Africa’s growing middle class being battered by coronavirus; COVID-19 could push 58 mn into extreme poverty

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About 170 million out of Africa’s 1.3 billion people are now classified as middle class. But about eight million of them could be thrust into poverty because of the coronavirus and its economic fallout, according to World Data Lab

Nairobi: James Gichina started out 15 years ago as a driver shuttling travellers from the airport, worked his way up to safari guide, and with the help of some bank loans, bought two minivans of his own to ferry vacationers around.

His clients were, as he is, members of Africa’s growing middle class — bankers from Nigeria, tech entrepreneurs from South Africa and fellow Kenyans who could finally afford trips to enjoy their own country’s beaches and wildlife preserves.

But when the coronavirus pandemic cratered the tourist industry and the economy, Gichina removed the seats from his minibus and started using it to hawk eggs and vegetables. With what he now earns, he said, he can barely afford to pay rent, buy food or send his nine-year-old son to school.

“We have been working hard to build better lives,” Gichina, 35, said of his colleagues in the tourist sector. Now, he said, “We have nothing.”

As the coronavirus surges in many countries in Africa, it is threatening to push as many as 58 million people in the region into extreme poverty, experts at the World Bank say. But beyond the devastating consequences for the continent’s most vulnerable people, the pandemic is also whittling away at one of Africa’s signature achievements: the growth of its middle class.

For the last decade, Africa’s middle class has been pivotal to the educational, political and economic development across the continent. New business owners and entrepreneurs have created jobs that, in turn, gave others a leg up as well.

Educated, tech-savvy families and young people with money to spare have fed the demand for consumer goods, called for democratic reforms, expanded the talent pool at all levels of society, and pushed for high-quality schools and health care.

About 170 million out of Africa’s 1.3 billion people are now classified as middle class. But about eight million of them could be thrust into poverty because of the coronavirus and its economic fallout, according to World Data Lab, a research organisation.

It’s a setback that may be felt for years to come.

“The tragedy is that because Africa is not growing fast, this collapse of the middle class could take several years to recover,” said Homi Kharas, a senior fellow at the Brookings Institution and the co-founder of the World Data Lab.

Africa’s middle class tripled over the past 30 years, by some estimates, spurred by job opportunities in sectors like technology, tourism and manufacturing. But now that the region is facing its first recession in 25 years, millions of educated people living in urban centres could fall victim to the extreme income inequality that has defined Africa for decades.

The rising middle class has been “critical for the future prospects of African economies as they stimulate long-term growth, social progress, an inclusive and prosperous society and effective and accountable governance,” said Landry Signé, author of Unlocking Africa’s Business Potential. The coronavirus “will drastically delay wages and hold back the dreams of Africa’s middle class,” he said.

Governments across Africa responded differently to the coronavirus, but Kenya was among those that closed borders, imposed curfews and restricted movement between counties. In Nairobi, the capital, malls were once touted as a symbol of a rising middle class. Now their owners are furloughing employees, shuttering stores and desperately trying to survive the crisis.

When Kenya first announced lockdown restrictions in March, there was almost no foot traffic at the Junction mall, where Nairobi’s middle class had once gravitated to dine and shop in more than 100 stores.

Eastleigh, a bustling area with dozens of malls, hotels, lodges and banks, was also put under a total lockdown in early May after a jump in reported coronavirus cases.

Maryan Bashir, who owns three stores in Eastleigh that sell mattresses and curtains, said traders like her were already worried about whether they could still get supplies from China as the pandemic began to affect imports. But the lockdown left them reeling from lack of customers.

It also cut employment. Out of 12 of her co-workers, only three lived within the locked-down area and could report to work.

Authorities lifted the curfew from Eastleigh in early June, but Bashir said it will be a long time before shop owners like her are able to make the same profits they made before the pandemic.

“The landlords are still asking for rent,” she said, “but if we are not earning anything, how do we even pay?”

The economic fallout of the COVID-19 outbreak is also being felt among the middle class in Nigeria, Africa’s largest economy. Hit by low oil revenues in the pandemic, the West African nation faces increasing unemployment rates and a recession that could last until 2021, according to the International Monetary Fund.

As demand for goods and services crashed, small businesses and entrepreneurs dependent on cash flow found themselves increasingly in dire straits.

Biola Kazeem established his sports marketing company, Elev8 Sports Entertainment, six years ago, marrying his passion for sports with his college degree in communication. But as sports leagues worldwide canceled or postponed events, Kazeem said he lost 70 percent of his business and had to put half of his 11-member staff on leave without pay.

Despite facing financial challenges in the early years, “nothing absolutely prepared us for this,” Kazeem said in a phone interview from Lagos.

In Zimbabwe, which has been in economic free fall for years, the pandemic and the ensuing restrictions are threatening the solvency of those who have built a bridge into the middle class.

For years, Madeline Chiveso’s restaurant in downtown Harare, Zimbabwe, served professionals such as bankers, journalists and engineers flocking to work. But as infections rose and the restrictions tightened, there were no customers to serve. She was forced to close the restaurant.

She used to make $350 a day and now makes nothing. She is using her savings to pay bills, she said, jeopardising her dream of one day owning her own home.

“The future looks surely uncertain because nobody knows how this would end,” said Chiveso, who is 46 and a single mother of two daughters, both in college.

Kharas, of the World Data Lab, defined the middle class in Africa as households that spend anywhere between $11 and $110 per capita per day.

What distinguishes the middle class from the poor, said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered bank, is the ability to earn a steady income. But because of the pandemic, many more people across Africa are at risk of being “knocked back into poverty” because of lack of jobs, unemployment benefits or any social safety net, she said.

The pandemic is also posing a threat to nascent industries supported by governments in Africa in recent years to boost the number of middle-income earners.

Rwanda, which announced aspirations to become a middle-income nation by 2035, supported the local textile and fashion industries to limit imports of used clothing from the United States and boost manufacturing.

Matthew Rugamba, 30, created House of Tayo in 2011, building it into one of the leading brands in Rwanda’s burgeoning fashion scene. Rugamba gained enough notice for his designs to be worn in Hollywood, at the premiere of the movie Black Panther.

But as Rwanda enforced one of the toughest lockdowns in Africa, Rugamba’s store shut its doors, only to open several weeks later to almost no customers. Even though he’s pivoted to making masks and introduced a delivery service, business has not been the same.

“We were at a point where people value the work that we do,” Rugamba said. But with the pandemic, he said, “you go through periods where you are worried that this is something that I have invested nine years of my life in, and is it going to be there tomorrow?”

More governments are offering financial support and tax breaks to businesses, and urging proprietors to hold onto their employees even if they reduce production or services, said Kharas, of the World Data Lab.

Economists like Khan said that emerging markets in Africa, no strangers to economic shocks, have proven resilient in the past and could come out stronger when the pandemic is over.

But that hope is likely a long way off for Gichina, the safari guide now selling eggs to survive. He works for the tour company Bonfire Adventures, which was founded in 2008 by an entrepreneur named Simon Kabu specifically to serve Africa’s growing middle class.

Once a milk delivery guy and conductor on the matatu minibuses used for transit in Kenya, Kabu grew up in Kenya’s central highlands to a mother who was a farmer and a father who was a retired civil servant.

But by starting a business that served the ever-growing travel needs of the middle class, he grew Bonfire Adventures into an award-winning tours company with 10 offices, 200 permanent staff and 300 drivers and guides.

The coronavirus has gutted all that, pushing Kabu, 45, to lay off his employees en masse. The only staff members currently working, he said, are accountants who are processing refunds for customers unable to travel.

Gichina hopes business will resume soon — especially as he dreads losing out on the peak wildebeest migration starting in late June, which usually draws tourists from across the world.

“The banks are pressuring us a lot,” he said of the urgency to settle his loans. “They are saying you have to pay.” But, he asked, “Where should we get the money?”

Abdi Latif Dahir c.2020 The New York Times Company