Africa, over the past 15 years, has seen robust economic growth and made strides in governance and stability.  While it is difficult to generalize about the state of an entire continent, it is doubtless that fewer Africans live in abject poverty and an African middle class is growing into consumers for international goods and services.

While many Western banks and investors are eager to profit from this new and developing market, it is important that they remain aware of the realities of the African market for consumer goods.

Africa has begun to emerge from decades of violence and corruption, which only help to keep people impoverished.  In the past twenty years, the number of major conflicts in Africa has been reduced from twelve to just four.  Increased peace and stability not only increase people’s ability to provide for their families, but also increases consumer confidence.

Additionally, the number of democracies in sub-Saharan Africa has grown from three in 1989 to 23 in 2008.  Better governance and transparency has made it easier for people to start businesses and for outside investors to participate in African economies.

The middle class in Africa is defined as those living on USD $2-$20 a day, though those making between two and four US dollars are considered to be a ‘floating class’.  This group is highly susceptible to being pulled back into poverty in the event of a food crisis or if the major breadwinner in the family should lose their ability to work.  They are, however, part of the recent spending boom in Africa.

Consumer spending is expected to rise from USD $860 billion in 2008 to a projected USD $1.4 trillion in 2020.  In the past decade, six out of the ten fastest growing economies in the world were in Africa, with Ghana leading the charge with a growth rate of 13% annually.  All this has been highly encouraging to Western investors, eager to cash in on the growth of a new market while debt and banking issues slow economic growth at home.

Much of the information about the growth of the African middle class has not been entirely accurate, however.  These hopeful facts and statistics do point to positive trends, but the African middle class is not homogeneous, nor does it have all the characteristics of middle classes in the West or in Asia.

It is important to bear in mind that Africa is home to an incredible diversity of people and cultures, and the middle class in South Africa will likely have different habits than middle class folks in Rwanda or Mali or Ghana.  Additionally, certain accomplishments, such as a college degree, are considered requisites for the middle classes in the West or in Asia, but in Africa this is less true.

Middle class Africans are often involved in entrepreneurship, or in importing goods for sale in their local communities.  Many investors make assumptions about middle class Africans based upon the spending habits of middle class populations elsewhere, but the economic outcome of the growth of the African middle class is likely to look very different.

– Abigail Hanson
Sources: UHY, World Bank, Harvard Business Review