Johannesburg
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 balance-sheet backing. In addition, understanding the intricacies of the local consumer landscape is crucial.
“From ‘farm to fork’, the entire consumer value-chain offers exciting potential,” says Brendan Grundlingh, an executive from Standard Bank’s global consumer sector team. “Business practices and commercial climates may vary from region to region, but there is one thing that rings true: 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,” says Grundlingh.
Opportunity on the continent can be found across several markets. 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. Opportunities also lie in unlocking the route to market in Nigeria for the FMCG (Fast Moving Consumer Goods), and food & beverage sectors, despite a challenging economic and regulatory environment.
Key statistics show that the potential and growth of the consumer sector is expected to drive industry advancement well into the future. Multinational FMCG companies are already taking the leap, with organic growth in key African markets.
The continent’s population is expected to reach 2 billion by 2050, accounting for 24 percent of the world’s population, a significant jump from 15 percent in 2010.
According to United Nations data, almost 60 percent 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 $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,” says Grundlingh.
“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, But it is important for businesses to look deeper, into the sectors themselves,” he says.
For example, Grundlingh notes, it may be important for a consumer-facing business or supplier to know that the need for greater regional food security will spur future development, enhancing Africa’s position as a burgeoning global supplier.
Consumer players often diversify their operations, providing infrastructure and employment, which stimulate middle class formation and have a far-reaching impact due to the multiplier effect. The growth of the consumer sector in Africa is closely aligned to power and infrastructure development. Institutional regulation and economic freedom also vary widely across Africa.
“Another important theme is that 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,” Grundlingh says.