Unveiling East Africa’s Middle Class: Opportunities for Growth in Retail, Restaurants, Healthcare, and Education Among An Elusive Demographic
A REPORT about the salience of the middle class in generating profit and driving regional transformation.
Abstract
The middle class. Heralded as the engine of economic renewal and societal transformation, broadly defined, consists of individuals and households that fall between the lower and upper-income brackets, typically distinguished and delineated by their purchasing power, level of education and aspirational lifestyles. Whoever can uncover the hidden identity and patterns of the often overlooked middle class wields great power, as this segment is integral in generating profit and driving regional transformation.
This report acknowledges that the middle class is the furthest thing from homogenous; it encompasses a diverse set of individuals and households whose tastes and spending habits differ largely according to factors such as geography, culture and income levels. Nonetheless, within this diversity lies the potential to distil trends that unlock the vast opportunity for businesses operating in retail, food, healthcare, and education to enter the door of sustainable growth and long-term success in these industries.
Kenya, the largest economy in East Africa, provides an unparalleled starting point for understanding and engaging the middle class. Its substantial and dynamic middle-class segment, with distinct spending patterns and aspirational behaviours, serves as a blueprint for success in the region and, because of this, will be the main focus of this report.
Introduction
The concept of the middle class in Africa has been widely discussed as a symbol of economic development and democratisation. However, critiques reveal the limitations of applying Western frameworks to African contexts, as the middle class is not a homogeneous entity with uniform political or economic behaviours. In East Africa, truly understanding the middle class requires a nuanced approach that considers cultural, social, and historical factors unique to the region. While the true essence of the middle class may be complex and multifaceted, engaging with definitions and statistical data to establish possible ranges is crucial. This approach enhances our understanding, informs business strategies, and drives industry growth in East Africa.
The potential of the middle class lies in the stories of economies reshaped, markets redefined, and aspirations realised. For instance, Konga, founded in Lagos, Nigeria 2012, has played a significant role in Nigeria’s e-commerce sector by bridging the affordability gap by integrating logistics and payment services, tapping into the weaknesses that pervaded Western Africa’s middle class. As one travels down the South of the continent, the same pattern is replicated with industry leaders like Tiger Brands in South Africa (the nation’s largest food producer) deliberately extending its reach to the middle class by advertising and selling in townships and more rural areas in August of last year. These are beyond stories of growth—they are testaments to the untapped potential that lies within recognising and empowering this vital demographic.
Defined by the African Development Bank (AfDB) as households spending between $2 and $20 a day, adjusted for 2005 purchasing power parity (approximately $3.18 to $31.80 per day today), the middle class occupies a dynamic space between subsistence and affluence. Based on the definition provided by the AfDB, the most comprehensive figures regarding the size of East Africa’s middle class were 29.3 million people in 2011, which represented 22.6% of the region’s population at the time. Considering East Africa’s notable economic growth, with the region’s GDP is projected to increase from 17% in 2022 to 29% by 2040, it may be safe to assume there has been a significant increase in the area’s middle class. However, without a precise set of figures, this is difficult to ascertain. According to the same definition, in 2011, 17% of Kenya’s population fell into this category. Since then, the average Gross Domestic Product (GDP) per capita has increased by over 77% by 2023, and Gross National Income (GNI) per capita has increased by approximately 80.02% by 2023, thus suggesting an upward trend in the size of the middle class.
Additionally, the growth of the middle class is avidly revealed through an increase in consumer spending, with the Stears Consumer Intelligence Report 2024 noting that the average household expenditure and gross domestic product (GDP) in Sub-Saharan Africa both have a growth rate of 3.2% despite the post-COVID economic uncertainty. It suggests that ‘given that consumption is a component of GDP, this indicates strong economic activity on the continent driven by consumer spending.’ Kenya has the highest consumer spending in the region, with approximately $80.06 billion in 2024. Despite the $2.66 billion decrease in consumer spending from 2023, it remains the largest economy in the region. It also has the highest GNI per capita in the region of $2,110. Following World Bank metrics, this makes it a securely lower middle-income country. Given that it is the biggest economy in the region, this report will focus on the Kenyan market.
The retail, food, healthcare and education sectors have been selected as the focus of this report as they represent varying proportions of household spending in Kenya, and so provide a balanced depiction of general spending trends. Of total household expenditure, food and non-alcoholic beverages make up 32.91%, restaurants and accommodation services 8.1%, education 5.56% and healthcare 2.91%. By examining sector-specific demand and identifying opportunities for businesses to address these needs, the report will offer strategic insights on maintaining competitiveness within these markets.
Methodology
To understand the demands of Kenya’s middle class, this report focuses on trends in the education, food, healthcare, and retail sectors, analysing consumer spending patterns and preferences over the past five years to explore how businesses can remain competitive. A mixed-method approach was adopted, combining qualitative and quantitative data to ensure a comprehensive perspective.
The primary research relied heavily on secondary sources, such as policy briefs, academic articles, news reports, and industry publications, which were critically evaluated to draw meaningful insights. Key data sources include the World Bank, which provides global economic indicators like Gross National Income (GNI) per capita, and the Kenya National Bureau of Statistics (KNBS), which offers region-specific data crucial for understanding local spending trends and economic dynamics. This combination of sources enabled the integration of macroeconomic trends with sector-specific observations, presenting a holistic view of the market.
While this methodology offers depth and breadth, certain limitations are acknowledged. Research on East Africa’s middle class is still emerging, leading to a scarcity of comprehensive data, particularly on specific spending habits within this demographic. Furthermore, the lack of consensus on defining the middle class creates challenges in pinpointing clear trends, requiring the use of societal markers and widely accepted economic definitions as a framework. Despite these constraints, the report achieves a well-rounded analysis by leveraging the strengths of its mixed-method approach and drawing on reliable and credible sources to deliver actionable insights for businesses seeking to cater to Kenya’s evolving middle-class market.
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