Retail and consumer markets are buoyant in developing countries throughout the globe. Personal incomes in many of these regions have increased steadily over the years, prompting the emergence of a growing middle class. Africa is no different. According to World Bank estimates, our continent is home to more than a billion people, a figure expected to increase to more than 2.5 billion by 2050. Perhaps, more crucially Africa has one of the fastest growing youth populations in the world.
PwC recently released a report, So Much in Store, which is an in-depth study into sub-Saharan Africa retail and consumer goods industries. The findings are compelling. The report provides a five-year outlook by focusing on 10 African economies that PwC believes offer substantial opportunities for retail and consumer businesses looking to expand into African markets. These countries include: Cameroon, Ethiopia, Kenya, Nigeria, Tanzania, Zambia and Côte d’Ivoire. Despite a slowing Chinese economy, and subsequent lower commodity prices, having a knock-on effect on real GDP growth in a number of African economies, there appears to be a silver lining. African economies predominantly reliant on commodities are beginning to diversify.
The growing consumption of the middle class in Africa has been driven by several key factors, such as: an increase in internet usage and accessibility; ubiquitous use of social media; private healthcare; and budding retail property developments (malls). Consumers in sub-Saharan Africa in particular are becoming more brand conscious and aspirational; they are willing to satisfy their needs and wants at a whim provided they can afford it.
“Africans are becoming more connected to global trends than ever before as a result of growth in internet penetration and travel,” says Anton Hugo, PwC Africa Retail and Consumer Industry Leader.
There’s been a spike in the level of consumer discernment when it comes to their purchasing decisions, thereby stimulating retailers to create new products to meet this demand.
One issue highlighted by PwC is that there are several misconceptions about doing business in Africa. Like going into any new business venture, there’s no such thing as a one-size-fits-all approach. Firstly, Africa is home to more than 50 countries, with even more languages, including indigenous dialects. It’s integral that companies seeking to enter African markets get their hands dirty, on the ground, to gain an understanding of the region. A business can ill-afford going into any part of Africa with preconceived notions. Instead, firms should take the approach of immersing themselves into the culture of the local people to understand the dynamics of business in that country.
In addition, having the right strategy cannot be over-emphasized. Strategy can strengthen or decimate a business in an instant. Some firms fail to recognize a strategy that has been successful in South Africa, for example, does not necessarily translate to success in other African countries. Firms must formulate a unique and well-thought strategy for the different markets it aims to enter to avoid becoming another casualty, similar to Woolworths in Nigeria.
Despite the varying challenges that are slowing growth in the retail and consumer businesses in Africa, the PwC report assures companies that the opportunities far outweigh the impediments. There are enormous opportunities yet to be realized: retail trade in Africa is still largely concentrated in informal markets; the online retail industry is still in its infancy and intra-African trade is incredibly low.
“Each country in Africa has its own value proposition. Smart investing in Africa means investors need to understand key regions and local markets. Furthermore, investors need to note that there are specific risk factors underlying the development of Africa. Despite these risks, investors and retailers will continue to see the African market as a huge opportunity,” says Hugo.
When opportunities aren’t realized, they remain idle. Development in Africa and expanding African retail and consumer businesses in Africa will require collective action from business and governments. Governments need to invest in infrastructure, such as transport networks, in order to open more markets.
It will be interesting to witness the progress of the African retail and consumer business sector in the next five years. The odds are in its favor; now let’s see whether it can thrive.