Retail in Africa is still a good bet

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The report, an in-depth study into the make-up of sub-Saharan Africa’s retail and consumer goods industries, provides an outlook over the next five years for 10 economies on the continent that PwC believes will offer the most compelling opportunities for retail and consumer businesses. The countries include: Angola, Cameron, Ethiopia, Ghana, Côte d’ Ivoire, Kenya, Nigeria, South Africa, Tanzania, and Zambia.

Factors such as Africa’s demographic dividend, its growing middle class, rising income levels and rapid urbanisation are positives that are assisting to drive the growth of retail. In Nigeria alone Lagos’ population is set to grow to 24 million people by 2030 while Dar Es Salaam and Johannesburg will boast 11 million people. These are massive numbers and a huge consumer base for retailers to target. Building on this is an improvement in governance and democracy together with a reduction in red tape across the continent.

A market of close to 100 million

“Political leaderships have realised that if their country is to prosper then their political leadership has to work for the people. As a result, we are seeing the emergence of trade blocks that neutralise movement across borders. Essentially this gives retailers a market of close to 100 million people,” says Michael Mugasa, partner PwC Kenya – industry leader for consumer, industrial products and services.

This point is a significant cause for optimisation, says Anton Hugo, PwC Retail and consumer leader – Africa. “The removal of trade barriers makes it easier for retailers to increase geographical territory and provide a bigger diversification of products.”

What we do need to see more of is the manufacturing and producing of goods on the continent. “The process where we send products to Europe, where it is packaged and branded and sold back to us needs to end. We are starting to see investors who want a presence in Africa, and retailers who are looking to operate across Africa, and to do so they have to ensure that they have supply chain optimisation,” says Mugasa.

Assist in improving infrastructure

What this also does is to assist in improving infrastructure he adds. “Governments are developing infrastructure to make it easier for companies to operate - for example, the development of fast speed rail and a new port in Kenya. In Mombasa it took 30 days for goods to clear, today it only takes three to four days.”

There is also an increase towards modernisation and while the strength of informal trade in Africa is still high, it does present retailers with the opportunity to take market share, says Hugo. There is already some growth in Western-styled malls in West Africa.

There has been huge growth in loyalty programmes. “This is not only about driving feet in store, but about accessing the buying behaviour of consumers so they can be targetted at the right time and at the right price. “East Africa’s largest retailer has a strong loyalty programme. Now in its fourth year, that programme has served them well in terms of information on their customers,” says Mugasa.

Other factors include consumer credit, which has grown in both in East and West Africa, cellphone penetration and technology, with technology being a complete game changer for consumers and retailers.

Introducing the Report, Eben Gerryts, PwC industry leader for consumer, industrial products and services – Africa, says that there is reason to be optimistic - retail in Africa still has a good story to tell. “Retail in Africa is still a good bet.”