Africa’s middle class definition should include the Diaspora

The Guardian’s Poverty Matters blog has been publishing some analysis on Africa’s middle class. According to research reports they cited, 1 in 3 Africans on the continent can be classified as middle class. The Guardian’s tight definition of Africa’s middle class is those individuals spending between $2-$20. It is quite a large range and actually a shocker to some people.

I wanted to take a look at those numbers a little deeper in my layman-nowhere-near-economist-or-mathematician kind of way. Help me out here if the math is flawed, but I hope you understand what I am trying to get at. Most of the reports cited by the Guardian articles make no mention of the Diaspora. Surely our $40 billion in annual remittances should be counted. Right? Does it really matter where we earn it when all of it is being spent on the continent?

Let’s look at the numbers. David Smith first reported that Africa’s middle class totals a staggering 333 million. That is a third of the continent’s population that spends between $2 and $20 per day. This is not the same definition used to describe the global poverty line. That, is defined as those earning less than $2. I am not yet sure what the difference is between earning and spending, but I am sure they mean different things in this context.

So let’s do some calculations.

According to Smith’s cited calculations, Africa’s middle class has between $666 million and $6.6 billion in discretionary income. When you look at that from the perspective that Africa’s population is 1 billion people and its total GDP was over $1.6 trillion, then we are not talking about a whole lot of money here. But, this small range is responsible for generating half of the continents collective GDP of $1.6 trillion.

The middle class was responsible for at least half of Africa’s GDP of $1.6tn, he added. The trend reflected years of sustained economic growth, with sub-Saharan Africa projected at 5.5% this year.

My question is why aren’t remittances counted in this equation? If we (Diaspora) are spending $40 billion annually on the continent, what kind of contribution are we having on the continent, when a mere $6.6 billion at the top level of that range accounts for half of the continent’s GDP? What am I missing here? Especially when that $40 billion is contributed by roughly 10 million of us frequenting Western Union, Money Gram and other means of transferring money to the continent. That’s an average of $4000 per year per per Diaspora or $11 per day per Diaspora in discretionary income sent to the continent. $11 per day put the Diaspora in the upper middle class based on that earning range. Why isn’t this part of the equation and conversation? I’ve got to be missing something here.

Africa’s Diaspora spends more on the continent than the supposed middle class on the continent, yet we are not counted. I don’t get it. The Diaspora needs to be counted as part of the continent’s middle class. Just because we don’t live there full time doesn’t mean that our money isn’t being spent there. And to answer their question, yes this “missing” middle class is contributing to a reduction in poverty and literacy. I know this because my remittances do just that. A third sibling is graduating from Makerere University while the other two are already gainfully employed. Now that’s just me. Multiply that effort by roughly 10 million and we become a catalytic, economic force for change — especially as many of us are turning that discretionary expenditure into money-generating businesses or social ventures.

Trade Africa quoting the ADF and World Bank:

Report on African countries remittances, skills and investments are jointly carried out by the African Development Bank and the World Bank as part of the Africa Migration Project.

A breakdown of the$40billion investment showed that Nigerians in diaspora invested 57 percent; 55 percent in Kenya; 36 percent in Burkina Faso; 20 percent in Uganda and Senegal, 15 percent.

Interesting to note that Andy Sumner and Nancy Birdsall‘s piece references The Globe and Mail’s piece that defines the middle class as a catalyst in 5 categories:

the catalyst class (a) has an interest in accountability because they pay more taxes; (b) probably don’t work for the state and thus don’t see their loyalty and interests tied to the status quo; (c) have parents who led quite different consumption lifestyles to them; (d) probably have internet (cafe) access and cell phones; and (e) want “open business conditions, fair and honourable contracts, and a route to employment unclotted by corruption”.

When it comes to Africa, if that doesn’t sound the like the Diaspora, I don’t know what does. Again, I am no economist, but the numbers are painting a picture that many are not seeing. Any ideas why?

UPDATE:

Andy Sumner has a great follow-up piece on the definition of the middle class