More bills than thrills for Africa’s middle class
A new study by Africa-focused distribution company CFAO argues that Africa's middle classes are smaller, more conservative and more fragile than others have claimed.
Africa’s middle classes are oft discussed but hard to quantify. The African Development Bank (AfDB) gamely tried to come up with an estimate of their numbers in 2011, placing Africa’s middle classes at around 350 million people. This had the merit of sparking debate, even if there were plenty who disagreed with the AfDB’s criteria of a daily income of between $2 and $20.
Seventy percent of urban growth in Africa happens in towns of under 500,000 people–don’t forget there are middle classes there
What the AfDB calls the ‘floating middle class’ is suspect, even if this group shares some characteristics with its better-off middle class peers. “These characterisations are always very fluid,” says Institut Français des Relations Internationales (IFRI) researcher Hélène Quénot-Suarez. She points to the strong regional disparities of the middle classes around the continent and their fragile nature: “There are some people for whom the end of the month is floating or poor, even if they start the month in the middle class.”
The strength of Africa’s middle classes remains a subject of controversy, particularly for companies wishing to target these consumers. In June, Switzerland based agribusiness Nestlé announced that it is cutting 15% of its workforce on the continent because it had overestimated the strength of Africa’s middle classes.
“We thought this would be the next Asia, but we have realised the middle class here in the region is extremely small and it is not really growing,” Nestlé’s Equatorial Africa boss Cornel Krummenacher told reporters.
It is unclear how much these comments reflect Nestlé’s operational issues or a wider trend, precisely because the data are so sparse. France-based distribution and retail company CFAO jumped into the breach in October, publishing the largest and most detailed study of the middle classes yet to emerge.
Choosing five countries –Morocco, Nigeria, Kenya, Côte d’Ivoire and Cameroon – and eschewing the ‘floating’ segment defined by the AfDB, research outfit Bearing-Point and pollsters Ipsos restricted themselves to households with revenue between $15 and $60 a day or $450 to $1,800 per month.
Extrapolated, that would give a middle class of around 140 million people, corresponding roughly to the superior and inferior tranches identified by the AfDB. Researchers conducted 4,000 interviews, taking between 30 minutes and an hour on each of them, with questions touching economic data, social issues and consumption habits. The study included a further 50 in-depth half-day studies.
Who did they find? What is the average middle-class household like?A picturee merges of a frugal, striving class that is fearful of slipping backwards. Its members see themselves as custodians of anew morality, one that is ‘anti-bling’.
They have stable incomes, often with several jobs and often with two people contributing to the household budget. More than 90% of them have bank accounts, compared with an African average of 15-20%. Significantly, more than two-thirds manage to save around $135 a month. While the average member of the Moroccan, Cameroonian and Kenyan middle classes carries significant debt, there is much less debt among their peers in Nigeria and Côte d’Ivoire.
These African households tend to comprise four to five people, with an average of 1.8 children. Education plays a key role in them. More than 70% of the heads of household have a degree, and four out of every five households are financing the education of at least one child. Often, the money from a side business pays for it.
A 44-year-old public-sector worker in Nigeria explained to the researchers: “If we didn’t have the taxi, we could not put the children in private school.”
The middle classes are acquisitive but also restrained. Virtually every household surveyed has a television and nine in every 10 have a refrigerator – which they fill on occasional trips to a supermarket, at least once a month.
Food represents a quarter of their monthly spending. Housing follows at 18%, and it is closely followed by education. So how do companies target these people, with their low budgets and spending? To a large extent, it’s about offering the right product.
CFAO chairman Richard Bielle points to India, where companies like Suzuki offer low-cost motorbikes and Bic sells razors individually rather than in packs of 20:”With us, after years of only having more-expensive models, Yamaha finally came up with a $1,000 model and got 40% sales growth instead of 3%.”
Small town dues
IFRI’s Quénot-Suarez also explains that distributors should pay attention to smaller cities. “Seventy percent of urban growth in Africa happens in towns of under 500,000 people–don’t forget there are middle classes there.”
And while CFAO is a gateway company for foreign brands seeking markets in Africa, its report gives some succour to local businesses. The middle classes in this study may not necessarily be politically active–Nigeria aside–with their members preferring to keep their heads down and uplift their families. But they do, however, show a strong preference for ‘Made in Africa’ products, and local manufacturers can keep one step ahead by being closer to local tastes.
Despite the arguments in the CFAO-commissioned studies that the African middle classes are small but striving, it is easy for optimism to creep in. Researchers at Bearing Point predict that Africa’s middle classes will be 900 million strong by 2040. That would be bigger than the middle classes of China and India combined – something that may get the naysayers in Nestlé to rethink their cutbacks. ●