Forget the hype about Kenya turning into a middle-income economy soon

Cabinet Secretary for National Treasury Henry Rotich (left) during the launch of the Nairobi Securities Exchange (NSE) initial public offering. With him is NSE Chairman Edward Njoroge. FILE PHOTO |   NMG

In Summary

• The vast majority of the country’s households — 92 per cent — are still considered low income, that is, those earning less than Sh40,000 a month (figures converted from US dollars).
• Kibakinomics gave the illusion that the middle class was rapidly growing, but the evidence on the ground did not support this. Countries need to be at least 50 per cent urbanised before they can attain middle income status.
• Since the total population of these cities is about five million, of which at least a third live in poverty, we can roughly estimate that there are only about three million urban Kenyans who could fall in the range of rich, upper middle class, middle class and lower middle class.

By RASNA WARAH
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I am glad that the Standard Bank Group’s researchers have debunked the myth that Kenya is an emerging economy because I am among those people who simply did not buy the hype that Kenya will have a robust middle class by 2030.

The Group’s recent research shows that, contrary to optimistic projections by Vision 2030 enthusiasts, Kenya still has a long way to go before it is can be classified as middle-income.

According to the report, only 4 per cent of Kenyan households fall into the middle class category, which the Group places as those that have an income of between roughly Sh60,000 and Sh300,000 a month.

The vast majority of the country’s households — 92 per cent — are still considered low income, that is, those earning less than Sh40,000 a month (figures converted from US dollars).

These figures have been validated by a recent Ipsos Ltd survey that showed 93 per cent of Kenyan adults earn less than Sh40,000 a month while 43 per cent earn less than Sh10,000.

These statistics fly in the face of African Development Bank figures that placed Africa’s middle class as those that earn between $4 and $20 a day, or between $120 (about Sh10,000) and $600 (about Sh50,000) a month.

Anyone living in Kenya today knows that if you earn Sh10,000 a month, you are definitely not middle class, and that if you earn Sh50,000, then you are really struggling to pay for food, rent and school fees.

However, you could have been middle class 20 years ago. In 1992, at the beginning of my professional career, I was earning a salary of Sh15,000 a month.

GOLDENBERG GHOSTS

Going by the exchange rates for that year, my salary was about $500 a month, which was not fabulous, but it would have allowed me to rent a house in a lower middle-class area, such as Buru Buru, for about Sh5,000 a month. Today, I would need to earn at least six times that salary to afford a middle-class house in, say, Kilimani.

So what happened in the last 20 years? Well, Goldenberg happened and by 1993, the dollar was exchanging at Sh100, and suddenly, people who thought they were middle class ended up poor.

I am no economist, and cannot pinpoint why the economy never recovered from Goldenberg — it just never did. (Perhaps economist David Ndii can explain this in one of his columns).

However, as a consequence, inequalities grew and we had a situation where the richest people in the country were not just earning 5-10 times more than the middle- or low-income classes, but hundreds of times more.

Kibakinomics gave the illusion that the middle class was rapidly growing, but the evidence on the ground did not support this. Countries need to be at least 50 per cent urbanised before they can attain middle income status.

No economy in the world where the majority of the people live in subsistence farming-based villages has attained middle-income status.

Migration to cities must also be accompanied by industrialisation, with manufacturing leading the way. This is clearly not happening in Kenya.

Government policy-makers continue predicting high urban growth rates for Kenya, and claim that in 2030, more than half the country’s population will be urban.

However, United Nations estimates indicate that only 24 per cent of Kenya’s population resides in cities and towns, and by 2030, only one-third of the country’s population will be classified as urban.

Kenya’s middle classes are concentrated in three of the largest cities, namely Nairobi, Mombasa and Kisumu.

Since the total population of these cities is about five million, of which at least a third live in poverty, we can roughly estimate that there are only about three million urban Kenyans who could fall in the range of rich, upper middle class, middle class and lower middle class.

Now three million out of a population of 40 million makes for a very tiny middle class.

Let’s face it — we are a poor and highly unequal country and will remain so for some time to come.

rasna.warah@gmail.com