by Piet Coetzer

Opportunities and challenges of middle-class growth

Population growth of the continent challenges economic ascendency

Africa connected
Africa connected.JPG

The middle class in Africa has tripled over the past 30 years from 111 million in 1980 to 313 million in 2010, or from 26% of the population to 34.3%. On the back of relatively strong economic growth, the trajectory suggests growth to 42% or 1.1 billion by 2060. Besides opportunity, however, the continent’s population boom presents a dilemma.

A just-released report by consulting company Deloitte and Touche (D&T) – The Rise and Rise of the African Middle Class – concludes that with African economies representing seven of the 10 fastest-growing economies in the world, wealth is trickling down. Africa now has the fastest-growing middle class in the world.
The study by Dr. Jacqueline Chimhanzi, Lead: Africa Desk, and Anushuya Gouden, Partner: Head of Africa Desk at D&T, found that the colluding of a number of social and demographic actors is driving a new wave of consumerism on the continent. 
Africa’s growth, contrary to the popular perception that it is driven by mining and commodities, is primarily driven by consumption of goods and service to the tune of two-thirds of GDP.
These social and demographic factors include:
• As Africa’s economies grow, income trickles down and people have more disposable income with spending patterns dictated and shaped by media and other influences as the continent opens up; 
• Africa’s population is disproportionally young, with 62% under 25, guaranteeing a consumer base for years to come; 
• There is a trend towards urbanisation with rapid growth of African cities and an accompanying increase in income, albeit informal. The urban/rural divide is illustrated by the fact that although only a third of Africa’s population is urbanised, it accounts for 80% of total GDP. By 2060 50% of the population will be living in cities; and 
• Statistical data shows a link between those African countries with very low internet access and low levels of health, education and income, indicating a connection between social gaps and the digital divide.
The report concludes that internet access is both an indicator of socio-economic well-being as well as a predictor of participation in the mainstream economy.
“ICT access is increasingly being seen not as a luxury but as a very necessary tool for development.
“In Africa, the mobile phone is a tool that is, at once, equalising and empowering and has allowed those marginalised in society to participate in the mainstream economy.
“Africa became the most connected region after Asia in late 2011, with 616 million mobile subscribers.
“With new mobile telephony applications continually being developed in areas such as banking, health, education, agriculture, it is clear that lives will also continue to change qualitatively,” the report states.
The D&T study found that a 10% increase in mobile phone penetration is linked to an increase of 1.2% in a middle-/low-income country’s GDP due to the ensuing economic activity that people engage in as a result of being “plugged in” and connected.
The report states that the biggest implication of the emerging African middle class is for consumer goods and services such as consumer business/retail (both food and clothing), technology, mobile and telecommunication (TMT) entertainment, financial services and healthcare. But there is also a spill-over effect into other areas such as  construction, infrastructure development and agriculture.
The report, however, warns that despite glowing statistics and a continent that is “directionally correct”, it is important to remember that 61% of the population still survives on less than two US dollars a day.
African people are generally entrepreneurial and often supplement their formal income in various ways.
“While this informal sector is significant in Africa, it is unaccounted for. However, for illustrative purposes, Mozambique is growing fast but still remains one of the world’s poorest countries yet ... is one of South Africa’s top five contributors towards tourism in terms of spending as Mozambicans visit South Africa frequently for shopping,” the report quotes South African Tourism as recording.
On how the rise of the African middle class manifests itself, the report states: “In the markets from Senegal to Swaziland, new traders are setting up mini ‘supermarkets’ stalls selling everything from mobile phone sim cards and phone credit vouchers to  30g sachets of Sunlight and Omo washing powder that appeal to consumers with cramped homes and cramped budgets."
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Issue 393


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