Formerly, "This is Africa/fyeahAfrica".
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Afro-curator, womanist, media studies student, pop culture enthusiast, aspiring journalist, curious amateur photographer, social media guru.
Based in Cape Town, South Africa
From Lagos, Nigeria
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(since Oct. 21st 2012)
The most popular view puts the number at more than 300 million, a diverse basket that includes all sorts: cattle-ranchers, road-side food vendors, taxi drivers, railway pensioners etc. But this view has its critics, and though they are not as often heard, they shout when they get the opportunity, saying things like: only five percent of African consumers qualify for the ‘middle-class’ tag.
If that position was valid, it would mean this class has suddenly shrunk from 300 million-plus all the way down to about 40 million or 50 million people (bearing in mind that even the exact population in Africa is debatable due to weak census data in many African countries).
But that is not even the most disconcerting view. Someone even say that there is basically no middle class consumer segment worthy of any serious analysis in Africa at all. However you choose to spin it, the fact remains that your target consumer base has now shrunk to zero. From 300 million to zero, now that is something.
For a start, Africa’s middle-class is exceptionally heterogeneous. It is that fact rather than the sheer number of middle class consumers or even the pace of growth in these numbers that can have the strongest effect on the economic role and business significance of Africa’s middle class.
The African Development Bank (AfDB), for instance, has fixed the range of income for middle class status in Africa between two dollars and 20 dollars. This complicates things for the analyst relying on income assessment to decipher what are complex sociological issues regarding ‘aspiration’, and economic issues relating to ‘purchasing power’, and how these differ from country to country in Africa and make a simple enumeration of the Middle Class technically problematic.
The African growth story has been told over and over again but the reality is that there are winners and losers.
Celeste Fauconnier, RMB Africa analyst says that the services sector for example is growing and resource rich countries such as Nigeria and Zambia have become less dependent on commodities because it they have developed secondary industries. In an internal survey that RMB conducted last year, it found that most of its clients predicted that the logistics and automotive sectors would present more opportunities, followed by retail and resources were only listed in third position.
However, Fauconnier says that South African retailers face serious competition when entering some African countries, especially those in the East. The latter countries have invested in producing their own products and have established retailers such as Nakumatt in Kenya. This is one of the reasons that Shoprite has been struggling to get into Kenya and subsequently does not have a presence there.
Dianna Games, CEO at Africa@work, says that South Africans also have to be more aware of what is happening in Africa and enter with a naïve notion that they can strike a deal in a day. Sometimes signing a deal and finding the right partner can be a lengthy process, she says.
South African companies should also change the perception that they are the only ones going into Africa. Faure Heymans, analyst at RE:CM, says that there are good companies in Africa that are well managed and exist in strong markets such as Dangote Cement in Nigeria and ARM Cement in Kenya. These companies are now looking to invest in South Africa due to its opportunities, he says.
"Everyone is chasing a piece of the pie for the sake of it and it’s unsustainable – analysts"
In a recent interview, African entrepreneur, Tony Elumelu spoke about the rules of engagement for business in Africa emphasizing that Africa is open for business but not at any cost. “Africa’s economic history has been characterised by extractive industries and rent seeking practices that have not created development in any meaningful way. Africapitalism is simply saying there is a better and more ethical way to invest in Africa for a sustainable future.
I would like to see both African and international investors review their strategies for Africa. Yes, we are open for business but not at any cost. Our rules of engagement have changed,” he said.
Elumelu was one of the high profile African business leaders handpicked by the White House to meet with President Obama on his current three country Africa tour. Elumelu, who is the former Chairman of United Bank for Africa and Chairman of diversified investment group, Heirs Holdings recently invested USD300 million in Nigeria’s largest power plant, located in Ughelli, Delta State during the Nigerian government’s recent power privatization process.
Speaking on the motivations behind the group’s investment, he said,”Unlimited access to affordable power in any country is a game changer and will move the needle on the country’s development exponentially. It’s not just the fact that children will be able to do their homework, or that computers and phones can be powered in rural villages; it is also the impact that access to affordable power will have on the economic ecosystem. Prices will come down, entrepreneurs will expand and innovate, and jobs will be created as a result. This is Africapitalism at work.”
Speaking further on his investment in Nigeria’s power sector, Tony Elumelu said: “We played a transformative role in democratizing the banking sector at a time when no one was really paying much attention to Africa, Elumelu says. “We had a clear strategy, first mover advantage and an understanding of what the market needed and we are focused on doing the same for power. We are taking over an old government-run plant that desperately needs rehabilitation and doubling its output within our first two years of operations. By 2017, we will be generating 1000MW of electricity and Nigerians across the country will feel the impact of affordable and consistent power.”
Nigeria’s commercial nerve center, Lagos is set to become the continent’s 13th biggest economy, similar to the size of West African nation, Ghana, investment research and advisory firm, Renaissance Capital has revealed. In its latest report titled, “Nigeria Unveiled: Thirty Six Shades of Nigeria,” the company stated that with a per capita income of about $2,900 which is currently double amount of the national average of $1,700, Lagos is at par with countries such as Morocco and Sri Lanka.
Lagos’ economy is significant to that of Ghana and is the heart of Nigeria’s $284 billion GDP economy.
“We base our analysis on states’ internally generated revenue, which make up 15 per cent of state government revenue, and consumption data, as proxies for state income.
“Lagos State produces about 12 per cent of Nigeria’s GDP, which is equivalent to $32 billion by 2013 ending. Post rebasing, which we now expect in early 2014, we estimate a 40 per cent upward revision in the country’s national income.
“By our estimates, the Lagos State economy will become Africa’s 13th biggest economy in 2014 at approximately $45 billion – equivalent to that of Ghana,” said RenCap.
You know it’s serious when they start comparing a city to countries. And we manage all this without stable electricity, easy access to basic resources, and the necessary infrastructure to accommodate life in a commercial urban landscape.
Just think about what Lagos would be if all the above-mentioned factors were appropriately set up and maintained.
The World Bank says, between 2013 and 2015, Sub-Saharan Africa’s economy will grow at an average of five percent while the global economy will only grow by about three percent over the same period.
However, high growth rates are no reason for euphoria, says Robert Kappel, a German Africa researcher from the GIGA Institute in Hamburg. He has been researching the development prospects of 42 sub-Saharan countries. He says international comparisons show that most of them are performing poorly.
"The growth is mainly coming from outside factors such as the demand for raw materials and agricultural products that has increased greatly in recent years and has pushed up prices. That means export has greatly contributed to this high economic growth, and that is also a great weakness," Kappel told DW.
The International Monetary Fund (IMF) and the World Bank recently warned that Africa is becoming dependent on trade with foreign countries.
At this year’s World Economic Forum in Cape Town, former UN Secretary General Kofi Annan urged the industrialized nations to apply stricter rules for trading in natural resources with Africa. He said corruption and tax evasion are bleeding wealth from the continent.
Industrialization in Africa remains slow and agriculture cannot even meet the needs of Africa’s own populations. Job markets show zero growth. In South Africa, more than 25 percent of the population, mainly young people,are unemployed.
"Africa is doing well. We are making tremendous progress, particularly in the past two decades. But if we are to sustain this and to ensure growth that allows for employment creation for the youth and greater equitable distribution of prosperity, then we need to speed up the reforms, deepen transparency, reduce bureaucracy in getting projects approved."