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Growing Consumption of Africans

By Jim on 2016-10-8 10:59:9 posted in Market Analyze

JOHANNESBURG — Across sub-Saharan Africa, consumer demand is fueling the continent's economies in new ways, driving hopes that Africa will emerge as a success story in the coming years comparable to the rise of the East Asian Tigers in the second half of the 20th century.
After seeing years of uninterrupted economic expansion across Africa, governments are focusing on this fast-growing continent's shoppers and workers rather than just the usual upswing in commodity prices that have driven past cycles of boom and bust.The African Development Bank projected in its latest annual report in May that foreign investment in Africa would reach a record $80 billion this year, with a larger share of the money going to manufacturing and not just the strip-mining of resources. 
"The development is real, and on the back of that, there's a lot of commercial opportunity that's emerging," said Simon Freemantle, senior political economist at Standard Bank here.
At times messy and difficult to quantify, Africa's economies give pessimists and optimists plenty of statistical ammunition to support their narratives of the future. Growth is uneven. Inequality is rising in many corners. Millions of people still live in extreme poverty. 
The middle class has expanded rapidly across the continent, but the population has grown so quickly that the absolute number of impoverished Africans has gone up at the same time.
However,yet a sign of confidence is the success with which African countries have been able to tap international capital markets of late. In spite of recent terrorist attacks, Kenya sold $2 billion worth of bonds to international investors last month, which will be used in part to pay for infrastructure projects; in the earlier, it was Zambia with a $1 billion offer.
Exports from sub-Saharan Africa leapt from $68 billion to more than $400 billion from 1995 to 2012. A total of $300 billion of that came from natural resources, the extraction of oil, natural gas, precious metals and diamonds. Angola pumps 1.8 million barrels of oil a day which is why its capital, Luanda, hosts fancy designer boutiques.
But some of the most rapid growth is now coming from other sectors. In South Africa, for example, the broader economy has been sluggish, but the black middle class now spends more money than the white middle class.  
For decades, this country's long-neglected black consumers spent their money on the far edges of the economy, buying necessities like soap, salt and milk at informal convenience stores called spaza shops. 
Businesses alert to the opportunities are setting up shop in Africa.
In April, Marriott closed a deal to buy the 116-hotel Protea Hospitality Group, based in South Africa. Clothing companies like Forever 21 and Sweden's H&M plan to open their first shops here as well. Wal-Mart's South African arm, Massmart, has stores in a dozen African countries, including Uganda and Mozambique, and plans to expand into Angola next year.
Last year, Honda opened its third motorcycle subsidiary in Africa, based in Kenya, including a new assembly plant. Heineken plans to invest nearly $700 million a year in Africa to keep up with the demand of the continent's beer drinkers. The Chinese shoemaker Huajian is spearheading the construction of a $2 billion special economic zone in Ethiopia that will focus on light manufacturing.  
Perhaps no country illustrates the pitfalls and opportunities quite as starkly as Nigeria. Even as the country is projected to grow at a swift 7.3 percent clip this year and next, the kidnapping and murdering by Boko Haram militants, who operate with impunity in Nigeria's northeast, transfix the world.
Adewale Opawale, executive director at Strategic Research and Management Insight, a market and social research company in Lagos, said he had witnessed drastic change not just in the number of cars on the streets and airplanes taking off from the international airport there, but in the way that people do business.
Consumers are moving from running around with cash for purchases to using their Internet-enabled cellphones (many with more than one phone) to place orders from online retail chains that have started to cash in on the country's rising middle class. "It's loads of opportunity in the Nigerian consumer market," he said. "Nigeria is on track to become one of the 20 largest economies in the world."
The commercial gains are not spread equally or across the continent. A study of the top African brands found that of the top 25, all but one — Kenya's Safaricom — came from Nigeria or South Africa. Seven of the top 10 brands were South African. How the spoils of that growth are shared is as important to the economic success of Africa as the headlines proclaiming a statistical boom versus a broad-based improvement in the lives of the masses.

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