Several recent mainstream media pieces (including The Wall Street Journal linked herein), picking up on a research paper from the African Development Bank, underline a common point, though it’s one that frontier savvy mangers and investors have been harping on for quite some time now–namely that the growth rate of Africa’s middle class continues to accelerate, while consumption expenditures in turn continue to converge with developing countries (a phenomenon we’ve highlighted previously vis a vis Morocco and Tunisia, specifically, with Europe.  That said, the study in question–which delineates middle class by purchasing power parity and daily per capita expenditures (as well as the fact that it is “likely not to derive its income from agricultural and rural economic activities [but rather from] salaried jobs or small businesses), and further subdivides it into “floating”, “lower” and “upper” regions, admits there exists a “high concentration in the lower ranks” vulnerable to exogenous shocks (to that end, the percentage of the continent’s middle class without said wobbly “floating” class has actually dipped slightly in the past thirty years).  As the authors point out this applies most notably to the three most populous countries in Africa, Nigeria, Ethiopia and Egypt “where more than half of the middle class is in the floating category, living on less than $4 per day.”  Not surprisingly, the paper concludes that going forward “Africa’s middle class [will be] strongest in countries that have a robust and growing private sector,” while pointing out that statistically “enhancement of a country’s human resources through greater access to education and improved healthcare shows [the highest] positive correlation” with the size of a respective, middle class.”  So what’s an investor to do?  We continue to look for the most robust countries that offer exposure not only to these specific paradigm shifts relating to sustainable middle class composition as well as continual improvements to the ease of private sector wealth creation and the renovation and nurturing of physical (and social) infrastructure, education and health care, but also natural resources–wealth from which will [theoretically] help hasten a given economy’s transition away from commodity export reliance, encourage foreign investment and thus fuel the development and maturation of local sovereign and ultimately corporate debt markets–the true crucible and/or vanguard of enduring political, social and economic change to the continent, in our opinion.  The ever-mobile Mark Mobius, for example, hit on these same points recently, highlighting Nigeria, Ghana and Kenya in particular.

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