I have an uncle who I don’t see very often. A few months ago, when I met him again for the first time in ages, he asked me: “So what’s it like to live in Nairobi?” I thought a bit, and found it difficult to come up with an answer.
“(I) get up, have coffee, go to yoga, have more coffee, work, walk the dog, work, have more coffee, walk the dog, go to yoga, have dinner, done. Go out every once in a while.”
He still wasn’t happy, so: “I live in an apartment, I shop in supermarkets, I hang out in cafes or bars or restaurants occasionally.” That, he found “sounds pretty much like here!”
Yes, I shrugged my shoulders, “Sorry! Nothing much to see here.” Pretty much like Germany, only with a guy at the gate, a few more concerns about car jacking, and the odd power cut. And a housekeeper, which is nice. The other day I saw a monkey climb on the electricity wire at the street corner, which is a bit unusual in my road and wouldn’t happen in Germany.
I gave him a qualifier: this is a sort of middle-class life and environment. There’s a whole world, in fact different worlds, not very far away in Nairobi. I can’t talk much about those because don’t know them. If you live in Mathare, it’s a whole different story. If you are a nurse or a teacher in a public institution, it’s a whole different story, as it is if you are floating around in the vicinity of State House.
The mythical African middle class and its long-time faithful companion, the 'Africa Rising story', have recently come under scrutiny: Oil prices are falling, China’s growth is softening, African currencies are crashing. So, is it all coming to an end now and have investors been duped?
I find this an unproductive question because there’s so much to disentangle. Africa is not, of course, a country, but a continent. Yes, it makes sense to try to trace overall trends, but they will lack meaning if they are not underpinned by more local information, context and data.
Look at the African middle class, that beast haunting private equity and other investment prospectuses. There is mainly one data analysis that is typically referenced – the African Development Bank study from 2011.
The AfDB uses a percentage of average consumption to define middle class. This is lower than average consumption in industrialised countries. So if you are used to images of what typically qualifies as middle class in Western industrialised countries – Ikea shelves, overpriced organic groceries – you might not recognise those people.
In the 2011 report, it was anyone living on $2 and $20 a day. Especially at the lower end of that bracket, there is enormous vulnerability, as the AfDB also acknowledges with the use of the term ‘floaters’ – not something we typically associate with middle class. It’s worth bearing in mind that this is a technical definition.
There are probably two stories here. There’s a demographic that spends pretty much like it would in London or Hamburg or Boston. It’s a market – as Morten Jerven, author of ‘Poor numbers: How we are misled by African development statistics’ is quoted in Reuters: “What we are seeing is not a pyramid bulging in the middle but a society where the top spenders are getting richer.”
There is also a large number of those people living on daily budgets of $2 to $20. Smart companies have recognised that the combination of less spending power, but large numbers, is a market, too – especially if you adjust your product design, delivery and sometimes payment mechanisms. And it’s not just a large market for basic commodities, but for fun things, too – poor people, just like us! Not everyone will be successful in this, of course, but it’s a large market.
On the macro side of the story, I hope to see far more country-by-country, sector-by-sector analysis of the impact of the commodity price decline, the softening of China’s growth, and the recent sovereign bonds. Is this going to be part of a long-term pattern of upswings and downturns? Will this expose weaknesses in the 'Africa Rising' story and the continued lack of domestic manufacturing capacity?
Is there an opportunity in this, to stop relying on extractive industries and China’s no-questions-asked money? Or will the institutional weaknesses prevent these opportunities from being taken? Will the recent sovereign bond issues mark a turning point, or a return to the old-school heavily indebted poor country category? Ghana might have a thought or two on this.
So what’s the story? Africa is not a country. There are always many, many stories. Entrepreneurs have made, and still make, good money in the most difficult of environments like, say, Somalia, because they know their market and the opportunities.
If you put money down just because someone spun the Africa 'Rising Story' to you so enticingly, you may not have done your homework. It won’t be easy. If you do it, you will end up with the craziest stories.