Africa's Economy Thriving on 'Influenced Spending'

''As African economies grow, the growth is trickling down and people have more disposable income. Their spending patterns are being dictated and shaped through media and other influences as Africa ‘opens up’." This statement is from a report by Deloitte Africa, The Rise and Rise of the African Middle Class published this year.

The question as to who belongs to the middle class in Africa has remained debatable but varying statistics have shown that the middle class has been growing over the years. The African Development Bank (AfDB) defines the African middle class as those spending between US$2 (KES 170) and US$20 (KES 1,700) a day.

In Kenya, and true for many African countries, the category of people described by the report as middle class fit the description that spending habits have been influenced by the media, world trends and the urge to achieve satisfaction of what society has defined as the good life.

The middle class

The report describes the African middle class as people who live in urban centers residing in bigger and more permanent dwellings equipped with modern amenities. Most of them have attained higher levels of tertiary education, hold salaried jobs, are small business owners, young and in the acquisitive phase of life. They usually have fewer children than previous generations and their rural counterparts. This group of people is generally aspirational in life and do not derive income from farming and other rural based economic activities.

The middle class, the report says, in terms of asset ownership as owners of major household durable goods such as refrigerators, telephones, flat screen TVs and automobiles. They have more recreational time, embrace technology, are politically assertive and culturally self-confident.

Influenced spending

This description fits enough people you see on the streets of Nairobi and it would easily justify the "influenced spending" bit of the story. Thriving malls, increasing fashion stalls, branded eateries and hang out zones are some of the businesses targeted at middle class individuals who most of the time work with the 'me too' mindset.

In Kenya, up to the late 20th century, traditional large attendance weddings mostly taking place in rural churches were a common site. However, this is fast fading away with the emergence of the said middle class. This is qualified as influenced spending as more disposable income sets up wedding planners to convince the parties to take the more convenient and fashionable or classy options of garden weddings.

All roads leading to Nairobi's city center are lined with numerous motor bazaars full of sleek cars with all options from financing to insurance available for the buyers. The middle class are the target market for this vehicle marketers and the way the products are put to them, it leaves them with little room to resist the temptation of owning one, when they can manage to save up for one.

African consumers want the same as consumers elsewhere – a mobile phone, a bank account, and the latest Beyonce CD bought in a store at a shopping mall, the report says. And indeed, shopping malls are sprouting in the continent’s major capitals - Dakar, Lagos, Accra, Nairobi and Lusaka. Africa’s growth is being primarily driven by the consumption of goods and services – retail, financial services and telecommunications with consumption accounting for two thirds of Africa’s GDP growth contrary to perceptions of it growing on the back of mining and commodities.

The middle class stands at 313 million in 2010 equating to 34.3% of the population up from 151.4 million or 27% of the population in 1990. With those numbers, and that growth rate, it's definitely a market to tap into.

 

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