Categorized | Latest news

THE ECONOMIC MUSCLE OF KENYA’S MIDDLE CLASS OVERESTIMATED?

IMG_20150528_111619

Shoppers at the Garden City Mall

Article by Winnie Kabintie

The bubble that has surrounded the middle class philosophy in Kenya is about to burst if not already in the wake of recent statistics, which indicate that the middle class elite in the country is not as big as it is perceived to be.

According to an article published in The Economist; Africa’s Middle Class:Few And Far Between Africa’s middle class remains very small and is not growing after a decade in which economic growth has averaged more than 5% a year. “There are still only 15m middle class households in 11 of sub-Saharan Africa’s bigger economies (excluding South Africa and using a range of $15-$115 a day)”.

“Good data on the exact size of the middle class are hard to come by, but it remains small across most parts of the continent. The Pew Research Centre, an American outfit, reckons that just 6% of Africans qualify as middle class, which it defines as those earning $10-$20 a day,”.

IN EQUALITY, INCOME GAP

Kenya has been listed as a middle income economy, where the middle class, which currently stands at 44.9% of the total population, is said to be running the economy.

On the other hand 42 per cent (18 million of the population) is living in extreme poverty, which is posing a threat to the country’s economic growth. Large segments of the population, including the burgeoning urban poor, remain highly vulnerable to climatic, economic and social shocks.

According to the Kenya National Bureau of Statistics (KNBS), Kenya’s middle class includes anybody spending between Sh23, 670 and Sh199,999 monthly. The upper class (those who spend above Sh200,000 a month) stood at 3.6 per cent last year from one per cent in 2007. The lower class (those who spend less than Sh23,670 per month) shrank to 72 per cent from 80 per cent between 2007 and 2011.

However recent data from the Kenya National Bureau of Statistics (KNBS) shows that more than half of formal sector workers (64.5 per cent) are living on low wages of between Sh20,000 and Sh49,000 that have barely increased in the past 10 years, eroding the wage earners’ purchasing power.

Data also shows that although the number of people in the top earning bracket declined last year compared to 2013, the number of those at the bottom of the pyramid grew even faster, widening the inequality gap in the economy.

The economist argues that although the middle class has experienced some growth, it’s been painfully slow and most Africans are “now merely poor rather than extremely poor”.

“90% of Africans still fall below the threshold of $10 a day and the proportion in the $10-$20 middle class (excluding very atypical South Africa), rose from 4.4% to only 6.2% between 2004 and 2014; over the same decade, the proportion defined as “upper middle” ($20-$50 a day) went from another 1.4% to 2.3%,” the article reads in part.

In February this year, the study, Reasonable Goals for Reducing Poverty in Africa – Targets For Post 2015 MDGs And Agenda 2063 ranked Kenya sixth among top 10 countries in Sub-Saharan Africa with large populations living in extreme poverty.

CURRENT MIDDLE CLASS CANNOT DRIVE THE ECONOMY

One of the reasons touted for the expansion of the Kenyan economy is a burgeoning middle class but going by the current statistics, Kenya’s current middle class, whose purchasing power has been banked on by most investors, cannot drive the economy. Unlike the rich who will remain constant in their expenditure regardless, the middle class spending power shifts when the economy bites.

Kenya’s middle class is also driven by image and most people will spend just for showoff and this is catastrophic considering that most of them rely on salaries.

It’s this overestimation of the growth of the middle class that has seen notable multinationals like Nestle, Cadbury, Coca Cola and Eveready, who had banked on the middle class spending power, scale down their operation not just  in Kenya but Africa at large.

“We thought this would be the next Asia, but we have realized the middle class here in the region is extremely small and it is not really growing,” Cornel Krummenacher, Nestle’s chief executive for the equatorial Africa region said in an interview with the London Financial Times.

Nasa Nairobi Rally at Mathare Area

Uhuru Thika Rally

Archives

Calendar

November 2015
M T W T F S S
« Oct   Dec »
 1
2345678
9101112131415
16171819202122
23242526272829
30  
Visit Us On TwitterVisit Us On Facebook