The African middle class’s sheer size – about 313 million people – rivals that of China and India. And by 2015, new African consumers alone will equal all of Brazil’s today.
The African Development Bank (ADB) now records one in three Africans as middle class, a group it defines as people who spend $2 to $20 a day. A record number of Africans now own houses and cars, they use the internet and send their children to foreign universities.
Sales of fridges, TVs and mobile phones surged in virtually every African country in recent years. For example, car and motorcycle ownership in Ghana rose 81 percent in the last five years alone.
The ADB’s Chief Economist, Mthuli Ncube, said the findings should challenge the long-held perceptions of Africa as a place of famine, poverty and hopelessness. He added that the continent’s middle class makes for at least half of its $1.6-trillion GDP.
Much of this growth is happening in sub-Saharan Africa, which is rebounding from the economic crisis much faster than other areas of the globe. Its 48 countries should grow at an average rate of 5.5 percent this year, with consumer spending rising right along with it. From an investment point of view, that big picture opens up very real opportunities.
Real African Growth Has Begun
Africa has suffered many false economic dawns over the decades. But this one looks real.
Market liberalization and improved public management of finances have spurred growth. And the commodities boom certainly hasn’t hurt it, either.
- Africa has about 10 percent of global oil reserves, possibly more.
- Meanwhile, South Africa alone contains 40 percent of the world’s gold.
- The continent holds a third of all known cobalt reserves, and base metals also abound.
But perhaps China, India and Brazil’s influence has spurred its growth the most. China especially has sourced almost half its imports of aluminum, copper, iron ore and oil from Africa in the last several years.
Add to that the rapid expansion of banking, telecommunications and other services formerly weighed down by government. Demand now outstrips available supply in almost every sector.
The telecom industry’s impressive growth in Kenya and Nigeria, for instance, pointed to a market that few consumer companies and services thought of much before. Yet this larger emerging market – including North Africa – exceeds one billion people.
Africa as a Long-Term Investment
Of course, gaining exposure to those consumers isn’t an easy task. Infrastructure shortfalls remain a drag on access and growth, despite China’s best efforts.
And poverty remains entrenched as well. The ADB study showed 61 percent of Africans still live on less than $2 a day.
Compared to China, Africa is probably still 30 years behind in terms of development, and 20 years behind India.
But progress is being made all the same. And what investor wouldn’t want to turn back the clock and invest in China 30 years ago?
It is down for the year, due to its nearly 20 percent exposure to Egypt. But that could simply make it an even better bargain.