
These words by legendary advertising tycoon, David Ogilvy, perfectly sum up why going local is the answer to tapping into Africa’s consumer market and its full potential. In the last two decades or so, the continent of Africa has seen a radical rise of the middle class across countries and with that, increased consumer spending.
Today, the number of consumers in Africa stands at nearly 1.2 billion but they are projected to rise to 1.7 billion by 2030. (Brookings 2018) Furthermore, the urban population is predicted to rise at roughly double (46.3%) the pace of the rural population, from 38.0 million people in 2015 to 54.5 million in 2030 (Euromonitor, 2019).



THE AFRICAN ECONOMY
This is a clear indicator of why cities are gaining more interest – as reflected in big retail brands exploring secondary market expansion in high potential cities in Egypt with increasing disposable income and urbanization. Take Egypt for instance. Its share of investment deals rose by 7% during 2018, accounting for 22% of all Middle East and North Africa (MENA) investment deals.
Moreover, the continued growth in Africa is also reflected in the upgrade of countries such as Botswana, Nigeria, Kenya, Ghana, Tanzania, Mozambique, Uganda and Zambia to “emerging markets in Africa.” (IMF, 2017).
Ethiopia too is being considered one of the fastest-growing economies in the world in the last 10 years, with its average annual GDP growth rate of 9.8% a year till 2019 (World Bank)
However, the true value growth in the region can be gauged by the fact that Nigeria surpassed South Africa as the largest economy in Africa in 2019 and continues to maintain the lead in 2020 as well. (Bloomberg 2020). Both countries make up half of Africa’s GDP in the sub-Saharan region. This is the testament to how competitive Africa’s economies are as compared to other regions, given the advantages of a young and growing population, a rapidly growing workforce, and having the fastest urbanization rate in the world.
TRENDS IN 2030: CONSUMER SPENDING IN AFRICA
Market leaders have been mapping the African growth story for over two decades but now the big question is who is winning in Africa’s consumer market? And even bigger question is – what does market analysis say about its Africa consumer trends?
The latest African consumer trends show that consumer spending growth in Africa is projected to rise to $2.1 trillion by 2025 and $2.5 trillion by 2030. This reflects the Africa market potential as the number has more than doubled the level seen in the year 2015.
This is backed by McKinsey which predicts $5.6 trillion in African business opportunities by the year 2025. It is being said that the largest consumer markets in Africa by 2030 will include Nigeria, South Africa and Egypt. Considering the Africa consumer trends, there are said to be lucrative opportunities in Algeria, Ethiopia, Angola, Kenya, Ghana, Sudan, Tunisia, Morocco, and Tanzania, among other African countries. (Brookings, 2018).
The consumer spending patterns 2019 in Africa showed optimism and willingness to spend. The research noted that like many other developed economies, 86% of African people equated happiness with their ability to purchase new things. The quality too seems to be a focus with 85% of Ghanaians, 88% of Ethiopians, and 80% of Nigerians and South Africans .
However, 64% of Kenyans, 62% of Moroccans, and 57% Egyptians, on the other hand, chose quantity over quality (African Consumer Sentiment 2019).
If Africa sustains and accelerates structural reforms, some believe the continent can emulate China’s rapid rise of the last 50 years (WEF, Feb 2020)
THE FUTURE IS DIGITAL AND THE FUTURE IS HERE
In April 2019, Jumia, dubbed as the African Amazon, became the first African technology startup to be listed on the New York Stock Exchange. Jumia runs had 6.8 million active customers in 2020 Q1 and operates in several African countries (Statista 2020).
But it wouldn’t be far off the mark if someone said that they didn’t see it coming.
African Tech startups had a record-breaking run with funding the previous year, raising US$334.5 million in investment and this alone reflects Africa’s consumer market potential.
These developments are a good indicator of how the tech startups in Africa and other technological advancements are helping the continent to overcome infrastructure gaps and improving upon consumers’ access to information and products.
This is further cemented by a recent survey that it is digital all the way for the youth in the Sub-Saharan Africa region where media consumption through the internet stood at an impressive 46% with TV and Radio following behind – 25% and 24% respectively. The study noted that the youth in Sub-Saharan Africa comes across digital advertisements now more than any other form of advertisement. (GeoPoll Straw Poll June 2017)
INTERNET IN DIFFERENT REGIONS IN AFRICA
However, there is an interesting observation and a lesson to gain from here. While this research is restricted to a particular region of Africa, it provides valuable insight into media and marketing advertising agency in the said region.
The results may differ for countries such as Algeria, Egypt, Morocco, Libya and Tunisia.
Nigeria led with the highest internet users – at 126.08 million. Egypt stood at 49 million while Kenya followed closely at 16 million internet users. Algeria and Morocco stood at 25 million and 23 million respectively. (Statista, December 2019)
The lesson is that Africa is a vast continent and should be treated as such, instead of a larger collective entity due to its cultural and socio-economic nuances in different countries; this was noted in another report in the same year wherein middle-class dynamics and local factors were the reason for many businesses failing to tap Africa’s consumer market potential (Harvard Business Review, 2017).
“There are no secrets to success. It is the result of preparation, hard work, and learning failure.” – OLIVER SANDERO
CONSUMER MARKET DEVELOPMENT
It is interesting to note that businesses seemed to have realized that local demand matters. Consumer demand is now at number #2 in Business priority in 2019 and Product innovation at #3. This is a new development as four years ago, the companies primarily focused on the retail environment and growth with more focus on new products in the right stores. (Nielsen Africa Prospects Indicator (APi) Report, 2019)
Moreover, Africa’s local brands too bucked up the market with their own products to fuel the demand and supply, riding on their popularity. Zambia’s popular Eezee noodles, Kenya’s award-winning Keringet water and Nigeria’s iconic Peak milk are only some of many examples across the continent.
But Africa’s growth is not just consumer-driven. Investors too are showing keen interest in the region.
FDI stock data 2018 shows that Netherlands firms with $79 billion overtook their French counterparts ($53 billion) and becoming the largest foreign investors in Africa (United Nations Conference on Trade and Development, 2020).
It is interesting to note that over two-thirds of investment stock is from the Netherlands which is concentrated in three countries – Egypt, South Africa and Nigeria. There is an increase in intercontinental investment, with the stock of investment in Africa held by South Africa increasing by $7 billion in 2017 to $35 billion in 2018.
However, the investment stocks from the United States show a decline – by 15% with $48 billion due to divestment and profit repatriation.
But leading economies in Europe and Asia seem to increase their investment in Africa with the United Kingdom and China increasing their investment stocks by 10 percent to $49 billion and $46 billion, respectively. In the near future, these two countries could play an important role as investors in Africa.
“There are no secrets to success. It is the result of preparation, hard work, and learning failure.” – OLIVER SANDERO
Technological advancements including access to the internet in many countries of the continent and large-scale foreign investment have contributed significantly to Africa’s consumer spending.
Moreover, it is clear to see that the enterprising population is not far behind either and has successfully made their mark as local brands.
Given the promise of a financially stable and prosperous future that Africa’s consumer market potential holds, it can be said that more and more investors would agree with the Shakira song – “This time for Africa”.
https://www.africabv.com/what-can-we-expect-from-africa-consumer-spending-in-the-future/