Consumer growth to drive Africa’s emerging economies

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Africa’s growing economies are offering global corporations great potential for retail and distribution expansion.

Projections show that household consumption is expected to rise to US$2.5 trillion by 2030 due to changing demographics and strengthening business environments across the continent.

The continent’s largest economies comprising of Nigeria, Ethiopia, the Democratic Republic of Congo, Egypt, Tanzania, Kenya, and South Africa will soon account for half of the continent’s population. In tandem with the growth in these countries, 43 per cent of Africans will belong to the middle or upper classes.

Read: Nairobi to grow faster than South African and Nigerian cities, research shows

Rising income levels among all socioeconomic classes are seeing an increase in the demand for goods and services and firms should consider introducing their products to the continent since there are lucrative investment, production, and distribution opportunities all over Africa.

According to Brookings Institute, the sectors to look out for and invest in include Fast-Moving Consumer Goods (FMCG), online retail and luxury goods.

Fast-Moving Consumer Goods (FMCG)

Africans are known for their diehard loyalty when it comes to their favourite brands.

Brands already enjoying this immense benefit need to strengthen their consumer base by using creative advertising and expanding distribution for fast-moving consumer goods, which are low-cost products with a limited shelf life that are always in great demand, according to Brookings.

This sector will also serve the majority of low-income and middle-class buyers.

When it comes to luxury goods, rebounding oil prices in producing countries like Algeria, Angola, Nigeria, and Egypt may help luxury goods gain a larger market share.

South Africa, Egypt, Nigeria, Kenya, Tanzania, Ethiopia, and Morocco are home to ultra-high net worth persons. These individuals have net assets estimated to be above US$30 million.

With increased spending power among various segments of the population, there will be improved GDP per capita and those engaged in selling luxury goods should look to the continent for entry points.

Various reports show that Africa now is the world’s fastest-growing mobile communication market.

The continent has surpassed Asia as the world’s second-largest mobile market, as it is continually registering growth of an estimated 30 per cent in mobile phone connections since 2000. This annual growth is seeing close to half of all Africans go online every day.

Widespread use of information and communication technologies (ICTs) has opened up new channels for consumer purchasing and marketing.

Brookings notes that the differences in ICT sectors between countries may increase the risk of returns; yet, an increasingly mobile financial sector demonstrates that there are substantial returns if enterprises can take advantage of the continent’s expected digitalization.

Online retail

The consumer e-commerce business in Africa was valued at US$5.7 billion in 2017, and sales are expected to rise as the number of internet users in Africa grows.

Online retail and e-commerce are becoming increasingly major business opportunities as purchasing power rises in tandem with mobile phone and internet connections.

Read: Beyond COVID-19: how do we feed our cities and industries? – an agricultural insight

Africa is becoming more competitive, as seen by the recent entry of international firms such as Walmart.

But the growth potential Africa has is exposed by the limited saturation of consumer markets, particularly in fast-moving consumer goods, luxury products, and online shopping.

Nigeria, South Africa, Ethiopia, Angola, Sudan, Morocco, Algeria, and Kenya, for example, are ready for increased production and distribution, and business leaders and investors should be encouraged to meet rising demand and household consumption while navigating the challenges to generate high returns.

Entrepreneurs and policymakers have a role to play if they are to capture Africa’s consumer market momentum. By finding solutions to consumer challenges, these emerging markets remain a good bet for the continent’s economic growth.

Following the pandemic, the UN is focusing on building post-pandemic resilience through science, technology and innovation.

“The Covid-19 pandemic has underscored the pressing need to prioritize STI in terms of policymaking, resource allocation and international cooperation,” said Shamika N. Sirimanne, UNCTAD’s director of technology and logistics, who also heads the CSTD secretariat.

“But governments also need to make sure that the development benefits of STI translate directly into the daily lives of people all over the world,” Sirimanne said.

Noteworthy, the pandemic has brought a paradigm shift and the emerging economies have to also ensure equal access to the benefits of life-saving treatments, not only for the pandemic but also for poverty-related diseases, future health emergencies and infectious disease outbreaks.

Technologies have the ability to make developing countries leapfrog previous technological paradigms and transform their economies and societies.

Digital technologies have played a crucial role in addressing the pandemic and enabling resilience in many ways. These include the use of big data and artificial intelligence for public health interventions and the use of digital services to expedite infection monitoring and testing.

Other trends include the use of the internet and videoconference platforms for work and education and the expanded use of e-commerce and online entertainment platforms.

“On the other hand, those who lack affordable connectivity have been severely disadvantaged during this pandemic,” Sirimanne said.

She said other challenges that have emerged include widespread misinformation and disinformation, privacy and data protection and cybersecurity.

In 2017, Africa had 21 million online shoppers – showing the enormous potential of the African e-commerce marketplace.

With digitization bringing new opportunities to Africa, the continent is becoming the next frontier for Internet-based e-commerce solutions.

Across the continent, new digital businesses are emerging rapidly and growing fast.

But with Africa also epitomizing the digital divide between the connected and the unconnected, it is critical to seize the chance to drive development for African economies and their populations, so that no-one is left behind.

While African countries need to boost Internet penetration to grow e-commerce, many also have to get more of its existing Internet users to trust the online market for making purchases. The digital divide is impeding development and that by the end of the next decade, growth, productivity gains, and human development will be determined by levels of integration into the digital economy.

Even with the promise by technological advancement, the UN notes that the magnitude and unequal nature of the current crisis have resulted in an enormous setback to recent development gains, with impacts on unemployment, poverty and inequality.

The global body notes that only a feeble and uneven recovery is projected for 2021.

Read: Understanding the emerging economy of Kenya

I have 10 years of experience in multimedia journalism and I use the skills I have gained over this time to meet and ensure goal-surpassing editorial performance. Africa is my business and development on the continent is my heartbeat. Do you have a development story that has to be told? Reach me at njenga.h@theexchange.africa and we can showcase Africa together.

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