Afronomics: Africans hit the high street

Anver Versi

The modern African consumer has arrived and is going shopping with a vengeance

Image: Simon Davis/DFID CC BY-SA 2.0

Virtually all the major African cities today look like frenzied construction sites as glittering new office blocks, shopping malls, supermarkets, showrooms, entertainment centres, parking facilities and hundreds of thousands of new apartments seem to spring up almost overnight to cater to the urgent demands of a growing army of consumers with money to spend and impatient to do so.

Local and international consumer-oriented companies are tripping over each other to establish bases, build production facilities and expand as rapidly as they can. It is a fiercely competitive arena with Asian, Western and Brazilian firms going head to head with local companies for a slice of what one major investment bank has called the “the world’s most mouth-watering market”.

Fifteen years ago, the African consumer was conspicuous only by their absence from the high street. A dozen or so years ago, the ‘consumer market’ as we know it was confined to business and political elites and expatriates.

Today, this has changed out of all recognition. The ethnic African is the consumer king. It is this ‘democratisation’ of the consumer class that is driving what seems to be an unstoppable consumer boom. The boom is feeding off itself and spreading its largesse even further into society as it creates more jobs and additional disposable income – leading to further demand and so on in a virtuous cycle.

But, after decades during which the African consumer was a barely discernible blip on the developing world radar, what combination of factors has brought about this explosion of demand and the frantic efforts to meet it? What has given birth to the modern African consumer?

The steep rise in Africa’s consumption graph, as has happened elsewhere, has come in the wake of an astonishing period of growth for African economies. Africa’s collective GDP, at US$2 trillion today, is roughly equal to Brazil’s or Russia’s. It is expected to rise to $29 trillion by 2050 in today’s money.

Most economic growth is associated with the rate of urbanisation as societies move from dependency on agriculture to manufacturing and services. Africa’s rate of urbanisation has risen from 28 percent in 1980 to 40 percent today – equal to that of China and greater than the rate in India.

Urbanisation spurs the construction of more roads, buildings, water systems, railways, airports and similar projects, thus creating more jobs and putting more money in the hands of more people.

Africa’s labour force is expanding while it is contracting in the rest of the world. Today, the continent has more than 500 million people of working age; this group also forms the bulk of consumers. By 2040, Africa will have over 1.4 billion people of working age, more than in China or India, thus further raising GDP growth.

However, research by global management consultancy firm McKinsey has revealed that income from natural resources and government spending has generated only 32 percent of Africa’s GDP growth; the rest has come from a rapid expansion of sectors such as wholesale and retail, transportation, telecommunications, construction, banking, insurance, manufacturing, agro-processing, agribusiness, tourism, catering and other services.

Another key component to Africa’s growth has been the enthusiasm with which Africa has embraced new technology. Over the last 20 years, 75 percent of Africa’s per capita GDP growth has come from an expanding workforce, the rest from productivity increases.

“GDP per capita is the single most important driver of global growth in the consumption of fast-moving consumer goods, accounting for an average of around 73 percent of total growth across 60 product categories,” says a report in McKinsey Quarterly.

Africa’s middle-class consumers, earning around $20,000, are also eating out in restaurants far more frequently, and buying houses and apartments (Nairobi registered the highest growth in new property values over 2010-11 in the world, followed by new luxury developments in Mombasa). They are also spending more on fashion, accessories and shoes, and taking holidays at least twice a year. Families who earn in excess of $5,000 per annum, shop for branded products in supermarkets and fashionable retail outlets, and devote a considerable portion of their household budget to paying for their children’s private education.

The African consumer has well and truly arrived. Research indicates that Africans enjoy the process of shopping more than customers in any other region except parts of Asia, and that they are often willing to pay more for brands they have confidence in than opting for a cheaper alternative.


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