Africa The  Final  Frontier,  on  the  Brink  of  Economic  

Takeoff…  with  Billion  Consumers  &    Growing    Faster…  

          November,  2014    

Emerging Market Consulting

“Africa  could  be  on  the  brink  of  an  economic  takeoff,  much  like  China  was  30  years  ago,  and  India  20  years  ago”;  

World  Bank  -­‐2013  

“Economic  activity  in  sub-­‐Saharan  Africa  has  continued  to  grow  robustly  –  on  the  back  of  supportive  external  demand  conditions  and  strong  growth  in  public  and  private  investment  –  and  the  outlook  is  elected  to  remain  favorable  for  the  lion’s  share  of  the  region’s  countries.”  IMF  -­‐  2014  

World Bank says – Africa is great opportunity now!

IMF says – The World is in a mess but not Africa !

What  we  are  going  to  talk  about  !  

African Markets Key Drivers for Business Development are;

1.  High  Growth  Economies  &  Urbanization      

2.  Regional  Economic  Consolidation      

3.  Developing  &  Sizeable  Middle  Class      

4.  Market  Oriented  On-­‐going  Reforms    

Key  Drivers  for  Business  Development  

Key  Challenges  for  Business  Development  

African Markets Key Challenges for Business Development are;

1.  Diversity  of  Consumers    

2.  Poor  Infrastructure    

3.  Weak  Governance  &  Corruption    

4.   Severe  Income  Disparities  

In  a  Struggling  World  for  Growth  Africa  Stands  Out  

The  Rate  of  Growth  Significant  in  All  Countries  

Billion  Consumers  &  Growing  Faster  than  China  &  India  

Africa  Wants  to  be  Europe  

ECOWAS  The  Economic  Community  of  14  West  African  States  (ECOWAS)  is  one  of  the  strongest  regional  economic  blocks  on  the  African  continent => NIGERIA  The  Southern  African  Development  Community  (SADC)  is  an  inter-­‐governmental  organization  headquartered  in  Gaborone,  Botswana.  Its  goal  is  further  socio-­‐economic  cooperation  &  integration  as  well  as  political  and  security  cooperation  among  15  Southern  African  States.  => SOUTH AFRICA  The  East  African  Community  (EAC)  is  an  intergovernmental  organization  comprising  Mive  countries  in  African  Great  Lakes  Region  in  Eastern  Africa:  Burundi,  Kenya,  Rwanda,  Tanzania  &  Uganda  => KENYA          

Consumer  Diversity  

Rather  than  just  a  continent,  Africa  must  be  viewed  as  54  separate  and  distinct  countries  with  a  wide  array  

of  political,  economic,  

geographical,  cultural  and  social  features.  Even  a  single  country  like  Nigeria  has  over  250  different  

ethnic  groups  and  over  500  languages    

Across  the  ConInent  Young  Middle-­‐Class  is  Emerging  

 By  2020,  more  than  half  of  African  households  are  projected  to  have  

discretionary  income,  rising  from  85  million  households  today  to  almost  

130  million  in  2020.      

“Ethiopia,  Nigeria  and  South  Africa  are  expected  to  provide  the  largest  

numbers  to  the  new  middle  class  in  the  coming  years.”  AfDB      

“We  are  dealing  with  a  mostly  young,  dynamic  target  market  that  is  

becoming  globally  connected  

through  the  internet  and  mobile  phones  

and  they  are  understanding  

brands  a  lot  more,”    

Target  SEC:  Trendy  Aspirants  &  Progressive  Af[luents  

Fast  Growing  PotenIal,  but  “One  Size  Does  not  Fit  All”    

“No  single  African  consumer.”  “7  types  of  

consumers  can  be  grouped  in  3  tiers  based  on  monthly  

income  and  average  spending.”  Nielsen  

“The  household  spending  in  Africa  is  projected  to  increase  from  $860  billion  in  2008  to  $1.4  

trillion  in  2020”  McKinsey.  

Affordable,  Tried  &  Same  Brand    vs.    InternaIonal  with  respect  to  Local  

COMMON CONSUMER ATTRIBUTES IN 3 BIG

SUB_SAHARAN AFRICANMARKETS

MNC  are  More  Interested  than  Ever  in  Expanding  into  Africa    

A  RevoluIon  is  Underway  in  Retail  

Top Companies investing in SSA Retail MarketFOOD:    

Shoprite*  –  South  Africa  Pick  n  Pay  –  South  Africa  Spar  –  Netherlands  Nakumatt*  –  Kenya  Uchumi  –  Kenya  Naivas  –  Kenya  Tuskys  -­‐  Kenya  

Associated  British  Foods  –UK  Wal-­‐Mart  –  USA  (through  SA  Massmart)    

   

NON-­‐FOOD:    

Burberry  –  UK  Hugo  Boss  –  Germany  

Woolworths  –  South  Africa  Edgars  –  South  Africa  Foschini  –  South  Africa  Mr.  Price  –  South  Africa  

Sheet  Street  –  South  Africa  

*  Shopping  Mall  Developer  

OpportuniIes  Lie  Beyond;  tradiIonal  markets  of    Cairo,  Jo’burg  &  Cape  Town    

Africa’s  extra  people  are  Slocking  to  cities.  Some  40%  of  Africans  are  city  

dwellers  now,  up  from  30%  a  generation  

ago.  By  2025  the  number  is  likely  to  be  50%.    

Income  DispariIes  by  Countries;    BUT CiIes  paint  much  different  picture  than  NaIons  

The  demographic  pro[ile  of  these  cities  can  be  

much  different  than  the  national  level  picture,  

posing  interesting  market  opportunities  

According  to  EIU  data,  per-­‐capita  expenditure  was  higher  in  all  25  African  cities  studied,  than  in  their  respective  

nations.  Citizens in cities spent 94.4% more, per

capita, than their countrymen as a whole  

Major  Challenges  ‘DO’  Remain;  

Infrastructure;  SIll  a  Major  Gap  but  Developing  Rapidly  

South  Africa,  Nigeria  &  Kenya  Highlights  3  Big  Markets  

                                          South Africa:  GDP:  $350Bn    Pop.  48Mil.    PPP  $  11,500/cap    60%    of  Retail  Sales  in  Formal  Outlets  Retail  Market  :  14.4%  of  GDP  -­‐  $50BnGrowth  Rate  :  8.9%  in  Non-­‐Food    -­‐  2013  Key  Players:  Jet,  Mr.  Price,  Edgars,  Ackerman  Pep,  Woolworths,  Hugo  Boss  -­‐  Non-­‐food  

                                          Nigeria:  GDP:  $521Bn    Pop.  177Mil.    PPP  $  2,800/cap    10%*    of  Retail  Sales  in  Formal  Outlets  (est.)  Retail  Market  :  16.0%  of  GDP  -­‐  $83BnGrowth  Rate  :  9.2%  in  Non-­‐Food    -­‐  2013  Key  Players:  Shoprite,  Game,  Mr.  Price,  Pep,  Woolworths,  Hugo  Boss  –  Non-­‐Food                *  Import  Ban  for  Clothing  &  Furniture  lifted  on  Dec  2011  

                                          Kenya:  GDP:  $53Bn    Pop.  44Mil.    PPP  $  1,800/cap    30%    of  Retail  Sales  in  Formal  Outlets  Retail  Market  :  15.0%  of  GDP  -­‐  $8BnGrowth  Rate  :  6.5%  in  Non-­‐Food    -­‐  2013  Key  Players:  Nakumatt,  Woolworths  JV  w/Deacon,    Massmart,  Mr.  Price,  Sheet  Street  –  Non-­‐Food  

Recommended  Strategic  PrioriIes  &  IniIaIves  

Strategic Priorities Strategic Initiatives

1.  Build the Brand for Long-Term Business

2.  Focus Where it Matters.

3.  Develop Locally Relevant Approach

4.  Maximize the ROI with Supply Chain Integration & Economies of Scale

1.  Build  the  Brand  for  Long-­‐Term  Business  1.  Target  Long-­‐Term  Local  Operator  Partners  2.  Tailor  Value-­‐Proposition  to  Target  Market  

with  Affordability  in  focus.    

2.  Focus  Where  It  Matters  1.  Enter  into  Key  Economic  Regions  &  Key  

Countries  in  Africa  2.  Build  critical-­‐mass  in  Cities  offering  best    

opportunity    

3.  Develop  Locally  Relevant  Approach  1.  Ride  both  the  ‘Youth  Movement’  &  ‘Margin  

Generator’  niche.  2.  Product  offer  to  local  attributes  

 4.  Maximize  the  ROI  with  Supply  Chain    

Integration  &  Economies  of  Scale  1.  Develop  local  logistic  hubs  &    

suppliers  in  Economic  regions  &    expand  stores  in  parallel.