Business Outlook

Consumer Spending In Africa Continue to Grow

Consumer Spending Africa

With a growing young population coupled with rapid urbanisation and fast-growing consumer expenditure, Africa offers attractive opportunities for entities wishing to expand into new frontier markets. Retailing contributions to GDP across the region continue to increase, indicating that the region is consumption-driven. Retail sales in the Africa amounted to over USD500 billion in 2019. Key retailing markets included South Africa, Egypt, Morocco, and Algeria.

Although Africa is regarded as an emerging market, it is a different and complex one. The region is home to 55 independents states, which are characterised by diverse economies, and consumption patterns. It hosts a population of different income groups, religions, races, customs and languages. Furthermore, different countries are at different development stages.

To develop a good and strategic market entry approach into the region, one needs to understand the diversity and dynamics that drive retailing. In addition, understanding how and where one’s product is consumed and purchased in the region is necessary for developing a route-to-market strategy.

Africa is made up of a combination of traditional and modern retailing channels.  These channels vary by market and are influenced by factors such as economy, state of development, consumer preferences and local culture.

There are significant variations in the logistics costs and lead times required to access different African markets. The region is characterized by a multitude of retail channels, distribution networks, supply chains, marketing strategies, and different regulatory administrations. Underdeveloped infrastructure and complex distribution channels make it challenging for companies and products to reach consumers.

Many consumer goods are imported from outside the region and thus demand an efficient supply chain. This comes with challenges such as volatile currency fluctuations and import duties.  Partnering with local players that are connected along the value chain, coupled with creative, flexible approaches to supply chain and logistics can help companies overcome distribution challenges.

Africa is on track to hit a predicted USD 2.1 trillion in consumer spending by 2025

These market dynamics indicate that Africa’s retailing landscape is diverse and increasingly expanding to suit the changing consumer demographics.

 

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