[ 2016-03-16 ]

More in store for African retail & consumer businesses – prospects remain positi
PwC’s inaugural publication entitled ‘So much
in store’ is an in-depth study into the make-up
of Sub-Saharan Africa’s retail and consumer
goods industriesAfrica’s economy has seen modest
growth in the wake of falling commodity prices,
slowing revenues and volatile currencies.

The moderation in growth impacts a range of
industries and sectors, including retail and
consumer products that must contend with rising
costs, and a fall in prices.

Despite the decline in growth, the long-term
outlook remains positive.

The economic growth predicted for 2016 and beyond
in some African countries and the growth expected
in Africa’s consumer market provides major
opportunities for retail and consumer companies
looking to the future.

These are some of the highlights from a report
released by PwC yesterday “As Africa has risen
to prominence as an investment destination over
the past several years, so the role of retail and
consumer goods has taken on greater
significance,” says Anton Hugo, Retail and
Consumer Industry Leader, PwC Africa.

“Sub-Saharan Africa (SSA) remains one of the
fastest growing regions in the world and the
successful expansion of a number of global and
African retailers and consumer goods companies
across the region speaks to the opportunities that
exist.”

“However, Africa’s fortunes are very much
tied to those of the global economy. Pressure on
emerging market currencies coupled with a decline
in oil and other commodity prices has seen
pressure on government revenues and the ability of
governments to increase social expenditure and
wages in the public sector.

African retailers will need to focus their efforts
on operational efficiency and managing the effect
on their operations of volatile currencies,”
adds Edafe Erhie, PwC Partner in Nigeria.

PwC’s inaugural publication entitled ‘So much
in store’, is an in-depth study into the make-up
of SSA’s retail and consumer goods industries,
and provides an outlook for the coming five years
by focusing on 10 African economies that we
believe offer some of the most compelling
opportunities for retail and consumer businesses
looking to expand into Africa: Cameroon, Ethiopia,
Ghana, Côte d’ Ivore, Kenya, Nigeria, South
Africa, Tanzania and Zambia.

Trends shaping the retail and consumer sector in
SSA Significant global megatrends will help drive
the retail and consumer goods industries and
create future opportunities.

Africa’s demographic dividend, its growing
middle class and rising income levels, and rapid
urbanisation will all have a part to play in the
continued growth of the retail sector across the
continent.

Currently, Africa is home to more than one billion
people which is expected to increase to more than
two billion by 2050Africa’s working age
population is forecast to grow at a faster rate
than its overall population.

When the labour force grows more rapidly than the
population dependent on it, resources become
available for investment in economic development
and personal consumption. This offers an
opportunity for rapid economic growth.

More informed and healthier consumers Changes in
consumer lifestyles and ambitions are influencing
purchasing behaviour and patterns, according to
leading retailers.

Overall, consumers in SSA are becoming more
aspirational and brand-conscious.

“Africans are becoming more connected to global
trends than ever before as a result of growth in
internet penetration and travel,” explains Hugo.
Those that can afford it are also becoming more
health-conscious, favouring nutritious and healthy
foods.

Home-grown champions make their mark Closer to
home, African organisations are becoming dominant
players in local markets and expanding their
presence across the rest of the continent.

Informal trade continues to lead For the
foreseeable future informal retail will continue
to dominate sales in SSA.

With the exception of South Africa and Angola, it
is estimated that upwards of 90% of sales in the
focus countries is through informal channels such
as markets, kiosks, table-top sellers and street
hawkers.

“However, the industry is in the process of
modernising with a number of western-style
shopping centres taking shape in countries like
Nigeria, Kenya and Ghana.

It is also interesting to note that in some
countries such as Ghana, Nigeria and Zambia, many
of the malls are anchored by South African
retailers.

For some countries, the building of shopping malls
is a challenging and expensive business due to the
difficulties in securing land, resources, and the
costs associated with building,” says Michael
Mugasa, PwC Partner in Kenya.

Local production on the rise Increasingly there is
a growing movement towards local production. This
trend is driven by a number of factors.

These include, amongst others, political
stability and government incentives to boost local
manufacturing. Despite the opportunities,
manufacturing in Africa comes with numerous
challenges.

Supply chain optimisation A critical success
factor for retailers and consumer goods companies
moving into many African countries has been their
ability to implement supply chains that deal with
the operational challenges that exist.

“Given the size of Africa, supply chains tend
to be complex and expensive,” says Hugo.

“Other obstacles include poor transport,
inadequate local supply capacity and the dominance
of informal retail trade.”

Distribution The dominance of informal trade and
Africa’s large rural population makes
distribution a complex exercise.

However, as 90% of sales are made through informal
channels, those that ignore this segment are
missing out on a significant share of potential
revenue.

There are also many examples of companies that
have introduced innovative ways of improving their
distribution in various countries.

Hugo concludes: “Each country in Africa has its
own value proposition.

Smart investing in Africa means investors need to
understand key regions and local markets. Despite
these risks, investors and retailers will continue
to see the African market as a huge
opportunity.”

Source - B&FT

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