There’s been a lot in the news of late about the size and worth of the emerging African middle class subsequent to the release of an as yet unseen report by an economist, Simon Freemantle, at Standard Bank, South Africa. The various headlines conflict each other, some say the middle class isn’t as large as earlier reported, others say its growing at a rapid clip. Their tone seems to depend on which aspect of this alleged report they support.
Instead of simply defining the middle classes by available daily spending power, as the African Development Bank did back in 2011, when they first announced the emergence of these new consumers, the Standard Bank report goes on to assess households by using the South African Living Standards Measure (LSM) as a means to segment them. But because we have yet to find a copy of the actual report itself, only articles referencing it (via a press release, to hazard a guess), there is no clarity on whether the South African LSM segmentation was directly applied to the households under consideration or whether the LSM was adapted for regional, social and cultural differences.
Even the SAARF, the South African body responsible for this evaluation tool has been questioning the validity of the LSM as it is structured at the moment. There are a few different approaches under development, from what I can tell based on a quick search online, including one which seeks to regionalize the LSM so that it can be far more accurately applied across the continent rather than for South African conditions alone. Again, we are not sure which version has been used in this new Standard Bank report.
The bottom line is that the emerging African middle class may indeed be smaller than imagined, though growing rapidly, or, that its as large as the AfDB originally estimated. That is, we still don’t know the size and worth of this consumer market. I suspect the reason for this that we’re trying to measure volatility, the underlying characteristic of the informal sector’s income streams, and that is why the goal posts seem to keep shifting.
The OECD had once said that the global emerging middle classes of today are not the same as those that emerged after the industrial revolution and established the foundations of the highly industrialized nations of the so called ‘first world’. That these new upwardly mobile and aspirational consumers were in fact emerging from the population segment originally designated as the ‘base of the pyramid’ and were less likely to have university degrees or salaried jobs.
This was also the point that Bright Simons made in his HBR article, that while it was undeniable that there was an increasingly visible pattern of conspicuous consumption happening across sub Saharan Africa, it should not be conflated with the concurrent rise of a “middle class” as the term is commonly understood.
I would first ask why are we trying to put numbers on the size of the middle class?
Are we conflating the concept of an educated white collar bourgeoisie with the corporate need for market analysis required to estimate the size and value of a market opportunity before making the decision to invest or enter a new market?
And, if so, then are the two necessarily the same thing?