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Africa

The Making of the Middle Class in Africa

Mthuli Ncube's picture
Also available in: Français

Robust economic growth over the past 15 years has led to visible changes across Africa. Visitors to cities on the continent cannot help but notice the emerging African middle class.  Defined as those earning between $2 and $20 a day in 2010, Africa’s middle class is expected to grow from 355 million (34 percent of Africa’s population) to 1.1 billion (42 percent of the population) in 2060. To be sure, about 60% of them – approximately 180 million people – remain barely out of the poor category. They constitute the ‘floating’ class, earning between $2 and$4 a day. They are in a vulnerable position, constantly at risk of dropping back into poverty in the event of any unexpected shocks, such as the loss of income and the death of the head of household.
Pointing out business processess at ITU-Inveneo ICT Entrepreneurship Training Not only is Africa’s middle class crucial for economic growth, but they are essential for the growth of democracy and will play a key role in rebalancing the African economy. Consumer spending by the middle class has reached an estimated $680 billion in 2008 – or nearly a quarter of Africa’s GDP. By 2030 this figure will likely reach $2.2 trillion and Africa will comprise about 3 per cent of world-wide consumption.

Despite a reputation for thrift, middle-class households do allocate part of the household budget to leisure and entertainment. Our analysis shows that middle-class households are likely to spend more on private education and health, as well as on household assets such as televisions and refrigerators. In addition to being better off in material terms, the middle class are in general both more satisfied and more optimistic about the future than their poorer compatriots.

Is Trust a Crucial Factor in Business Success?

Jacques Morisset's picture
Also available in: Français

Victoria has been running a small business that deals in computers and medical equipment in Dar es Salaam for about five years now. While she is making a bit of money, the business has in fact not grown to a point where she can afford an extra hand.
 
Compared to trends in industrial and emerging economies, small businesses like Victoria’s operating in developing countries have generally failed to become the main vectors of growth, job creation, and innovation. This failure is generally attributed to insufficient skills and financial resources in the hands of local entrepreneurs in addition to unreasonable administrative and transport costs.
 
Valid as these arguments might be, they also miss a crucial factor which might be instrumental in the apparent flourishing of such firms elsewhere – trust, or the lack thereof, of small firms in their operating environment.
 
Maasai women make, sell and display their bead work Distrust – or lack of trust – works against the success of small businesses in many ways. It is depicted in the standard payment policy of 100 percent upfront in order to guard against the risk of not being paid after the merchandise is delivered. Such a policy is detrimental as small firms lose clients who do not always have the resources at hand given their restricted cash flow. Indeed, in the US where less than 20 percent of transactions are on a cash basis, a firm would risk losing many of its customers if it was to adopt such a policy today

The Mini-Revolutions of the New Transparency

Gabriel Demombynes's picture

Development economics has been rocked by three mini-revolutions in recent years. The materials, methods, and medium have all been transformed—making for what Michael Clemens and I call “the new transparency” in a new working paper, forthcoming in the journal World Economy. We use the controversy around the Millennium Villages Project (MVP) as a case study to explain what we mean.

GH058S03 World Bank A separate new book, The Idealist, by journalist Nina Munk, traces the trials and tribulations of the Millennium Villages. The account of the attempt to jump-start development in rural Africa has generated reviews in the New York Times and Wall Street Journal. The book jumps back and forth between a profile of Jeffrey Sachs, the project’s tireless promoter, and on-the-scene reporting at two Millennium Villages, which the author visited several times over six years. Munk’s narrative of good intentions stymied by the challenge of implementation makes for a gripping and heartbreaking read, particularly in the account of the site at Dertu, Kenya where ongoing drought overwhelmed the project’s efforts.
 

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