In Africa, a New Middle-Income Consumerism
Monday, September 1, 2008
KAMPALA, Uganda -- Meet Denis Ruharo, an entrepreneur with a master's degree, a man who carries a BlackBerry and two Nokia cellphones, buys organic greens at a grocery store and sometimes does business over a cold Nile beer at a club called Silk.
"I have the mortgage and home improvement," he said, glancing at the budget he and his wife keep on their computer. "The car, carwash and parking tickets. Entertainment -- cable TV, two movies a month. The health club. Then normally we vacation twice a year. Last time it was Nairobi."
"What else," he said, scrolling down on his Mac PowerBook. "Newspapers, charity, clothes, books and CDs . . . "
In a region more often associated with grinding poverty, Ruharo is part of a modestly growing segment of sub-Saharan Africa -- upwardly mobile, low- to middle-income consumers.
The group includes working Africans who make as little as $200 a month, a paltry sum by Western standards, yet hardly the $1 or so a day in earnings that describe life for about half the continent's population. Perhaps a third of all Africans, or 300 million people, fall into a middle category -- people struggling to put their kids through school and pay rent, but able to buy a cellphone or DVD once in a while.
Their buying power is evident around Kampala, a green and hilly city where iron-sheet homes are interspersed with high-rise condos, streets are crowded with bikes and Japanese sedans, and the city's newest mall, Oasis, is under construction. It will be anchored by what amounts to sub-Saharan Africa's first Target-style superstore chain, Nakumatt, which sells corn flour, aromatherapy bath salts and nearly everything else. The company is opening two other superstores here, plus two in Rwanda, three in Tanzania and 11 in Kenya, where it began as a trading firm in the 1960s.
"It's psychological -- people want upward movement," said Thiagarajan Ramamurthy, Nakumatt's operations director. "The appetite is increasing -- the 14-inch TV became a 21-inch. The 21 became a 29 and the 29 became plasma. It's an aspiration."
Although the continent has always had a modest middle class made up mostly of government workers or others tied to the ruling elite, the middle ranks have begun to expand in recent years with private sector employees. They include secretaries, computer gurus, merchants and others who by virtue of education, geography or luck have benefited from economic growth of around 6 percent annually in such countries as Uganda, Ghana and Kenya, and around 8 percent in Rwanda. Increasingly, they are entrepreneurs such as Ruharo, who represents the wealthier end of the spectrum and whose company is an offshoot of the newly booming cellphone industry.
Though critics say the trickledown effect is meager, others credit leaders of those countries with adopting relatively sound economic policies that have allowed the private sector to expand, driving what analysts say is the highest level of consumer demand the continent has ever seen.
Nakumatt's annual sales have increased from $100 million in 2004 to a projected $350 million this year. That's peanuts compared with Wal-Mart, which has annual sales of $350 billion. But Ramamurthy expects the growth to continue and the company to surpass a billion dollars in annual sales in the next decade.
As he and other observers see it, the growth of consumer culture reflects something more significant than the availability of Chilean wines and red patent leather pumps from Paris. It reflects a gradual opening up of African economies, a freer flow of information and a parallel rise in expectations, some political.
During Kenya's recent post-election crisis, for instance, many observers say people in this middle group, who were steadily losing money, helped to pressure the country's warring political leaders into a compromise.