New report casts doubt on earlier studies, says poverty has hit 83pc - Daily Nation

New report casts doubt on earlier studies, says poverty has hit 83pc

Wednesday August 20 2014

A woman waves at a tourist convoy driving by her huts at Loiyangalani in Marsabit county on June 16, 2014. Warring communities in Marsabit County Saturday participated in a peace marathon to promote their co-existence ahead of World Peace Day celebrations in Moyale Town on Sunday. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP

A woman waves at a tourist convoy driving by her huts at Loiyangalani in Marsabit county on June 16, 2014. Warring communities in Marsabit County Saturday participated in a peace marathon to promote their co-existence ahead of World Peace Day celebrations in Moyale Town on Sunday. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP 

By JOSHUA MASINDE
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A new report by Standard Bank has cast doubt on previous studies on poverty that show the number of Kenyans living below the poverty line to have fallen below 50 per cent of the population.

The report released yesterday titled, “Understanding Africa’s Middle Class”, says that 38 million Kenyans, or 83 per cent of the over 40 million population, live on or below the poverty line.

The report also indicates that the growth of Kenya’s middle class lags behind that of Uganda, Tanzania and Ethiopia. In absolute numbers, Kenya has added only 400,000 households in the past quarter of a century.

“Change is clear within Kenya’s low-income band, though at a more gradual pace,” the report says.

The figures, however, represent a sharp contrast with government and World Bank estimates of poverty in Kenya. The World Bank estimates that about 38 per cent of Kenyans live below the poverty line, compared with about 47 per cent in 2005. The government, on the other hand, estimates that 46 per cent of Kenyans live below the poverty line — on the basis of existence on Sh110 ($1.25) a day.

It puts Kenya’s middle class at only 400,000 in a population of over 40 million people, having grown only threefold in nearly a quarter of a century. The annual income these people is at between Sh748,000 ($8,500) and Sh3.69 million ($42,000).

This group stood at 130,000 in 1990 and 190,000 in 2000. By 2030, it is expected that Kenya will host 1.1 million middle-class households, covering eight per cent of the population.

The United Nations estimates that with a fertility rate of 4.41, Kenya’s population will grow from over 40 million to 66 million by 2030.

The report focused on 11 countries — including Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda, and Zambia. It found only 15 million middle-class households, up from 4.6 million in 2000 and 2.4 million in 1990. It also noted vast income discrepancies among the 11 economies.

EXAGGERATED

“While the scale of Africa’s middle class ascent has been somewhat exaggerated in line with the at times breathless ‘Africa Rising’ narrative, there is still plenty of scope for measured optimism regarding the size of the middle class in several key SSA economies,” says Standard Bank senior political economist Simon Freemantle, the author of the report.

In 2011, an African Development Bank’s study dubbed, “The Middle of the Pyramid: Dynamics of the Middle Class in Africa”, categorised individuals with middle class status as those earning between Sh352 ($4) to Sh1,760 ($20) a day. It also categorised those in the lower middle income class as earning between Sh176 ($2) and Sh352 ($4) a day. Such categorisation put nearly a third of Africa’s population (over 300 million) as ‘middle class’.

The Standard Bank report, which also critiques the AfDB categorisation, says investors using such an assumption might find individuals they thought were middle class were actually highly vulnerable to economic shocks, hence lose that status.

The report instead categorises household income into four distinct bands — low income (annual consumption under $5,500), lower middle class ($5,500 – $8,500 annual consumption), middle class ($8,500 – $42,000 yearly consumption) and upper middle class ($42,000 and above annual consumption).