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Africa The Final Frontier, on the Brink of Economic
Takeoff… with Billion Consumers & Growing Faster…
November, 2014
Emerging Market Consulting
“Africa could be on the brink of an economic takeoff, much like China was 30 years ago, and India 20 years ago”;
World Bank -‐2013
“Economic activity in sub-‐Saharan Africa has continued to grow robustly – on the back of supportive external demand conditions and strong growth in public and private investment – and the outlook is elected to remain favorable for the lion’s share of the region’s countries.” IMF -‐ 2014
World Bank says – Africa is great opportunity now!
IMF says – The World is in a mess but not Africa !
What we are going to talk about !
African Markets Key Drivers for Business Development are;
1. High Growth Economies & Urbanization
2. Regional Economic Consolidation
3. Developing & Sizeable Middle Class
4. Market Oriented On-‐going Reforms
Key Drivers for Business Development
Key Challenges for Business Development
African Markets Key Challenges for Business Development are;
1. Diversity of Consumers
2. Poor Infrastructure
3. Weak Governance & Corruption
4. Severe Income Disparities
In a Struggling World for Growth Africa Stands Out
The Rate of Growth Significant in All Countries
Billion Consumers & Growing Faster than China & India
Africa Wants to be Europe
ECOWAS The Economic Community of 14 West African States (ECOWAS) is one of the strongest regional economic blocks on the African continent => NIGERIA The Southern African Development Community (SADC) is an inter-‐governmental organization headquartered in Gaborone, Botswana. Its goal is further socio-‐economic cooperation & integration as well as political and security cooperation among 15 Southern African States. => SOUTH AFRICA The East African Community (EAC) is an intergovernmental organization comprising Mive countries in African Great Lakes Region in Eastern Africa: Burundi, Kenya, Rwanda, Tanzania & Uganda => KENYA
Consumer Diversity
Rather than just a continent, Africa must be viewed as 54 separate and distinct countries with a wide array
of political, economic,
geographical, cultural and social features. Even a single country like Nigeria has over 250 different
ethnic groups and over 500 languages
Across the ConInent Young Middle-‐Class is Emerging
By 2020, more than half of African households are projected to have
discretionary income, rising from 85 million households today to almost
130 million in 2020.
“Ethiopia, Nigeria and South Africa are expected to provide the largest
numbers to the new middle class in the coming years.” AfDB
“We are dealing with a mostly young, dynamic target market that is
becoming globally connected
through the internet and mobile phones
and they are understanding
brands a lot more,”
Target SEC: Trendy Aspirants & Progressive Af[luents
Fast Growing PotenIal, but “One Size Does not Fit All”
“No single African consumer.” “7 types of
consumers can be grouped in 3 tiers based on monthly
income and average spending.” Nielsen
“The household spending in Africa is projected to increase from $860 billion in 2008 to $1.4
trillion in 2020” McKinsey.
Affordable, Tried & Same Brand vs. InternaIonal with respect to Local
COMMON CONSUMER ATTRIBUTES IN 3 BIG
SUB_SAHARAN AFRICANMARKETS
MNC are More Interested than Ever in Expanding into Africa
A RevoluIon is Underway in Retail
Top Companies investing in SSA Retail MarketFOOD:
Shoprite* – South Africa Pick n Pay – South Africa Spar – Netherlands Nakumatt* – Kenya Uchumi – Kenya Naivas – Kenya Tuskys -‐ Kenya
Associated British Foods –UK Wal-‐Mart – USA (through SA Massmart)
NON-‐FOOD:
Burberry – UK Hugo Boss – Germany
Woolworths – South Africa Edgars – South Africa Foschini – South Africa Mr. Price – South Africa
Sheet Street – South Africa
* Shopping Mall Developer
OpportuniIes Lie Beyond; tradiIonal markets of Cairo, Jo’burg & Cape Town
Africa’s extra people are Slocking to cities. Some 40% of Africans are city
dwellers now, up from 30% a generation
ago. By 2025 the number is likely to be 50%.
Income DispariIes by Countries; BUT CiIes paint much different picture than NaIons
The demographic pro[ile of these cities can be
much different than the national level picture,
posing interesting market opportunities
According to EIU data, per-‐capita expenditure was higher in all 25 African cities studied, than in their respective
nations. Citizens in cities spent 94.4% more, per
capita, than their countrymen as a whole
Major Challenges ‘DO’ Remain;
Infrastructure; SIll a Major Gap but Developing Rapidly
South Africa, Nigeria & Kenya Highlights 3 Big Markets
South Africa: GDP: $350Bn Pop. 48Mil. PPP $ 11,500/cap 60% of Retail Sales in Formal Outlets Retail Market : 14.4% of GDP -‐ $50BnGrowth Rate : 8.9% in Non-‐Food -‐ 2013 Key Players: Jet, Mr. Price, Edgars, Ackerman Pep, Woolworths, Hugo Boss -‐ Non-‐food
Nigeria: GDP: $521Bn Pop. 177Mil. PPP $ 2,800/cap 10%* of Retail Sales in Formal Outlets (est.) Retail Market : 16.0% of GDP -‐ $83BnGrowth Rate : 9.2% in Non-‐Food -‐ 2013 Key Players: Shoprite, Game, Mr. Price, Pep, Woolworths, Hugo Boss – Non-‐Food * Import Ban for Clothing & Furniture lifted on Dec 2011
Kenya: GDP: $53Bn Pop. 44Mil. PPP $ 1,800/cap 30% of Retail Sales in Formal Outlets Retail Market : 15.0% of GDP -‐ $8BnGrowth Rate : 6.5% in Non-‐Food -‐ 2013 Key Players: Nakumatt, Woolworths JV w/Deacon, Massmart, Mr. Price, Sheet Street – Non-‐Food
Recommended Strategic PrioriIes & IniIaIves
Strategic Priorities Strategic Initiatives
1. Build the Brand for Long-Term Business
2. Focus Where it Matters.
3. Develop Locally Relevant Approach
4. Maximize the ROI with Supply Chain Integration & Economies of Scale
1. Build the Brand for Long-‐Term Business 1. Target Long-‐Term Local Operator Partners 2. Tailor Value-‐Proposition to Target Market
with Affordability in focus.
2. Focus Where It Matters 1. Enter into Key Economic Regions & Key
Countries in Africa 2. Build critical-‐mass in Cities offering best
opportunity
3. Develop Locally Relevant Approach 1. Ride both the ‘Youth Movement’ & ‘Margin
Generator’ niche. 2. Product offer to local attributes
4. Maximize the ROI with Supply Chain
Integration & Economies of Scale 1. Develop local logistic hubs &
suppliers in Economic regions & expand stores in parallel.