Africa’s Middle Class Spearheads Economic Growth

An IMF Survey released, December 26, 2013

• Economic growth in Africa should be more inclusive
• Continent’s fast-growing middle class can bolster growth
• Job creation for job-ready population is key to reducing poverty

Africa’s economic growth should be more inclusive, and the middle class has a strong role to play in strengthening this growth, says economist Mthuli Ncube.

In an interview with IMF Survey, the Chief Economist and Vice-President of the African Development Bank gave his thoughts on the African middle class, the state of data in Africa and the continent’s stellar economic performance.

IMF Survey: Can you tell us more about Africa’s growth over recent years?

Ncube: Africa is rising. The continent is still showing that robust growth, which we expect to hover around 5 percent and higher for some countries. But this growth needs to be more inclusive. I think that is the message that we should take away.

IMF Survey: Many commentators have argued that Africa is rising because it is led by a growing pool of middle class consumers. But other critics argue that the traditional concept of middle class does not exist in Africa. What do you respond to that?

Ncube: There is a middle class in Africa, and it has been growing at a rate of 3.2 percent per annum since 1983. You have over 300 million people who are sitting in the middle of the pyramid as I like to call it. But there is a distinction. Out of those 300 million people in Africa, half are what you call the floating middle class. They could revert into poverty very easily because of a death in the family, or some other shock. At any given time, there is always a floating middle class. Then there is the more stable part of the middle class—about 150 million people, and they are ones who provide robust growth.

I think one element that is stimulating consumption from this middle class is the African diaspora. The diaspora now transmits more money into Africa than foreign direct investment, aid to Africa, and portfolio investment in stock market and bond markets. That supplemental income from the diaspora is enabling that floating middle class to consume more.

IMF Survey: What reforms should be implemented to ease the poorer population’s access to this growing prosperity?
Ncube: The best way to reduce poverty is to create jobs. However, for people to be job ready, they must have the right skills. You have to invest in the right type of education which gives you job readiness. 

Young Africans should be given the option to go full academia, but also have the option at the right level of high school to switch to a vocational education. I think a concerted effort in this area is required for this to happen. Job creation is really the key to reducing poverty.
In the interim, social safety nets, aid flows, and assistance are critical for dealing with poverty in the short term, but long term it’s about jobs.

IMF Survey: You were in Washington to attend a seminar on the state of data in Africa. How is the quality of data in Africa?
Ncube: Because of the large informal sector in Africa—approximately 25 percent in most countries of sub-Saharan Africa—much of the economic activity goes unmeasured, and the data is deemed unreliable.

African countries—on their own and in collaboration with the African Development Bank—have done a lot to improve the quality of statistics in the last 10 years. We have invested $100 million in the last 10 years on African statistics. But to improve the quality of statistics to the level of Asia or other regions, we will need approximately $70 million a year invested in Africa.

Our main challenge at the moment is to harmonize the data, so that it is comparable across countries. To this end, we have set up a program across sub-Saharan Africa. We are connecting each African country to a hub—a portal in the, so they can enter their data live. This exercise is happening much better and faster than we anticipated, but much more remains to be done.