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Published in the Indicator

March 19, 2019

 

53% of consumers in East Africa have achieved an income of 2 USD per day or greater according to a study of the African Consumer using the most recently available figures.

Which EAC countries have the highest and which the lowest increases in disposable income?

Kenya, Uganda and Rwanda have shown the greatest increases in recent years. Tanzania is increasing due in part to the major forces behind the macroeconomic trends impacting this large populous country.

Why is having greater disposable income in EAC countries important?

Disposable income is important for economic activity for many reasons. In the short term, it’s a strong gauge of the purchasing power of consumers and how likely they might be to purchase a non-essential item or service.

In the longer term, disposable income is used as a proxy measure of the overall health of the economy, savings and consumption rates. Information on savings and savings rates are particularly important for policy-makers who may influence interest rates.

How does the level of disposable income in the EAC compare with other parts of the world?

Disposable income in EAC

Within the African continent, Kenya is performing at higher than average, while Uganda is closer to the average. Tanzania, Rwanda and Burundi are below the average but are likely growing their rates of disposable income soon.

Consistent with GDP per capita figures and compared to the developed and emerging economies around the world, the disposable incomes of the EAC member nations are lagging behind. We are expecting strong growth not only because of the current market conditions but because of the fundamental societal forces that will make strong growth in disposable income a practical inevitability.

Is disposable income in EAC countries growing or shrinking?

Disposable income is growing in East Africa. The regional trend harmonizes with the continental trend of personal incomes increasing due to increases in urbanization, demographics and population growth, and adoption of cost-saving technologies. The trends for Kenya and Rwanda seem to be especially promising.

What investment opportunities are likely to perform well as disposable incomes increase across the EAC?

As seen in the growth of other nations, a rise in the overall economy typically results in an increase in the number of people with higher rates of disposable income. This is similar to what we see in the EAC member nations.

Higher disposable income results in growth in sectors including healthcare, education, transportation/logistics, food and household products, financial services, and real estate/construction.

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Source: The Exchange

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