In this report, Deloitte assesses how the African market has developed, how perceptions of Africa have changed, and how consumers are responding to a period of rapid economic growth. We also make the case for seizing the opportunities within the continent.
What it took to succeed in the past may not be what it takes to succeed in the future. We discuss the importance of developing a 21st century view of the African consumer market and make a case for seizing the opportunity. Business strategies also need to be tailored to the specifics of each market or sub-region if they are to succeed. This report aims to provide you with insight and data to enhance your understanding of the opportunities and challenges in Africa.
“Despite low income levels, young consumers surveyed attach more importance to the quality of products than price. Across the four markets researched, quality ranks higher than value for money when it comes to deciding where to shop. Not only are younger African consumers focused on quality, they are also brand conscious. Deloitte research shows that in some categories, such as food and drinks, local brands are preferred by the younger population. In other areas, such as fashion and cosmetics, quality is linked to international brands.”
In recent years a diversifying economy has supported an emerging middle class, driving demand for consumer goods and services, as well as luxury brands. Rising consumer demand, aligned with annual growth of around eight per cent, is likely to add around $1.1 trillion to African GDP by 2019, with Ethiopia, Uganda and Mozambique among the fastest expanding markets, and large economies such as Nigeria, South Africa and Egypt continuing to perform strongly. However, risks remain, including a lack of infrastructure, poor governance, fragile security and unreliable logistics, but conflicts are more localised and democracy is spreading, suggesting the dominant trend is positive. In Deloitte’s view, the consumer opportunity in Africa rests on five key pillars: the rise of the middle class, exponential population growth, the dominance of youth, rapid urbanisation and fast adoption of digital technologies.
Rise of the Middle Class
Between 2000 and 2012, Africa’s aggregate household final consumption expenditure grew at an average annual rate of 10.7 per cent, rising by more than $850 billion and reaching nearly $1.3 trillion. The emerging middle class is more optimistic, brand conscious and connected. In 2013 there were over 375 million middle class people living in Africa, or 34 per cent of the population. By 2030, over half a billion Africans are projected to be middle class. While the numbers are impressive, it should be noted that 60 per cent of those considered middle class today live on $2 to $4 a day.
Exponential Population Growth & Youth Dominance
More than 200 million Africans, or just over 20 per cent of the total population, are aged between 15 and 24, and that demographic is expected to grow to 321 million by 2030. Younger Africans form a large share of the rising middle class and will seek to access a wider choice of food, consumer goods and entertainment, and increased connectivity. Africa’s population is also increasingly clustered in large urban centres, and urbanisation will be a key driver of economic activity. Many urban areas will cross national boundaries, linking major populations and creating sizable markets and trade opportunities.
Fast Adoption of Technology
The growth of mobile digital technologies meanwhile has also allowed Africans to leapfrog poor landline infrastructure. Africa is already a world leader in mobile money and mobile is fast becoming the primary channel for accessing the Internet. The potential for growth is significant, with only 20 per cent of the population online, compared with nearly 75 per cent in Europe and 32 per cent in Asia.
To measure current consumer sentiment, Deloitte surveyed young Africans across four of the fastest growing consumer markets: Egypt, Kenya, Nigeria and South Africa. The research shows that young consumers in the fastest growing markets of Kenya and Nigeria are most optimistic about their personal financial situation, more than in wealthier South Africa and Egypt.
Despite low income levels, young consumers surveyed attach more importance to the quality of products than price. Across the four markets researched, quality ranks higher than value for money when it comes to deciding where to shop. Not only are younger African consumers focused on quality, they are also brand conscious. Deloitte research shows that in some categories, such as food and drinks, local brands are preferred by the younger population. In other areas, such as fashion and cosmetics, quality is linked to international brands.
The results of the survey suggest that Africa is not suffering from a lack of demand, but sometimes from a lack of supply. For companies seeking to invest, Africa remains complex. Companies should be prepared to engage on a longterm basis and to consider a variety of strategies while carefully weighing the risks and rewards. However, where there are challenges, there are also opportunities to innovate and given the potential for growth the continent offers, the business opportunities in Africa could outweigh the risks.