The article in the Financial Times from last weekend ( April 19/20, http://www.ft.com/intl/indepth/the-fragile-middle) mentions how Africa has effectively developed a new middle class numbering 115m in 1980, reaching 326m in the past years. But only 14% (44m) have only firmly achieved that status earning between USD 10-20/ day. Others are still floating taking home around USD 2-4, ie. living barely above the poverty line, and the ” lower middle” making USD 4-10 a day.
Africa’s middle class is with 33% still the smallest compared to other emerging regions, e.g., 77% in Latin America and 56% in developing Asia.
Nevertheless, Africa represents a huge opportunity for retailers ( Shoprite just opened 150 outlets in 16 African markets). Sixty percent of the African population is under the age of 25 presenting a guaranteed consumer base for the coming years.
However, at the same time, some consumer goods companies start to sound more cautious. In Nigeria, results for Unilever and Nestlé showed a significant slowdown in turnover and profit. Reasons given are rising inequality and growth in sectors generating little employment such as natural resources.
So… What can we do to keep many more Africans in the middle class and graduate many poor into it?
Microinsurance? Protecting people against the backlash of a family member dying (funeral insurance) and having to pay high funeral cost, or a family losing the bread winner and reciving support inpaying back the loan to the MFI (credit life insurance) are good options to protect people to slide back into poverty.
Financial education? Helping people better understand hoe to save and hoe to rotect themselves against potential backsliding.
Responsible lending! No matter if for microentrepreneurs or for salaried people, banks have to ensure that the client understand what he is getting into and what the risks are if the microloan or salary loan is not repaid.
Business Development Services? Especially entrepreneurs might sometimes need some support when doing their cost analysis, developing their internal control measures, or improving their governance.