Why middle class figures are misleading

Lewis Njoka @LewisNjoka

Economic experts are casting doubts on the narrative of a robust Kenyan middle class saying official data does not portray the true representation of the economic situation on the ground.

This skepticism comes on the backdrop of recent surveys including one by real estate consultancy Knight Frank showing the number of rich and ultra-rich Kenyans dropped significantly last year.

Wealth Report Attitudes Survey 2020 estimated the number of dollar millionaires dropped by 500 people to stand at 2,900 last year down from 3,399 in 2018.

Similarly, the number of ultra-high net worth individuals (worth above Sh3 billion) reduced to 42 last year down from 48 in 2019.

The middle class has been considered by many economists and even the World Bank and IMF as the drivers of growth in Sub-saharan Africa including Kenya, but the numbers do not seem to add up.

With such rankings in mind, economic experts now say many of the people categorised as middle income earners by the Kenya National Bureau of Statistics (KNBS) cannot afford the quality of life associated with that social class, calling it a flawed classification.

They also voiced reservations about the government’s 2014 move to rebase Kenya’s gross domestic product which saw it become 25 per cent larger, moving the country into middle- income economy category as per the World Bank rankings.

Reginald Kadzutu, a project head at Zamara Capital says very few Kenyans would make it into middle class if the classification was pegged on disposable income, as opposed to gross earnings.

“It depends on how you measure middle income. Some use what people earn while others use what people spend. KNBS says anyone who earns between Sh25,000 and Sh99,000 a month is middle income class.

If you use that definition, then we are a middle income country, but is that definition sufficient to define what we call a middle income country? I do not think so,” said Kadzutu.

“If we use a more international definition, it should be people who can spend a discretionary Sh25,000 to Sh99,000 a month. People who can spend this over and above their normal monthly expenses, are the real middle income earners,” he added.

Of the approximately 76,000 formally employed Kenyans who earn more than Sh100,000 a month, very few can afford to spend Sh25,000 above their normal monthly expenses considering that the average salary in Kenya is Sh55,000, according to Kadzutu.

He said the decrease in the national savings rate and the high indebtedness among individual citizens were indicators that many Kenyans were yet to become middle income earners.

Samuel Nyandemo, an economics lecturer at the University of Nairobi, blames the lack of disposable income on the ever-increasing bills.

“The incomes are okay but what suffocates the earning is the daily commitments in terms of school fees, daily bread and expanded households. You cannot look at incomes in isolation ignoring the African culture of African Socialism, we have extended families,” said Nyandemo.

University of Nairobi economics lecturer Gerrishon Ikiara, however, defended the government position on individual incomes saying the skepticism was unwarranted.