Posts Tagged ‘informal bourgeoisie’

Africa’s Middle Class: Development economics and marketing demographics conflating the holy grail

The most developed nation on the African continent, south of the Sahara desert, is considered to be South Africa with its financial and transportation infrastructure and systems, a legacy from history. In the first decade of the 21st century, the black middle class – known as Black Diamonds in marketer jargon – came into prominence on the back of numerous economic initiatives after the fall of apartheid.

img-south-africa-consumer-goods-02The rise of the Black Diamonds was meant to be the signal of a changing rainbow nation, one whose peoples would finally be included in the social and economic advancements long enjoyed by a privileged minority. This emerging middle class was also among the first to be noticed as African consumers in their own right, and their discovery pioneered the subsequent search for the now mythical African middle class. Even then, their total number was under scrutiny for its aspirational inclusivity versus actual households fitting the conventional definition of a middle class. From The Economist writing in 2007:

The University of Cape Town’s Unilever Institute of Strategic Marketing says there are now 2.6m “black diamonds”, as it calls the black middle class, a 30% increase in less than two years. Included in the definition are working professionals; those who own things such as cars, homes or microwave ovens; university students; and those who merely have the potential to enter these categories. The survey estimates that these black diamonds represent 12% of South Africa’s black adults, and make 180 billion rand a year ($26.2 billion), or 28% of the country’s (and more than half of all black South African) buying power.

For some, such as Lawrence Schlemmer, a sociologist in Cape Town, this definition is far too broad to be meaningful. He agrees that numbers are rising fast but argues that they are still tiny. Last year, he says, only 322,000 black South Africans (less than 1% of the black population of 38m) could be deemed “core” middle class, a far cry from 2.6m black diamonds.

Still, whatever their size, the buppies are affecting the economy and the political landscape.

This week, a comprehensive new survey by the South African government shows the on the ground reality in 2016. The National Income Dynamics Study (NIDS)‚ launched by the Department of Planning‚ Monitoring and Evaluation (DPME) in Pretoria surveyed 28‚000 people who were tracked every two years from 2008 to 2015. Very similar in fact to the recent household panel survey completed in India. Even their conclusions resemble each other:

According to the study‚ those in the middle class have a tendency to drop in and out of poverty.

And the size has not actually changed much since 1993 – the year before the fall of apartheid and the election of Nelson Mandela.

The study also shows that the South African middle class is much smaller than estimated‚ sitting at around 14.5% of the total population in 2014. Women are more affected by poverty, and even those who manage to climb the ladder may slip down again.

“…It has not grown much since 1993 — growing its share by only two percentage points in the past 23 years…”

20151024_mac237And, perhaps, the real challenge we face with the ongoing search for Africa’s middle classes is the conflation that took place back then between a consumer marketing segmentation and a socio-political demographic.  By allowing the aspirational reach of the consumer marketing driven research to inflate the size of the segment classified as middle class, it has given rise to an ongoing and complex muddle across teh entire continent. As the AfDB’s former president Donald Kaberuka said last year:

“I think we are wasting too much time on the definition of the middle class and the cut off point, it is a sterile debate.

“A dynamic middle class that rises with the sea increases domestic demand, the diversity of the economy, [its] resilience, and they also stabilise the politics of a country as well, since they have a stake in the system.”

He has a point. But perhaps not the one he intended to make. Instead, if we consider disentangling consumption and demand for consumer products from the increase in political voice and “stake in the system”, we may in fact discover that there is indeed a sizeable bourgeoisie emerging even though they may not possess all the qualifying criteria traditionally attributed to a middle class per se. (Previous posts on this topic have been tagged informal bourgeoisie)

There’s the demographic segment which is the middle, and then, there’s the conceptual body of solid citizens invested in the democratic stability and economic growth and development of their countries. As Jacques Enaudeau wrote in 2013:

But fixated on wealth, the discussion on middle classes in Africa misses out on the other two pillars of social stratification: social status and political power.

As soon as those two are factored in, discussing the “African middle class” as a homogenous entity seems absurd, and so it should. Thinking that what separates the senior civil servant from the street hawker or the country head of a multinational from the shop owner is a matter of daily expenditure amounts to looking at their reality through the wrong end of the telescope: the bigger picture is that they live in different worlds.

In the developing world, the formal sector with its white collar jobs populated by university graduates may jostle cheek by jowl with the informal economy’s life lived on the street but that proximity might be on the only thing they have in common.

For here lies the rub: the material culture that the notion of “middle class” posits as shared consciousness is articulated to a strong sense of individualism, which is borderline contradictory with the idea of class. All the more reasons for the analysis to consider the representations which members have of themselves as a group and the historical context in which such groups are being shaped.

This, however, is not the post to unpack those complexities of self image and collective consciousness. It’s one which pauses to ponder the newest set of findings on the dynamic nature of poverty and wealth in the more uncertain and volatile operating environments of the still developing world. And considers the South African example introduced today:

There has, however, been considerable demographic transformation within that band of the middle class, with Africans now outnumbering whites by about two to one, the report said.  Factors driving the surge include greater access to credit, improved education levels, BEE and improved economic growth until recently.

Transformation of societies is underway, just as the Indian researchers concluded in their analysis. This might be a much larger global trend underway, whose weak signals we’re just beginning to pick up now. I’ll be following up with these musings on the blog. The people with the real problem on their hands are the consumer companies looking to justify entering the African markets, and perhaps that’s a topic to take up in the next article.

Segmenting the African Middle Class without dollar figures

Continuing the thinking from my previous post on the various attempts to size and value the potential of the emerging African middle classes based primarily in dollar figures, I thought to take a step back from income data to see if I could approach the challenge of segmentation in a different way. Below is the chart estimating the size of the original emerging African middle classes as posited by the African Development Bank back in 2011.

That is, rather than simply segmenting by range of daily expenditure i.e. $2 to $4 or $10 to $20 a day, what if we took a closer look at the reasons behind the spending and segmented by consumer mindset and buyer behaviour. After all, given the size of the informal sector in the majority of African countries and the percentage of population relying on irregular income streams from a variety of sources, few can confidently expect to spend exactly $4 each day. There might be times of abundance when hundreds of dollars may be available, and big ticket items purchased like colour television sets, offset by times of scarcity when one might just be making ends meet. Variability in cash flow is an inherent characteristic of entrepreneurship, regardless of income bracket or revenue sources. Furthermore, we can add geography as a factor, since urban expenditure is of a highly different nature than that in rural regions. Taking all of this (and more, based on years of observations in the field among consumers) here is my version of consumer segmentation of the same demographic as covered in the chart above.

Descriptive segmentation of consumer behaviour

The Middle class – traditional definition, white collar jobs, steady paycheck, education/professional qualifications, closely aligned with “upper middle class” in the AfDB chart.

Emerging “middle” or rather the increasingly visible African consumers – non traditional (OECD cite), rapid upward mobility, primarily based in informal sector trades and services, newly successful entrepreneurs, small businessmen, extremely ambitious

Floating class 1 (“Brass Ring Syndrome“) – seeking status signifiers that are the ‘brass ring’, that is, they are ready to leap upwards, are almost there, focused on investing in future revenue generation opportunities, aspirational, may tend to be seen more in rural areas than urban.

Floating class 2 (“Fragile” or “Newborn”) – seeking footholds to gain enough stability to balance upon so as to make the leap for the brass ring, saving to invest in future revenue generation, hungry for more (not food but a mindset, as in hungrily seeking upward mobility), they may include the youth startups, tech entrepreneurs and all looking for the “something”, maybe more urban, and in the African contextual usage of the word “hustling” for the opportunity.

“Bottom of the Pyramid” –  The $2/day demographic made famous by CK Prahalad,  they are the pool from which the above three segments are emerging and are critically important in Africa in a way that they aren’t in opposed to India for instance because they don’t think of themselves as permanently poor, just temporarily cash crunched, especially migrant workers. Very, very different consumption behaviour between urban  and rural in this segment. They may indeed form the rural version of Floating Class 2.  I include them here because AfDB segmentation starts at $2.

Concluding thoughts

Once one’s mindset has evolved into considering oneself as part of a certain lifestyle, even if one’s income is “floating”, there are changes in buying habits that remain as part of this upward mobility. An example is that of the milk ATMs in Kenya. That is why I believe that taking a closer look at shifts in household consumption patterns as indicators of emerging into the so called “middle class” may offer more valuable insights for consumer market analysis than attempting to segment by dollar figures alone.