Africa is a continent on the rise with the growing middle class credited for the massive economic growth potential. African countries such as Nigeria, Ethiopia, South Africa, Ghana and Kenya have taken the bulk of the spotlight for what many articles call the growing middle class. It is therefore important to define the term middle class. The African Development Bank defines the African middle class as those spending between USD 2 – USD 20 a day, Pew Research Centre as those earning USD 10 – USD 50 a day and categorizes those who earn USD 20 – USD 50 a day as the upper middle class, South Africa’s Standard Bank defines the middle class as those earning USD15 -USD115 a day while Kenya National Bureau of Statistics as those spending KES 23,670 – Ksh 199,000 on a monthly basis (USD 8 – USD 64 a day for a 30 day month when the USD 1 = KES 103). First, the terminologies used in the above various definitions have the following meanings as per the Merriam – Webster dictionary:
Earn is “ to receive as return for effort and especially for work done or services rendered”
Spend is “to use money to pay for something.”
It is important to note that these definitions take a Purchasing Power Parity perspective which basically allows one to estimate the exchange rate between two currencies so that a given amount of a currency can purchase the same amount of goods as it will if changed to a different currency. In a nutshell KES 1000 can still purchase the same goods if it is converted to USD. Having defined the terms above, we will assume that Expenditure (Spend) represents what is left after taxes and other deductions while Earnings is the gross figure before these deductions. Using the minimum tax rate of 30% as the maximum deductions from earnings the table below represents the various expenditures and earnings:
|Organization||USD Earnings Per Day||USD Expenditure Per Day|
|Kenya National Bureau of Statistics||10.79||90.68||7.55||63.48|
|African Development Bank||2.87||28.57||2.00||20.00|
|Pew Research Centre||10.00||50.00||7.00||35.00|
The table is generated at USD 1= KES 103 and the figures in red are results of transformations using the assumption that total deductions average 30%.
On average, the table below represents the minimum and maximum earnings and expenditure of the middle class according to the definitions above.
|Min Earnings (KES)||Max Earnings (KES)||Min Expenditure (KES)||Max Expenditure (KES)|
The middle class spends their money as shown below:
|Item||Min Expenditure (KES)||Max Expenditure (KES)|
|Rent and Utilities (23.6%)||5,003.42||36,804.26|
Generally, Urban Centre’s middle class can therefore be defined as those willing to or are spending between KES 5,000 and 36, 804 on rent and other utilities. This means that for a married middle class couple (assuming equal contribution on bills) the maximum expenditure on rent and other utilities could be up to double the figures shown.
A number of concerns are raised as regarding the qualification of two individuals with different dependency ratios and the rural resident who spends considerably less and can be able to get food from subsistence farming without necessarily having to spend money. How do you quantify this consumption to fit into these definitions and is the purchasing power of money harmonious across the country. For starters a given amount of money is likely to rent you a better house upcountry than in town. It is therefore very surprising that a Deloitte report, The Rise and Rise of the African Middle Class, categorically stated that the middle class do not derive income from farming and rural economic activities because we know they do. By looking at the range of incomes for teachers some of whom practice farming commercially and some of whom are bound to be found in rural settings, it is rather obvious that at incomes starting at KES 16, 480 a significant number fall in the middle class.