social security

The Middle Class Conundrum in Africa

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This article first appeared in my column with the Business Daily on March 25, 2018

With the emergence of ‘Africa Rising’ narrative, came the related rise of interest in the ‘newly forming’ African middle class. To be clear there are various definitions of this demographic group, but I think the most realistic definition is those who earn between KES 850,000- 4 million a year. You need to be making just over KES 70,000 a month to fit into this qualification. However, even with this relatively generous definition, this middle class is very fluid, limited and difficult to pin down as a ‘steady’ income group.

Indeed, perception and image aside, one can argue that the actual middle class segment that consistently fits within that definition is smaller than often imagined because dropping out of middle class into low income is very easy. That said, there is a middle class present in Africa and one of the key misconceptions of this class is that they have sizeable discretionary income. The reality is more often that the middle class has several classes of priority spending and have to negotiate the use of their own money beyond meeting their basic needs.

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Often the spending power of the African middle class is wildly over-stated in terms of funds for discretionary spending. This is because the lack of a robustly government-financed social welfare net translates to the middle class financing social security services through their own money, thereby eating into ‘non-essential’ spending. The Panglossian narrative about the spending power of the African middle class ignores the fundamental pressure that African middle class pockets feel. Busy supporting friends and relatives, there is often little left over for indulgent spending for many people.

That said, aspirational capitalism has taken root in Africa. Many Africans want big cars, big houses, engage in leisure activities and buy luxury goods. Many are of the view that having worked hard for their money, they ought to spend some of it on themselves. There is even an emerging trend, particularly among the younger middle class, of getting lines of credit to buy furniture, music systems, and go for lunches at high-end cafés; such is the pull of the lifestyle. And while some may choose to spend their cash (or loans) on themselves, it does not negate the fact that many will forgo those purchases to support friends and family in need.

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Ergo, African middle class pockets are pulled in two directions: financing friends and family in need, or using ‘extra funds’ for self-indulgent spending. The weight given to each of those sides is often a personal choice that many must negotiate. It is not a simple choice, and the decision-making process is very personal, nuanced and complex.

Thus companies, particularly those with limited experience in Africa, ought to be careful of boldly strolling into Africa in order to tap into the middle class because not only is it easy for many target consumers to slip into low income, other priorities compete for the same resources.

It is time those watching the African market create more nuanced analysis of this income segment and take the time and effort to truly understand the strange and complex creature that is the middle class African.

Anzetse Were is a development economist;

Economic case for cushioning Kenyans with social security

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This article first appeared in my column with the Business Daily on March 22, 2015

Often discussions around social security and welfare in Africa are grounded in the narrative of human rights: the right to health, food, employment, and so on.

Kenya should seriously consider putting more public funds into social security because of the economic benefits it can catalyse.

Social security can be loosely defined as the provision of a steady stream of income to replace lost wages due to unemployment, retirement, disability, or death.

In Kenya, social security is weak and only limited to free primary education, a presidential bursary scheme, retirement funds, insurance for work-related injuries, limited cash transfer programmes and the National Hospital Insurance Fund.

Implementation of these benefits, however, is mired in bureaucracy, corruption and poor implementation. The urgency of expanding social security protection is dire given that 46.7 per cent of Kenyans have difficulty getting food.


Let’s look at poverty, the ironies therein and how social security resolves the mess. Low income people have a high propensity to consume; meaning they want to buy goods and products but lack the means to do so.

Ironically, those with the highest hunger to consume are often unable to do so.

By providing income support, social security provides a means through which the poor can meet their basic needs.

This bolsters the economy because beneficiaries spend their monthly benefits, which in turn boosts the economies of counties in which the money is spent.

Remember that often those who receive social security benefits are unable to save. Kenya’s savings rate is 13 to 14 per cent of the gross domestic product.


Beneficiaries spend the money on goods and services, pumping it back into the economy. Clearly, this leads to the next point, the multiplier effect of social security

Income used to buy goods and services allows companies to register more profits and hire more employees who then spend their wages on more goods and services. This creates a virtuous cycle of increased spending and income for more Kenyans.

Thirdly, social security is a massive employer. In the US alone, for example, nine million jobs are linked to the social security system. The flip side of this is that, if done carelessly, it could add to the already onerous public wage bill.

However, this needn’t be the case as a creative reorganisation of the current public office positions could surely reallocate thousands of shillings to meet the needs of the most poor within a social security mandate.

Also, is something to be said for tapping into the skills of employable individuals, engaging them in meaningful work and lowering unemployment rates.

Further, Kenya arguably has a problem with labour oversupply giving rise to high unemployment, wages are often low, interest rates are high and therefore aggregate demand is muted. Social security provides an injection of capital that boosts aggregate demand.

sovereign-wealth-fund0Finally, social security strengthens savings and lowers dependency rates. This dependency dampens the ability of Kenyans to save and invest. Once relieved of the high levels of dependency, those earning an income can plan the use of their capital in a more productive manner.

Ms Were is a development economist. Email: Twitter: @anzetse