THE admission by Nestlé that it overestimated the size of Africa’s middle class has caused ripples in the "Africa rising" story. But it is also a much needed reality check for companies that have pinned their hopes — and their investments — on ambitious growth forecasts of the middle-class pot of gold, writes DIANNA GAMES
Pubished in Business Day SA, June 22 2015.
Last week, the multinational food producer said it was cutting 15% of its workforce across 21 African countries and reducing its product lines. In 2008, it decided to invest heavily in sub-Saharan Africa based on projections of rising middle-class demand. Last week, it said turnover was way short of growth forecasts.
Much new investment in Africa in recent years has been based on the potential of this rising middle class despite the fact that the size and actual spending capacity of this category of consumer is rather hazy.
The African Development Bank’s 2011 research estimated that 34% of Africa’s population — 313-million people — was middle class.