Business & Economy

Positive prospects for African retail and consumer businesses

AFRICA’S economy has seen modest growth in the wake of falling commodity prices, slowing revenues and volatile currencies. The moderation in growth impacts a range of industries and sectors, including retail and consumer products that must contend with rising costs, and a fall in prices.
Despite the decline in growth, the long-term outlook remains positive. The economic growth predicted for 2016 and beyond in some African countries and the growth expected in Africa’s consumer market provides major opportunities for retail and consumer companies looking to the future, says a report released early March by global accounting firm, PwC.
‘As Africa has risen to prominence as an investment destination over the past several years, so the role of retail and consumer goods has taken on greater significance,’ says Anton Hugo, retail and consumer industry leader, PwC Africa. ‘Sub-Saharan Africa (SSA) remains one of the fastest growing regions in the world and the successful expansion of a number of global and African retailers and consumer goods companies across the region speaks to the opportunities that exist.’
‘However, ‘Africa’s fortunes are very much tied to those of the global economy. Pressure on emerging market currencies coupled with a decline in oil and other commodity prices has seen pressure on government revenues and the ability of governments to increase social expenditure and wages in the public sector. African retailers will need to focus their efforts on operational efficiency and managing the effect on their operations of volatile currencies,’ adds Edafe Erhie, PwC Partner in Nigeria.

PwC is bullish about SSA's retail and consumer business
PwC is bullish about SSA’s retail and consumer business

PwC’s inaugural publication entitled ‘So much in store’, is an in-depth study into the make-up of SSA’s retail and consumer goods industries, and provides an outlook for the coming five years by focusing on 10 African economies that the company believes offer some of the most compelling opportunities for retail and consumer businesses looking to expand into Africa: Cameroon, Ethiopia, Ghana, Côte d’ Ivoire, Kenya, Nigeria, South Africa, Tanzania and Zambia.
It says significant global megatrends will help drive the retail and consumer goods industries and create future opportunities. Africa’s demographic dividend, its growing middle class and rising income levels, and rapid urbanisation will all have a part to play in the continued growth of the retail sector across the continent.
Currently, Africa is home to more than one billion people which is expected to increase to more than two billion by 2050Africa’s working age population is forecast to grow at a faster rate than its overall population. When the labour force grows more rapidly than the population dependent on it, resources become available for investment in economic development and personal consumption. This offers an opportunity for rapid economic growth.
In addition, changes in consumer lifestyles and ambitions are influencing purchasing behaviour and patterns, according to leading retailers. Overall, consumers in SSA are becoming more aspirational and brand-conscious. ‘Africans are becoming more connected to global trends than ever before as a result of growth in internet penetration and travel,’ explains Hugo.
Those that can afford it are also becoming more health-conscious, favouring nutritious and healthy foods.
For the foreseeable future informal retail will continue to dominate sales in SSA. With the exception of South Africa and Angola, it is estimated that upwards of 90 percent of sales in the focus countries is through informal channels such as markets, kiosks, table-top sellers and street hawkers.
‘However, the industry is in the process of modernising with a number of western-style shopping centres taking shape in countries like Nigeria, Kenya and Ghana. It is also interesting to note that in some countries such as Ghana, Nigeria and Zambia, many of the malls are anchored by South African retailers. For some countries, the building of shopping malls is a challenging and expensive business due to the difficulties in securing land, resources, and the costs associated with building,’ says Michael Mugasa, PwC partner in Kenya.

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