The African Middle Class-Hype or Opportunity?




middle class

One of the most common words used in the last few years is ‘Africa’s rising middleclass’. But what is the actual size of the continents middle class? Pundits argue that some major international corporations have already paid a heavy price for overestimating the actual size of Africa’s middle class.

In the second half of 2015, a leading retail agency in the world announced that it is going to cut down its workforce in Africa by 15%.The company had already made heavy investments in the continent. It had invested in building infrastructure for its operations in the continent. Despite all this, the company still couldn’t make a profit. Its operations in East Africa had to be shut down. Recently, the company’s head was being interviewed. He said that they had overestimated the actual size of Africa’s middle class and that it was extremely small.

Another drink multinational also suffered the same setback by inflating the figures of Africa’s middle class. In an effort to tap into this burgeoning class, the company started offering premium drinks that were highly priced than conventional drinks. This had catastrophic consequences. There was a dip in sales by up to 10%. The company had to speedily shift back to its previous strategies.

These two firms are Nestle and Diageo.

All these have come at a time when questions are being asked about the actual size of Africa’s middle class. A few years ago, technocrats from the African Development Bank published a paper titled ”The Middle Pyramid” In this paper, the experts argued that Africa’s middle class had tripled within a period of three decades. This showed that over 300 million persons in Africa were middle class. This indicates one in three persons in Africa is middle class. The AfDB paper defined middle class as someone who had a daily consumption of $2-$20.This was remarkably different from the conventional definition of middle class as one who had an annual income of $3900 or more.

Inside the report, the paper subdivided the middle class into three categories: floating class, lower middle class and upper middle class. The floating class constituted of individuals who consumed from $2-$4 on a daily basis. This group of individuals was extremely vulnerable t o unforeseen expenses and could easily fall into the poverty band. This class of individuals made up more than 60% of the middle class.

The next group is the lower middle class category. This group made up 25% of persons in the middle class group. This category of individuals has a daily consumption of $4-$10.This category can save and purchase non-essential goods on a limited capacity.

The final group is what constitutes the upper middle class category. This group of individuals makes up 15% of the middle class category. These are individuals who have a daily consumption of $10-$20.

In the year 2014, Standard bank published a report that wasn’t received well across Africa. In the report, the bank argued that the real figure of Africa’s middle class is somewhere around 15 million individuals. Here are some of the stats from the report.

 

Country % of Middle Class
Nigeria 11
Angola 21
Sudan 14
ZImbabwe 10

Source: Standard Bank Africa

The report said that majority of Africans lived below the lower middle class line. The approach the bank used to define its middle class was also different from the absolutist definition. The bank used a living Standards Measure. In this measure, what is put into consideration is ownership of non essential goods like households, cars and refrigerators. The absolutist definition defines middle class as someone who has a daily income of $2-$20.

However different we may look at it, experts argue that the unmistakable fact is that Africa’s middle class is surely rising. How can enterprises in the bit coin ecosystem take advantage of this? How can they ensure, that regardless of all the hype that is going on round, they can make sound decisions that will make them tap into this sector?

Although a majority of international bitcoin agencies have considered venturing into the continent, very few have actually made a foray into the African market. This is not advisable.

Investing early in the African marketplace can enable these companies to position themselves favorably and be in the lead in the continent. These enterprises should study traits of African consumers and optimize their strategies to address these.

As can be seen by firms that have already entered the bitcoin space in Africa, there can be significant gains to be made by coming early to Africa.

About the Writer:

Laura

Laura is a bitcoin crusader based in Nairobi Kenya.

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