Saturday, October 20, 2012

The rise and rise of Kenya’s middle class

 

By KENFREY KIBERENGE kkiberenge@ke.nationmedia.com

A few years ago, coffee houses such as Java were for a select middle class clientele. But today, at 8am, Java will usually be teeming with customers.

And the same is witnessed at other expensive coffee houses and restaurants, especially in Nairobi, where the new middle class hangs out.

This new class, conspicuous due to the showy display of their affluence, have a taste for the best things in life: food, drink, cars, residences and even dress. They literally stand out.

For a long time, the middle class in Kenya was anybody who could afford the average lifestyle: a month’s shopping and a Double M ride to town instead of the 14-seater matatu; a rental house with sizeable rooms, running water, hot shower and two or three electronic gadgets.

But, today, the middle class drives fuel-guzzlers, wines and dines in expensive restaurants and lived in upmarket estates.

That is not all. They furnish their houses with luxurious furniture. The floors have wooden finishing, they have Italian kitchens and enjoy premium pay TV channels.

In addition, they have leaner families and attend virtually all sporting events out of Nairobi. These outings, which cost tens of thousands of shillings, often turn out to be drinking jaunts.

They are also to be found in elitist events like Blankets and Wine sporting fashionable clothes with picnic baskets with their pet dogs in tow.

But they are not apologetic for their showy lifestyle. It seems it goes with the territory.

Take Chris Obure for example. Before 2008, he says could not afford a fraction of his current lifestyle. Now, Mr Obure, 33, owns a house in the leafy Lavington suburb in Nairobi, where he lives with his wife and son.

He has three big cars: a Mercedes S-Class worth Sh12 million, a Land Cruiser VX valued at Sh5 million and a Sh7 million SUV Range Rover.

“I’d say I’ve made it,” says Mr Obure, who deals in real estate and commodity trade. “You can’t employ me even if it’s for Sh1 million because I make that amount in one or two weeks.”

Taking children to private schools, living in apartments, double incomes, falling birth rates, and acquiring multiple university degrees are some of the status symbols of the growing middle class, according to economist XN Iraki.

Conspicuous consumption

“To quote economist Thorstein Veblen, conspicuous consumptions, trying to keep up with others through cars, attire, residence and so on, (are the other indicators),” Mr Iraki says.

Although he does not consider himself to be in the first class, Mr Obure spends Sh1 million per year on his son in fees at a private school in Karen and other upkeep expenses. He will comfortably blow Sh85,000 a night on premium whiskeys, exotic wines and foods whenever he entertains his business partners.

With a monthly entertainment allowance of Sh250,000 from the Meranti Holdings, where he is the only Kenyan director, the University of Nairobi alumnus spends between Sh1,500 and Sh3,000 on lunch in upmarket restaurants.

“I don’t feel any loss spending Sh3,000 for lunch,” he says. “This is my genuinely, hard earned cash so I have to spoil myself once in a while.”

Mr Obure is not alone. Nairobi has lately experienced an upsurge in the number of premium wireless-equipped coffee chains like Java, Coffee World and Savannah.

Trendy shops such as Deacons, Woolworths, Truworths, Identity, 4U2, Mr Price, Mr Price Home, Angelo, Adidas, Life Fitness and Babyshop are sprouting at various corners of the city.

Kentucky Fried Chicken, although shunned by the affluent in the West, has come to get a slice of the growing middle class in Kenya who have embraced it. The number of shopping malls is also on the rise.

John Mbindyo of Urbanklads, an online shop that deals in premium clothes and accessories, says some Kenyans are buying wrist watches for up to Sh24,000, belts worth Sh6,000 and shoes for Sh8,000.

“They pay in cash,” Mr Mbindyo says.

A report released earlier this year by Youth Dynamix revealed that the Kenyan youth spend Sh64 billion annually on clothes and other accessories.

Over Sh65 billion of the youth’s money also goes to entertainment and outings annually while a further Sh24 billion is used on mobile airtime.

Top-of-the-range vehicles like Porsche Cayenne, Chrysler and Jaguar have become common on the streets of Nairobi, adding to the existing expensive brands such as Range Rover, BMW, VW and Subaru.
The 2009 census report indicated that the number of registered vehicles more than doubled from 611,268 in 2001 to 1,221,083 in 2009.

Range Rovers

Premium car dealer Subaru Kenya moved from selling 57 cars in 2009 to 84 cars so far this year, according to marketing manager Joanne Nyagah.

On average, CMC Motors sells five SUV Range Rovers a month in Kenya each valued about Sh20 million, up from just one seven years ago. This excludes other CMC brands.

Kenyans’ visits to national parks – once seen as preserve of foreign tourists – rose by 55 per cent over the past five years, according to official figures from Kenya Wildlife Service (KWS).

Vision 2030 chief executive Mugo Kibati however says while the news of a growing middle class is welcome, the pace at which it is growing is disappointing.

“It is true lives are changing but not as fast as we want. We need every Kenyan in the middle class by 2030,” Mr Kibati says.

Last year, the Kenya National Bureau of Statistics (KNBS) economic survey showed that the middle class jumped to 24 per cent from 19 per cent in 2007.

A report by the African Development Bank (AfDB), however, put Kenya’s middle class at 17 per cent.

According to KNBS, Kenya’s middle class includes anybody spending between Sh23,670 and Sh199,999 per month.

African Development Bank, on their part, say it is anybody with an annual income exceeding Sh331,500 ($3,900) or who spends between Sh170 ($2) and Sh1,700 ($20) a day. The upper class (those who spend above Sh200,000 a month) stood at 3.6 per cent last year from one per cent in 2007.

The lower class (those who spend less than Sh23,670 per month) shrank to 72 per cent from 80 per cent between 2007 and 2011.

Appetite for luxury residential houses in Nairobi is at an all-time high, with a recent report by Knight Frank and Citi Private Bank ranking Nairobi as the best prime residential performing market globally, ahead of Miami in the US and Beijing in China.

Kenya’s coastal region –Malindi, Lamu and Mombasa – came second in the survey. The houses cost as much as Sh180 million and the offers are fast being gobbled up by the new middle class.

AfDB estimates that Africa’s middle class had risen to 313 million people in 2010 compared with 111 million in 1980, 151 million in 1990 and 196 million in 2000.

Stephen Jennings, the Renaissance chief executive, estimated this week that by 2050, the African economy will be bigger than that of the US and Europe combined.

Experts at Deloitte attribute the rise of this middle class to social and demographic factors that are driving the new consumerism on the continent.

In a recent report titled The Rise and Rise of the African Middle Class, Deloitte argues that the growth of African economies is trickling down and people have more disposable income. Their spending patterns are also being dictated and shaped by media and other influences as Africa “opens up”.

“Secondly, Africa has a disproportionately young population with 62 per cent of the population in Africa under 25 years. There is, therefore, a guaranteed consumer base for years to come in stark contrast to Europe, for example, which is characterised by a shrinking population,” the Deloitte report adds.

Europe’s work force

It is estimated that Europe’s work force will go down from 63 per cent in 2010 to 51 per cent in 2050.

Another contributor to the expansion of the middle class is the trend towards urbanisation, with African cities growing rapidly.

Socio-economically, Africa is defined along urban-rural lines, and a move from a rural community to the urban areas necessarily implies an increase in income, albeit informal.

The link between urbanisation and income is best illustrated with this statistic: while only a third of Africa’s population lives in cities, that segment accounts for 80 per cent of total GDP, according to the UN Centre for Human Settlements.

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