Tuesday, December 27, 2011

Africa's burgeoning middle class brings hope to a continent

Africa's burgeoning middle class brings hope to a continent

A new financial assertiveness and cultural self-confidence is growing, fuelled by technology
African middle class family in Lusaka
The Kapayas in Lusaka boast all the hallmarks of a middle-class lifestyle but try to maintain their rural family values. Photograph: Georgina Smith
At the end of another of Kinshasa's potholed roads, lined with shacks and crumbling matchbox houses, comes a sudden clearing. It is a sandy patch of land surrounded by water in which bare-chested boys in dugout canoes paddle among the hyacinths. A giant pump is working day and night, reclaiming land from the sandbanks and river beds, expanding the city in defiance of nature.

Welcome to La Cité du Fleuve – River City, or "the new Manhattan" as this multibillion-pound development has been hopefully described by newspapers in the Democratic Republic of the Congo (DRC). Just 15 hectares (38 acres) now, but aiming for 380, it is perhaps the most ambitious statement yet about Africa's improving fortunes – and the promise of a growing African consumer class.

River City is backed by a British hedge fund that specialises in counter-trend betting and, says the developer Robert Choudury, "a bigger counter-trend is hard to find". Ravaged by war and disease, DRC ranks bottom of the UN's human development index. More than half the population is living on less than $1.25 a day and only 2% of roads are paved.

But change is happening all over Africa and it looks possible, even here. Sitting with an iPad on his desk in the only building completed so far, French-born Choudury likens the project to Sandton, the commercial heart of Johannesburg often described as the wealthiest square mile on the continent.

His plans include a 18,000-square metre shopping mall and 100-room hotel built by South African entrepreneur Richard Moloko, plus churches, condominiums, hospitals and restaurants, "everything you need" away from the mayhem of Kinshasa's overcrowded, overpriced real estate today.

It is hoped that hydro-power from the nearby Congo River will provide more than a third of the new district's energy needs. All this could take decades, but Choudury has already sold four apartments – to Congolese buyers – for $218-250,000 each.

When Choudury, 52, was first trying to drum up interest in the development, he took out an eight-page newspaper advert with the words, "The future is Africa". The claim seems more and more credible.
Africa's middle class is a reality and widening by the day. It is a trend marked by changing lifestyles, greater spending power, more recreational time, the harnessing of technology and a new political assertiveness and cultural self-confidence.

The African Development Bank (AfDB) says Africa's middle class had risen to 313 million people in 2010, 34% of the continent's population – compared with 111 million (26%) in 1980, 151 million (27%) in 1990 and 196 million (27%) in 2000.

The bank's report defined middle class as people who spend the equivalent of $2-$20 (£1.30-£13) a day, saying this is appropriate given the cost of living for Africa's near 1 billion people. It acknowledged that many living on $2-$4 a day are "floating" and could easily slip back into poverty. Taking these people out of the equation, it put the stable middle class at 123 million, 13% of the population. But AfDB is bullish about the future, predicting the African middle class will grow to 1.1 billion (42%) in 2060. By then, those living below the poverty line will be in the minority (33%). Mthuli Ncube, the bank's chief economist, describes the trajectory as "unstoppable".

Others, such as the OECD and World Bank are less confident, yet a body of research is starting to build an alternative narrative about Africa. The Economist magazine, which in 2000 ran a cover story headlined "The hopeless continent", has just performed a U-turn with "The hopeful continent".
While the headlines in 2011 were grabbed by revolution in north Africa and famine in Somalia, the underlying mantra of the past decade has been growth, growth, growth.

The International Monetary Fund (IMF) expects Africa to have grown by 6% this year and grow by nearly 6% in 2012, roughly the same as Asia and in stark contrast to the eurozone. Over the past decade, six of the world's 10 fastest-growing countries were African. And in eight of the past 10 years, the African lions have grown faster than the Asian tigers.

One of the most striking examples is Nigeria, where GDP rose five-fold from $46bn (£29bn) in 2000 to $24bn (£158bn) in 2011, according to the IMF. A survey by Renaissance Capital found that nearly half of the country's middle class (defined as an average monthly income of $500-$600) were planning to buy fridges, freezers and other white goods, "suggesting a consumer boom is under way".

Africa has a young, fast-growing, fast-urbanising population. Many countries have benefited from a commodities boom and a 10-fold rise in foreign investment in the past decade, notably from China. Africa's productivity is growing by nearly 3% a year, compared with 2.3% in the United States. Arguably, governance is improving, elections spreading and dictatorships and wars declining.

Perhaps the most tangible catalyst is technology. The mobile phone is fast becoming as much an African symbol as the leopard or baobab tree.

A Gallup poll this year found they are owned by 71% of adults in Nigeria, 62% in Botswana and more than half the populations of Ghana and Kenya. The continent is the world's fastest-growing mobile phone market, according to the industry group Groupe Spéciale Mobile Association – Africa's 600m users make it second only to Asia. Subscriber levels have grown by almost 20% for each of the past five years, and the total is expected to hit 735 million by 2013.

Around a 10th of Africa's land mass is covered by mobile-internet services – a higher proportion than in India. This has allowed Africans to leapfrog poor landline infrastructure, which had been a brake on progress. Many will get their first internet experience on a mobile rather than a desktop computer, using services that are revolutionising commerce, farming and healthcare. Almost 18 million Kenyans use their mobiles as a bank account to deposit or transfer money and pay their accounts – contributing 8% of GDP.

Technology startup companies are flourishing in hubs in Kenya, Nigeria, Rwanda and South Africa.Internet penetration is still relatively low at 120 million users, but catching up fast: the growth rate between 2000 and 2011 was 2,527%, compared with a world average of 480%. These include around 32 million Facebook users. In all, 27% of African internet users have Facebook profiles, compared with 18% of users in Asia.
The spread of wireless-equipped coffee shops and shopping malls such as the Accra Mall in Ghana, The Palms in Lagos, Nigeria, and Westgate in Nairobi, Kenya, reflects the rise of the African consumer. Their spending is projected by the McKinsey Global Institute to reach $1.4tn (£900bn) in 2020, up from about $860bn (£550bn) in 2008. Retail giants such as Walmart are coming for a piece of the action, as sales of fridges, TVs and mobile phones have surged in virtually every African country in recent years, AfDB says.
Possession of cars and motorcycles in Ghana, for example, has risen by 81% in the past five years.

The African middle classes are more likely to have smaller families, own their homes and have salaried jobs or small businesses. They tend to opt for private education and health services and send their children to overseas universities. Some are turning into conspicuous consumers, running up debts on credit cards like their counterparts in the west.

But it's not all about lifestyles. A web-literate generation, with preoccupations beyond where the next meal is coming from, can self-organise and take on autocratic leaders, as seen in Egypt, Libya and Tunisia this year. Mo Ibrahim, a Sudanese mobile phone entrepreneur and campaigner for improved Africa governance, believes the middle class will be an agent of change.

"I think they're going to play a crucial role, because it does tend to be the educated young sector of the population, and those guys are better educated than our generation and much much better informed," he told the Guardian in Tunis. "They're growing up in a society which has lots of media around them – satellites, TV – they watch everything that's going on around the world. You have so many newspapers, you have the internet, you have mobile phones, you have all these things. In our times we had only one newspaper published by the government, one TV channel run by the government."

However, Africa is still the world's poorest continent, with life expectancy in some countries stubbornly below 50. Economic growth does not necessarily mean shared growth: in some cases it means widening inequality, most vividly in South Africa. Nor does it necessarily bring about genuine democracy, as some of Africa's strongest performers – Angola, Ethiopia – are ruled by autocrats.

Climate change and the threats of deforestation and land-grabbing have not gone away.
Kofi Annan, a former UN secretary general, warned that the gap between the elites and the majority still has to be bridged. "We would want to see development that improves the lives of all," Annan, now chair of the Africa Progress Panel, told the Guardian. "That is one of the reasons why we have been stressing the achievement and implementation of the MDGs [millennium development goals] and the governments making sure that the deals they are making for the exploitation of mineral resources, and the benefits that accrue from that, affects the population.

"We are not out promoting the establishment of a consumer class. Of course that is part of it, and it creates markets which encourages companies to invest, but the objective is to improve the lot of the entire population."

However, there is once again a "wind of change blowing through this continent", albeit different from the one Harold Macmillan was describing in 1960. It can be felt in places such as Maputo in Mozambique, where last year African Medical Investments (AMI) opened a private boutique hospital offering the country's first cosmetic surgery, including liposculpture, skin lightening and scar removals.

"A lot of it is through political stability," said Dr Vivek Solanki, then AMI's chief executive. "If you look at the wars and famine, it's minimal. Africa has more than 50 nation states," said Dr Vivek Solanki, then AMI's chief executive "and at the moment as we speak there are perhaps three or four countries with warring factions going on.

Most of Africa has now stabilised," he adds"most of Africa is educated and affluent not only through foreign investment but through local entrepreneurship, local enterprise, local education.

"The combination means there has been this burgeoning middle class that's come up and they have demands just like you and me."

Tycoons and philanthropists

With an estimated fortune of $10.1bn (£6.5bn), the Nigerian cement tycoon Aliko Dangote is Africa's richest man and one of the continent's 16 billionaires. The South African diamond magnate Nicky Oppenheimer – who also owns the country's largest private game park, the Tswalu Kalahari reserve – comes second, with a $6.5bn fortune. According to Forbes, Patrice Motsepe, a 40-year-old mining magnate, is South Africa's first and only black billionaire, with $2.5bn.

In November the magazine published its inaugural list of the "40 richest Africans", which it called "a testament to the growing global importance of the continent". Together, the combined wealth of Africa's 40 richest is $64.9bn – roughly twice the GDP of Kenya ($32bn) or Ghana ($31bn) in 2010.

Though many of the continent's countries remain among the poorest in the world, there are now more than 100,000 Africans with at least $1m to invest, according to the consultants Merrill Lynch and Capgemini. This year's World Wealth Report says the number of Africa's super-rich grew by 11.1% in 2010 – faster than in any other region. What's more, the report says, their combined wealth grew by 13.6% last year, to $1.2 trillion.

Some of Africa's wealthiest are also philanthropists: Dangote gave millions to a fund for small businesses in Nigeria last year, and Theophilus Danjuma, an oil tycoon, put aside $100m for NGOs working in the country.
According to a 2010 report from Barclays Bank, South Africa's super-rich are among the most generous in the world – second only to those in the US.

But the OECD has warned middle-income countries such as South Africa to keep a close eye on their top earners and the dangers of rising inequalities. Others note that, while they don't appear on Forbes's rich list, many of the richest people may well be former and current leaders of African countries.

Claire Provost