in the com­ing years.

Stan­dard Bank looked at 11 of the big­gest economies in the re­gion, and found that th­ese economies had grown 10-fold since 2000 to reach a col­lec­tive GDP of $1tr (R14tr).

Over the next 15 years, the mid­dle class in th­ese 11 coun­tries should reach 25m house­holds, with 12m of th­ese alone com­ing from Nige­ria, ac­cord­ing to the study.

“There is an un­de­ni­able and powerful rise in in­come across many of Africa’s key fron­tier economies, al­low­ing the for­ma­tion and strength­en­ing of a substantial mid­dle class,” the re­port says.

Ac­cord­ing to Credit Suisse, the US ac­counts for the world’s largest mid­dle class in ab­so­lute terms, but this ac­counts for just 38% of the pop­u­la­tion, ver­sus more than 50% of adults in Ire­land, the Nether­lands and New Zealand. The mid­dle class ac­counts for more than 55% of adults in Italy, Ja­pan, Spain, Tai­wan, the UAE and the UK. “The mid­dle-class in­ci­dence rate ex­ceeds 60% in Bel­gium and Sin­ga­pore, and is high­est of all in Aus­tralia, where 66% of adults are in the mid­dle class and 80% be­long to the mid­dle class or be­yond,” ac­cord­ing to the

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