Trends towards supply chain optimisation and local production are contributing to a positive long-term economic outlook for retail businesses in Africa, according to a report.
PwC’s report, So much in store, an in-depth study into the make-up of sub-Saharan Africa’s retail and consumer goods industries, said Africa’s economy has seen modest growth in the wake of falling commodity prices, slowing revenues and volatile currencies. Despite this there are still “major opportunities”, it concluded.
The report said significant trends will drive the retail and consumer goods industries in sub-Saharan Africa, including a growing middle class, rising income and rapid urbanisation. The report focuses on 10 African economies: Cameroon, Ethiopia, Ghana, Côte d’Ivoire, Kenya, Nigeria, South Africa, Tanzania and Zambia.
Africa’s working age population is forecast to grow at a faster rate than its overall population, which will mean resources become available for investment in economic development and personal consumption, offering the opportunity for rapid economic growth, PwC said.
Consumers in sub-Saharan Africa are becoming more aspirational and brand conscious, more connected to global trends and more health conscious in food choices.
Meanwhile, African organisations are becoming dominant players in local markets and expanding their presence across the rest of the continent, the report said.
Outside South Africa and Angola, retail will continue to be informal – via markets, kiosks, table-top sellers and street hawkers – for the foreseeable future. But more Western-style shopping centres are opening in countries such as Nigeria, Kenya and Ghana, often anchored by South African retailers.
A trend towards local production is being driven by government incentives to boost local manufacturing and political stability. However, the report notes that despite the opportunities, manufacturing in Africa comes with challenges.
Supply chain optimisation and the ability to implement supply chains that deal with the operational challenges that exist has been critical to the success of retailers and consumer goods companies moving into many African countries, the report noted.
The dominance of informal trade and Africa’s large rural population make distribution complex, the report said. However, as 90% of sales are made through informal channels there are many examples of companies that have introduced innovative ways of improving their distribution in various countries.
“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,” said Anton Hugo, retail and consumer industry leader, PwC Africa.
“Sub-Saharan Africa 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.
“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.”