The burgeoning African consumer sector offers attractive opportunities to businesses looking to enter new markets. But the key to unlocking these opportunities is sound commercial navigation and strong sector insights. In addition, understanding the intricacies of the local consumer landscape is crucial.
Africa has millions of expectant consumers-in-waiting. Retailers, and businesses through the chain, which formulate competitive strategies and team up with the right local partners, are well positioned to benefit despite the current headwinds caused by the weak global market conditions.
Geographic opportunity on the continent can be found across several markets. South Africa remains the “gateway” to Africa, with a well-developed agriculture, food, beverages and retail market. Within the retail sector, Ethiopia is establishing itself as a clothing and apparel manufacturing hub, offering opportunities for clothing retailers looking to establish operations on the continent. Family conglomerates dominate the agribusiness sector in East Africa and are sizeable enterprises that rival multinationals. And opportunities lie in unlocking the route to market in Nigeria for the FMCG (fastmoving consumer goods), and food and beverage sectors, despite a challenging economic and regulatory environment.
Lifting the lid on some key statistics shows that the potential and growth of the consumer sector is expected to drive industry advancement well into the future.
The continent’s population is expected to reach 2 billion by 2050, accounting for 24% of the world’s population, a significant jump from 15% in 2010. In addition, a strong shift is taking place from grassroots LSMs 1-4 into LSMs associated with middle-class lifestyle.
According to United Nations data, almost 60% of Africa’s population will live in cities by 2050. McKinsey’s recent Consumer Sector in 2030 report anticipates that middle-class spending globally will almost treble by 2030, and the 2014 Africa Annual report by Ornico Group expects consumer spending on the continent to rise to US$1 trillion by 2020.
Another important factor is that there are currently over 950 million mobile subscribers in Africa, according to telecommunications researcher Ovum. This is a significant opportunity for retailers to harness by bringing their shop windows and value propositions into the digital world, which now includes rural-based consumers that were previously unreachable.
Africa’s large youthful population, upward urban growth trajectory, socially-connected mobile users, untapped physical resources and the deepening of the financial sector are the key trends propelling the African economy into the future.
“Institutional regulation and economic freedom vary widely across Africa. Given this complexity, Standard Bank’s specialists understand the regulatory environment and are well positioned to identify suitable local partners and evaluate opportunity against risk,” says Clive Potter, Global Head of Consumer Client Coverage in Corporate and Investment Banking.
Multinationals looking for new sources of growth will find an attractive and receptive market in Africa, where a large portion of disposable income is currently spent on primary and secondary food products and beverages, and where the demand for non-food commodities such as beauty products is expected to increase in the years ahead. In summary, the African continent is open for business.