The growth of the African economies is being curtailed by the continuing diminishing of the middle class. The middle class is a social class that falls between the upper and lower classes and is often defined by income, education, occupation, or social status.
It is an important class as it consists of people who are ready to spend their income on consuming the goods and services produced in a country. They are employers and parents raising children who will make the next crop of the middle-class.
In terms of earnings, the middle class in Kenya is defined as those who earn between Sh46,356 and Sh184,394 per month. The middle class is often employed in the formal sector and pays a lot of direct taxes.
The World Bank, on the other hand, puts the middle-class individual’s or household’s daily income at between US$10 and US$50 per person per day.
Low-income and middle-income countries on the continent are suffering disproportionately from a dwindling middle class. The implications of this state of affairs are evident from the reduction in consumption of goods, “this will spiral into shutdowns of manufacturing plants and industries,” says Professor Emeritus Mandivamba Rukuni.
The closure of the manufacturing industries will lead to job losses and a rise in the number of jobless people, “this could spiral into social unrest as people struggle to fend for themselves and their families,” he offers.
It is not just the manufacturing sector that is impacted, the services sector is equally impacted, some would consume certain services, but they have all gone into learning how to do certain things to avoid having to spend on the given service.
While governments struggle to maintain an equal balance between recurrent expenditure and development expenditure the culprit is always the salaries of public servants, what is forgotten is that these form a large base of consumers of goods and services produced in the country.
The solution partly lies in growing the middle class by investing in systems that support the growth of the middle class to encourage spending on goods and services while avoiding the Middle Income Trap.
The middle-income trap is a situation where a country has developed until its Gross Domestic Product (GDP) per capita has reached a middle level of income. Still, the country does not develop further and it does not attain high income beyond the middle-income status.
Fadhel Kaboub, a Professor of Economics and Senior Advisor with Power Shift Africa President of the Global Institute for Sustainable Prosperity, says the current challenges facing the African continent stem from three factors that seem to impede it from realizing the growth aspirations due to colonial legacies, he argues that colonialism was never designed to achieve sustainable development but that it was a system of extraction.
Speaking to journalist, Li Jingjing, Prof. Kaboub says that the continent has the unfinished business of decolonizing economic structures on which the continent was designed as the source of cheap raw materials for the industrialized world, the Continent is billed as the place that consumes technology and industrial output from the industrialized world and also as a place where obsolete technologies, assembly line manufacturing that is no longer needed in the developed world is outsourced to and labeled as development cooperation, job creation, technical assistance, “but effectively what it does is that, it locks us at the bottom of the global value chain,” he offers.
It is now up to the African continent to find what works for it, and for African countries to get it right about wealth creation and industrialization, and to avoid the pitfall of confusing business with economics and building factories with industrialization, as to industrialize is not a mechanical process but a social process.
The writer is a Science Journalist at Kenya Broadcasting Corporation
