Africa’s Expanding Middle Class

Background:

Over the past decade, a number of coinciding factors have led to a rapid expansion of Africa’s middle class and associated increase in demand for consumer goods. Strong real GDP growth of about 6.5% in 2004-8 helped support income growth. This growth has coincided with a period of rapid urbanization of the continent—40% of the population now lives in cities, compared with 28% in 1980.

Between 2000 and 2008, a McKinsey report notes that the number of middle class households in Africa grew by 44% to 85 million households, with real consumer spending growing 3-5% annually over the period. They estimate that this trend will continue through the next decade, with the number of middle class households reaching 128 million by 2020. The increasing middle class population has created a larger share of income for discretionary spending, prompting an unprecedented interest from a range of companies across a range of consumer-focused industries, from telecommunications to banking. The Brookings Institute estimates that middle class consumption in Sub-Saharan Africa will increase from an estimated US$256 billion in 2009 to US$827 billion by 2030, about 1% of global consumption.