Breadline haunts the middle class in Africa

Just a step above poverty, is what a two-year research project concluded about Africa's middle class of 100million people who still have a combined spending power of more than $400-million a day.

The report, which spanned 10 sub-Saharan cities in nine countries, excluding South Africa, by the UCT Unilever Institute of Strategic Marketing and Ipsos South Africa, shows that 43% of the urban middle class is vulnerable, 25% are considered comfortable and 32% are accomplished.

The research canvassed growth in the middle class in Abidjan in Ivory Coast, Accra in Ghana, Lagos and Kano in Nigeria, Douala in Cameroon, Addis Ababa in Ethiopia, Luanda in Angola, Lusaka in Zambia, Nairobi in Kenya and Dar es Salaam in Tanzania.

Nanzala Mwaura, head of content at Ipsos South Africa, said: "We tried to represent the diversity of Africa in our research and covered Anglophone, Lusophone and Francophone countries."

"The middle class excludes anyone who earns less than $2 a day and includes those who earn $4 a day.

"This study was meant to dispel the myth that there is no middle class in Africa and that the continent only has rich and poor people," Mwaura said.

South Africa was excluded as there is wide-ranging data available on this market.

According to the research, consumers in the accomplished category have a tertiary education, greater stability in income and employment, low debt levels, access to e-mail, internet and a personal computer.

Accomplished consumers earn $19 a day, enabling them to spend more on food and clothing.

Those in the comfortable category earn $15.70 a day. They are younger than 27 years, are not responsible for their households, are less likely to provide financial assistance to families and most don't save money for emergencies.

Those who are in the vulnerable category earn $16.30 a day and less.

Even though this group earns more than those in the comfortable category, they are the most financially burdened, and have the highest debt levels and the least stable income. They spend more on education and medical expenses, but do save. As the significant part of the middle class, this group faces the risk of slipping into poverty.

The research was based on several factors including financial security, home and vehicle ownership, education, access to services and access to technology.

Mwaura said: "If you simply define the middle class by dollar terms you can get it wrong. Other things have to be looked at, such as who they are, how they live and what their aspirations are."

A breakdown of the research indicates that 71% of the middle class have an income which varies month on month. About 54% have tertiary education and 31% are studying towards improving their skills.

The urban middle class is also relatively young, with more than half between 22 and 34 years old, while only 40% are married.

"Some men are choosing to marry later in life, in comparison to their parents' generation, to gain financial muscle as life has become so expensive. The sentiment was mainly expressed in Cameroon and the Ivory Coast," the report said.

The average household for the African urban middle class is composed of a family unit of 3.6 persons.

Industry experts said the research would particularly be invaluable for South African business efforts to reach untapped markets on the continent and would enable them to tailor-make their product offerings.

"The middle class consumes and it represents an opportunity," said Haroon Bhorat, an economics professor from the University of Cape Town.

Paul Egan, managing consultant at UCT Unilever Institute, said information on Africa was vital for South African companies in order to make sound business decisions about their operations.

South Africa's slower economic growth, market saturation and a fall in the disposable income among domestic consumers are some of the challenges local companies face, while the growth of the urban middle class in sub-Saharan Africa could present an opportunity.

However, for some companies the expectation of a big payday in Africa has not materialised.

In 2015, Nestlé announced its intention to cut its African workforce due to disappointment with the growth rate of Africa's middle class.

Nevertheless, several South African companies already have interests across the continent including Shoprite and Pick n Pay, telecoms giant MTN, food manufacturer Tiger Brands, beverages maker Anheuser-Busch InBev, cement producer PPC, and Standard Bank, Barclays Africa and FNB.

The report also showed that public transport was the most popular form of commuting, as 68% of households did not have a car, which could suggest a potential market for car sales.

But for companies selling household cleaning products demand may be muted, given that 42% of households do not have running water inside the house and only 20% have hot running water. Only 69% have access to a flushing toilet inside the house and only half have a built-in kitchen sink.

Power supply is available to at least 96%, but power cuts are common and generators are used as back-up. As the continent moves towards digital migration, 64% of the middle class own a satellite dish.

A survey from the African Development Bank put the continent's middle class at 330million people in 2011, while a 2014 Standard Bank survey estimated it at 15million across 11 countries.