Long on the Continent
Bent on increasing revenues and profits, companies are scouring the world for markets to sell their goods and services, invest in manufacturing for local and/or export consumption and buy products for export to international buyers. With a steady buzz emanating from influential researchers and consultants about the eye-widening potential of Africa, smart business minds are beginning to see that nowhere may better fit their interests than that continent. Assessing Africa’s potential, McKinsey & Co., for example, reported that sub-Saharan Africa’s 2008 gross domestic product of $1.6 trillion equaled that of Brazil and Russia and projected the continent’s collective GDP to rise to $2.6 trillion by 2020.
Take sub-Saharan Africa alone as a consumer market. The region is expected to grow faster than Brazil and India and claim seven of the world’s 10 fastest-growing economies by 2015. Late last year, global consultancy Accenture forecast the continent’s population will double to 2 billion by 2050, with 66 percent of the people living in cities and of working age; poverty levels will decline to 20 percent by 2020, from around 43 percent in 1995; and spending by African consumers will reach nearly $1 trillion by 2020, rivaling that of Russia or India. Global market researcher Nielsen Co. followed suit in March with its unprecedented study “The Diverse People of Africa,” an analysis of the continent’s billion-plus consumers — a number growing faster than that of any other continent — and their widely varying attitudes, beliefs and buying patterns. “With young and quickly growing populations paired with a rising gross domestic product that has grown faster than that of the rest of the world every year since 2001, African markets brim with opportunity,” Nielsen says. “Africa’s middle class is growing at an astounding rate and the GDP per capita has grown 26 percent in the past 10 years.”
For consumer-oriented companies, it’s the perfect opportunity storm. “Collectively, sub-Saharan Africa’s growing population, urbanization, new middle class and rising purchasing power are creating opportunities in new sectors and subsectors,” Jake R. Bright, Whitehead Fellow at the Foreign Policy Association, wrote on the association’s website in March. No wonder smart money is going long on the continent. In his article titled “The New Business of Africa: Markets and People Transforming the Continent,” Bright notes that in the previous two years Wal-Mart acquired South African retailer Massmart for $2.4 billion, GE named Africa as a priority growth region and IBM invested $1.5 billion in African-focused Bharti Airtel, one of the world’s largest mobile phone operators.
Nielsen’s study shows companies where growth opportunities exist and how to reach the consumers in those segments. Researchers conducted face-to-face surveys of 5,000 residents between the ages of 15 and 45 in and around key cities in the Democratic Republic of Congo, Ethiopia, Kenya, Nigeria, Tanzania, Uganda and Zambia. While they insist that Africa must be viewed as 54 separate and distinct countries with a wide array of political, economic, geographical, cultural and social features, the researchers found three distinct consumer groups across the board, each requiring a different approach. They described them as follows:
Tier 1: Trendy aspirants and progressive affluents — wealthy, urban, well-educated Africans with high income and spending in the consumer packaged goods (CPG) category. They drive modern trade, print and online penetration and are more open to expensive and new brands. They represent just 28 percent of the population, but control 47 percent of the income and 40 percent of CPG category spend.
Tier 2: Balanced seniors and struggling traditionals — middle-aged, mid-income Africans with average CPG category spend. They are heads of households, shop for their family and are focused on affordability. Accounting for 27 percent of the population, they are responsible for 28 percent of CPG category spend, but only 22 percent of total income.
Tier 3: Evolving juniors, wannabe bachelors and female conservatives —Africa’s biggest tier, comprising consumers who spend much less than average on CPG categories. Primarily young and lower class, they are otherwise a diverse group, from increasingly modern students to conservative housewives. Collectively, they make up 45 percent of the population, yet contribute only 32 percent of the total CPG category spending. They are receptive to audiovisual media like TV and radio, score low on print and Internet penetration and are likely to own a mobile phone, which they use primarily for text messaging.
There’s more to come from Nielsen on Africa’s consumers. Its focus on Angola, Ghana, Mozambique, Namibia and Zimbabwe is slated for publication in the second quarter of this year.