The Rise Of Africa’s Middle Class: What does it hold?
3/28/2013 10:30:55 AM -
A lot of issues have been raised on the rise of the middle class in Africa and the change that these classes of people can actually cause towards the economic growth and transformation in Africa.
Many analysts have raised concerns as to which class of people falls within the so called middle class and what are the responsibilities that these classes of people are supposed to perform? How do we justify the increasing growth of the middle class in Africa to the standard of living of people on the continent? What really are the economic implications of the growth of the middle class in Africa? What economic prosperity does this signify? Should policy makers be concerned about developing policies to increase the number of the middle class in Africa or otherwise?
Reports from various distinguished quarters both on the continent and elsewhere have shown that a third of Africans are now middle class. A report by the African Development Bank (AfDB) states that Africa's middle class will triple to more than one billion people in the next half-century. Another report by AfDB predicts that the number of Africans earning between $4 and $20 a day will balloon from 335 million people today to 1.1 billion by 2060, thus representing 42% of the continent's population by that year. That is one in three Africans are in the middle class bracket. A new report from the African Development Bank says: 34%, or 313 million Africans are now middle class (living on $2-$20 a day), after several decades without any change, a jump from 27% in 2000.
Over the decades, the numbers have steadily risen from approximately 111 million or 26% of the population in 1980 to around 151.4 million (27%) in 1990. The 2010 figure, however, shows a significant surge of 60% from the 2000 figure of 196 million or 27.2% of total population. That is indeed a tremendous economic achievement.
There are many indicators used by various economists to define what really constitute the middle class. This span from the rate of savings and consumption as well as the range of scale of living ($2-$20 a day). MIT economists Abhijit Banerjee and Esther Duflo point out that the middle classes are less connected to agriculture, thus they do not derive income from farming and rural economic activities; and that they are more likely to be engaged in small business activities; and benefit from formal sector employment, with a weekly or monthly salary, which enables them to adopt a longer-term perspective towards their finances.
Africa's middle class is highest and strongest in countries that have a robust and growing private sector as many middle class individuals tend to be local entrepreneurs. Other determining factors also include the establishment of stable, secure, well-paid jobs, and higher levels of tertiary education as well as skills training centers.
However, broader perspective should be considered in defining who make up the middle class, like level of education, professions, lifestyle as well as aspirations. Africa's middle class in terms of residence live in urban centers. Middle class households tend to reside in bigger and more permanent dwellings equipped with modern amenities. Have higher levels of education and hold salaried jobs.
The growth of Africa's middle class can be attributed to some factors such as the youthful nature of the continent's population. This means a strong labour force and a large consumer base for expansion of businesses which eventually leads to reduction in unemployment rates. The youth constitute between 60 to 70% of the continent's population with a median age of about 20 years compared with 29 years in Asia and that of Europe is 40 years.
Again, the tremendous economic growth in Africa averaging about 4.7% in the last decade compared with 2.5% for the rest of the global economy, has also had impact on the standard of living of most Africans hence leaving them with larger disposable income. Since 2004, Africa has grown faster than the rest of the world. This has indeed contributed to the rise of the Africa's middle class.
The question then asked is 'What is the link between a rising middle class and economic growth and transformation? In other words, what are the implications of a rising middle class in a developing continent like Africa?
There are indeed economic, social and political reasons why the rise of the middle class in Africa matters for poverty reduction.
First, since most of the people in the rising middle class are small business owners, there is a wider potential to hire employees. This means that as the middle class increases, there is a correspondent reduction in unemployment on the continent.
Secondly, as middle class rises, there is potential of larger consumer market. These classes of people tend to demand higher compared with the poor, hence the potential to drive economic growth and attraction of private investors both locally and from elsewhere.
Thirdly, a rising middle income in Africa means a potential for savings and investment. As people live and still have excess in consumption, they tend to save and eventually invest. This means that adequate capital could be sourced domestically other than depending on development partners' donations.
Lastly, a rising middle class helps to shape political policies on the continent. The middle class are more likely to hold governments accountable for decisions.
Strong economic growth in Africa over the past two decades has been accompanied by the emergence of a sizeable middle class and a significant reduction in poverty. It is therefore very imperative that fostering the growth of the middle class in Africa should be of primary interest to policy makers. Conscious economic, political and social policies should be implemented to achieve an enviable and strong middle class in Africa.