African Lions: Who are Africa'

IPSOS VIEWS #15
February 2018
African Lions:
Who are Africa’s
rising middle class?
Hendrik van Blerk
African Lions
Who are Africa’s
rising middle class?
Defining the African middle class
The nature and size of the African middle class has often
been in dispute. Over the past two decades there has
certainly been a growth in those who can be classified
as “middle class” in Africa. However, these people remain
a mystery. Who exactly are they? And how can we
understand more about them?
Understanding the middle class is important to brands
wishing to grow in any market. The concept of a
middle class carries with it a sense of financial stability,
a developed consumer culture and a clear trajectory of
growth.
The task of defining the African middle class has always
been difficult due to the lack of availability of, and access
to, existing quality data. Previous estimates of the African
middle class often use different criteria and vary wildly. To
cite just a couple of examples, according to the African
Development Bank (AfDB) it consists of 350 million
people, earning between $2-$20 per person per day1. In
comparison, Homi Kharas from the Brookings Institution
puts the number at 32 million people, earning between
$10-$100 per person per day2.
2
Despite the disparities in estimates, the overriding
consensus is that the African middle class are thriving,
and with that brings new opportunities. In order to gain
a clearer understanding of the continent’s consumer
landscape, Ipsos’ African Lions study3 set out to answer
the question, ‘Who are the African middle class?’.
African Lions
Who are Africa’s
rising middle class?
The starting point
To define the parameters of the African middle class, we used the AfDB’s definition as a starting point (see graph below).
Their definition of class, based on the absolute dollar value of income or consumption, proved a useful measure for
cross-country comparisons and inclusion.
The middle class as a share of the total population, according to AfDB criteria
UPPER CLASS
6%
>$20/DAY
UPPER-MIDDLE CLASS
5%
LOWER-MIDDLE CLASS
Between $10 and $20 person/day
Between $4 and $10 person/day
9%
FLOATING CLASS
BELOW THE
POVERTY LINE
20%
60% of the total population
3
Between $2 and $4
person/day
<$2/ person/day
African Lions
Who are Africa’s
rising middle class?
Using these dollar definitions as a rough guide, we
brought in other criteria to further refine our thinking –
examining the attitudes people hold regarding money,
tradition, brands, nutrition, education and aspirations,
including how they see their wealth in relation to others.
We found that defining the middle class in dollar terms
alone was problematic. There is a clear disparity across
different markets in terms of what consumers can buy.
For example, in Lagos $4.60 would buy 10 litres of petrol,
but in Luanda the same amount would cost $11.50 (140%
more).
In addition, when we segmented the database, in order
to consider financial resourcefulness and a respondent’s
own sense of vulnerability, we identified a “floating class”
of people who earned above $4 a day (middle class
according to AfDB criteria) but who had no guarantee
against slipping back into poverty, so we excluded them
from our definition.
As a result, one of the biggest findings from our African
Lions study is that the African middle class cannot be
defined in dollar terms alone. Instead, we concluded
that there are multiple factors that determine middle
class status.
In the end, we derived a working blanket definition of the
African middle class as follows:
•
Have a disposable income (not spending more than
75% of income on utilities)
•
Employed, run a business or in further education
•
Have secondary school education and more
4
African Lions
Who are Africa’s
rising middle class?
Across the 10 cities we surveyed, we found that over 60%
of people can be defined as middle class, although this
ranges significantly by city. For example, in Dar es Salaam
69% (3m) of people are middle class, while in Nairobi it’s
49% (1.6m).
In total, our research (combined with using other data
sources in our extrapolation) shows us that there are over
100 million middle class people in Sub-Saharan Africa
(excluding South Africa) representing a total spending
power of +$400 million per day.
Middle class
(attitudinal
segmentation)
(M)
10 cities
Population
(M)
Middle class
% (attitudinal
segmentation)
Accra (Ghana)
2.3
61%
1.4
Addis Ababa (Ethiopia)
4.6
59%
2.7
Douala (Cameroon)
2.4
58%
1.4
Dar es Salaam (Tanzania)
4.4
69%
3.0
Abidjan (Ivory Coast)
4.7
56%
2.6
Kano (Nigeria)
3.3
57%
2.0
Lagos (Nigeria)
21.0
67%
14.2
Luanda (Angola)
6.5
67%
4.4
Lusaka (Zambia)
2.5
66%
1.6
Nairobi (Kenya)
3.3
49%
1.6
5
African Lions
Who are Africa’s
rising middle class?
Challenging assumptions
In many parts of the world, the notion of “middle class”
paints a picture of nuclear families, well-educated, owning
property and doing weekly supermarket shopping.
That picture simply does not exist in Sub-Saharan
Africa, outside of the affluent, and so any expectations of
the African middle class, based on comparisons to their
counterparts globally, should be significantly challenged.
6
Furthermore, generalisations about the demographic
are risky because of the disparity between countries. It’s
important to remember each city is diverse, and should
be approached differently.
African Lions
Who are Africa’s
rising middle class?
A lack of security
One common assumption that the notion of “middle class”
conjures up is a sense of lifestyle security, particularly
in property and income. 80% of our African Lions
respondents reported that they had “major unexpected
expenses” in the past year but insurance and formal
lending, although available, can be difficult to obtain.
Consequently, people use savings or borrow money from
family or friends to deal with emergencies. There is a big
saving culture amongst the African middle class - not for
retirement, but for emergencies.
Property ownership is aspired to but more people rent
(52%) than own their own homes. Similarly, car ownership
is lower than might be expected (68% of middle class
households do not own a car) and there’s a heavy
reliance on public transport. Challenging the assumption
that the middle class live in comfort, some homes lack
basic amenities associated with households that have
a disposable income. For example, most homes have
electricity but the supply is unreliable, some lack a
dedicated water supply and depend on communal taps
or the bucket system (only 42% have running water inside
the home), and only half have a built-in kitchen sink.
However, the absence of basic amenities in the home
is often for reasons beyond the individual’s control, with
poor infrastructure in many cities negatively affecting the
standards of living.
While a third of the African middle class have a formal
job, others are self-employed or have part-time jobs.
Doing the “hustle” is a popular term in the region; side
jobs and ventures such as selling goods on a stall in the
evenings to bring in extra money each month. We hear
people saying it’s not possible to survive on a single job
alone, and this sentiment is echoed by three-quarters of
our African Lions respondents who say that their income
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varies month-to-month. Seen as pivotal to success, there
is also a big emphasis on education, with 54% of the
middle class having some form of education post high
school and 31% studying further to improve their skills.
The role of remittances
Remittances play an important role in the region. In the last
five years, the amount of money sent home by Africans
working abroad in other markets – including the UK, the
US and the Middle East – has exceeded any World Bank
bailouts or cash inflow. Up until 2005, remittances
accounted for less than 5% of all capital inflow but that
figure is now rising towards 30%4. The misconception
of Africa as always being dependent on International
Monetary Fund (IMF) bailouts is fast changing.
African Lions
Who are Africa’s
rising middle class?
“Doing the “hustle” is a popular term in the
region; side jobs and ventures such as selling
goods on a stall in the evenings to bring
in extra money each month.”
8
African Lions
Who are Africa’s
rising middle class?
Understanding the African shopper
While there has been some growth in the formal retail
sector, the much larger informal market continues to
play a crucial role in people’s lives across the region5&6.
Many of the African middle class buy their goods at the
local store, open markets and from street vendors. There
is a lack of formal supermarkets, with regimented stock
control and brand management, and change remains a
slow process.
Before going to market with a new product, marketers
need to consider the dynamics at play within consumer
purchasing patterns. On a continent where wallets are
stretched and earnings are unpredictable, even among
the middle class, people often only buy what they need
when they have the money. Bulk buying offers value to
those who can afford it, however, products are regularly
packaged into smaller units to suit people’s needs. For
example, if a shopper can’t afford a whole roll of mints,
or a pack of cigarettes, the shopkeeper might sell them a
couple of mints, or an individual cigarette. In fact, laundry
detergent brands like Ariel produce strings of washing
powder sachets to be sold as single units for one wash.
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Furthermore, buying in small units agrees with those who
simply do not have the storage space in their homes for
multiple items.
Brand power in Africa
Brands are important to the African shopper. Yet, although
people are generally positive about brands, and aspire to
own the well-known ones, they believe marketers need
to adapt for their own market. For example, in Nigeria,
people are willing to accept foreign brands entering the
market but they want to know what these brands are
doing for Nigeria specifically.
Telecoms companies have enormous brand equity and
have made a significant impact across Africa. Much of the
middle class have a smartphone, using it for messaging,
social media and to run their various ventures. It’s not
uncommon in places such as Nairobi to hear of people
saying; “I’ve got 5,000 Facebook friends and I need to
be in contact with them all because of what they could
potentially offer me… that’s where my income might
come from tomorrow”. It’s a highly connected, savvy and
technologically advanced market, due to the rapid rate
of smartphone adoption. Mobile is often the only form of
internet connectivity in Sub-Saharan Africa, providing a
connection for a previously unconnected population. Key
factors supporting the growth of smartphone adoption
include the increasing affordability of new devices, a
growing market for second-hand devices, and the uptake
of mobile broadband services7. As a result, technology
brands have experienced great success in the region.
African Lions
Who are Africa’s
rising middle class?
Moving to food and drink, locally produced brands
have had success across several African markets. For
example, in Kenya, Keringet water is a well-regarded local
brand that resonates well with consumers. In Nigeria,
Peak milk is an iconic Nigerian brand that speaks to
consumers across generations and has dominated the
dairy market since its launch 60 years ago. Established
more recently, eeZee noodles in Zambia is the country’s
first indigenous noodle brand and has quickly developed
a strong reputation as a homegrown brand and market
leader since hitting supermarket shelves in 2012.
Interestingly, there are South African consumer brands
that are successful in South Africa, but have failed when
they have launched in other parts of the region. It’s not
advisable to just take a successful product from one
market, move it elsewhere, and expect shoppers to buy
it. Firstly, you need to consider the entire retail landscape,
10
including the undeniable appeal of local brands, to try and
understand consumer behaviour. It’s important to think
through how the brand is launched and advertised, to
speak the language of the consumer, modernise what
is already appreciated and acknowledge local culture
and tradition.
Traditions play a significant role in people’s lives,
particularly where food is concerned, and the preference
for traditional food is not easily displaced. Traditional foods
are considered trustworthy and nutritious; consumers
shop at open markets for fresh goods because they
have confidence in the origins. In developed Western
countries, there’s currently a whole movement towards
understanding the origins of food, but in Africa this
phenomenon has been around for a long time.
African Lions
Who are Africa’s
rising middle class?
Considerations for marketers
Marketers require simplicity and it’s not practical to have
multiple strategies for different cities. Unfortunately, if
you take a simplified approach of merging everything
together, you risk ending up with bland and difficult-touse segmentations. On the other hand, if you carry out
multi-country studies in the region and segment each
market in turn, you uncover more useful data, but this can
be time-consuming. Getting the balance right is key.
The African Lions study is a useful guide to the region,
providing data on consumer behaviours, attitudes
and relationships to a range of product categories and
brands. It provides a rich context for the astute marketer
who would like to carry out more focused qualitative or
quantitative research in relation to their specific project. It
is also a powerful platform to explore product or concept
innovation strategies.
A good starting point is to take a basic cross-country
view or segmentation, but also work hard within your
separate individual target markets for a more detailed and
localised overview. Use your key strategy as a starting
point, then build it up substantially for each market.
“A good starting point is
to take a basic cross-country
view or segmentation,
but also work hard within
your separate individual
target markets for a more
detailed overview.
Use your key strategy as
a starting point, then
build it up substantially
for each market.”
Understanding disparity
Understanding the disparity between countries in SubSaharan Africa is crucial – what works in Nigeria is not
necessarily going to work in Kenya, and what works
in Angola might not work in Zambia, and so on. Many
companies have burnt their fingers in the past by rushing
in with the approach; “Oh, there’s a growing middle class
in Africa and it’s the fastest growing economy in the world,
let’s just get in there!”, without sufficiently considering
these differences.
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African Lions
Who are Africa’s
rising middle class?
Looking to the future
Assuming these economies continue to grow, the
African middle class demographic will continue to surge
- irrespective of commodity driven economies - because
of the growing young population, urbanisation and the
entrepreneurial spirit. Africa’s urbanisation rate is already
at 37%, comparable to China and bigger than India.
Between 2020 and 2050, Africa is expected to be the
world’s fastest urbanising region8.
When looking to the future, we can also expect standards
of living to improve, although perhaps incrementally.
Substantial growth in the urban population across the
whole region will result in better access to jobs, but
it will also put a huge strain on infrastructure. Across
many markets there are already plans to tackle the
infrastructure challenge, including improving power
supply and transport systems, and this will be vital to
enabling a major economic shift.
Despite the continual challenges, those belonging to the
African middle class are characterised by their strong
sense of positivity and hope. This feeling of optimism is
further sealed by the fact that two-thirds of the African
middle class are younger than 35, a demographic
dividend signifying an overwhelmingly positive forecast in
terms of spending power growth. Marketers take note –
the African Lions are indeed rising.
12
“Despite the continual
challenges, those belonging
to the African middle
class are characterised
by their strong sense of
positivity and hope.”
African Lions
Who are Africa’s
rising middle class?
References:
1
AfDB (2011). The middle of the pyramid: dynamics of the middle class in Africa. African Development Bank Market Brief.
2
Kharas, H. (2010). The emerging middle class in developing countries. OECD Development Centre. Working Paper No. 285.
3
The African Lions Study (2017). Ipsos and The University of Cape Town Unilever Institute of Strategic Marketing (see box below for more detail).
4
Amadou Sy (2015). How finance flows to Africa.
5
ATKearney (2015). The African Retail Development Index. Retail in Africa: Still the Next Best Thing.
6
Deloitte (2015). African Powers of Retailing, New Horizons for Growth.
7
GSMA (2017). The Mobile Economy, Sub-Saharan Africa 2017.
8
United Nations (2014). World Urbanization Prospects – 2014 revision.
The African Lions study
The African Lions study was run as a partnership between Ipsos and The University of
Cape Town Unilever Institute of Strategic Marketing, with support from key clients.
The study comprised desk, qualitative and quantitative research spanning 10 major
African cities: Abidjan (Ivory Coast), Accra (Ghana), Addis Ababa (Ethiopia), Douala
(Cameroon), Dar-es-Salaam (Tanzania), Kano and Lagos (Nigeria), Nairobi (Kenya), Luanda
(Angola) and Lusaka (Zambia).
Taking over 18 months to complete, the study involved 150 researchers and thousands
of interviews, yielding over 300 hours of video footage. It provides a demographic profile
for the much talked about African middle class and explores topics including household
finances, nutrition, shopping, brand relationships and media usage.
For more information on this research, please contact Hendrik.VanBlerk@ipsos.com
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African Lions
Who are Africa’s
rising middle class?
Hendrik van Blerk
Account Director, Ipsos Marketing, SA
Contributor:
Nanzala Mwaura
Head, Ipsos Connect, SA
www.ipsos.com
@_Ipsos
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