Africa has experienced substantial growth in its middle class over the past 14 years, according to a study by Standard Bank.
The report, entitled ‘Understanding Africa’s Middle Class’ found there are 15 million middle-class households in 11 of sub-Saharan Africa’s top economies this year, up from 4.6 million in 2000 and 2.4 million in 1990, an increase of 230% over 14 years.
However, of the total number of households across these focal economies, 86% of them remain within the broadly “low income” band, emphasizing the nascent maturation of many of the continent’s markets.
The report also found that the combined GDPs of the 11 measured economies had grown tenfold since 2000.
The study uses a proven methodology widely employed in South Africa. The report, based on the Living Standards Measure (LSM), gives investors to Africa data on which to base their investment decisions.
In the past, the conventional wisdom was that as many as 300 million Africans are categorized as ‘middle class’. The report points out that investors using an unquantifiable assumption might find individuals they had thought were middle class were in fact highly vulnerable to lose that status in any economic shock.
The report suggests that while the middle class may be smaller than previously thought, two factors should give investors greater comfort: by any methodology Africa’s middle class is growing strongly, and Africa’s income accumulation is far more broad-based than had previously been thought.
Standard Bank senior political economist Simon Freemantle, author of the report, says the new report is cause for optimism among investors as it suggests even greater scope for future growth, and indeed the report forecasts acceleration in the accumulation of middle-class households in Africa.
Commenting on the lower than anticipated total number of middle class households, Freemantle says any view “concerning the undoubted ongoing improvement in Africa’s economic performance has to be tempered with the reality that the level of this growth and the nominal size of the continent’s middle class had not until now been adequately measured.”
He said the 11 focus economies are Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda and Zambia.
Furthermore, while figures for 1990, 2000, and 2014 all contain more lower-middle class than middle class households, by 2030 it is expected there will be notably more middle-class households than those in the lower-middle-class bracket (19.2 million versus 22 million).
Freemantle says: “The swifter pace of middle-class growth is critical in its suggestion of a more marked income ascent in the next decade and a half, compared to the period since 2000.