PwC report reveals growth potential for retail market in Africa

Emerging sub-Saharan African (SSA) economies like Nigeria, Ghana and Kenya are top choice for retail market expansion, despite decline in commodity prices, dwindling revenues and weak currencies.

This is based on a report by PricewaterhouseCoopers (PwC), the world largest professional services firm, which shows maximum growth potentials for retail and consumer businesses in 10 SSA countries.

The countries, which include Nigeria, Ghana, Kenya, Côte d’ Ivore, Kenya, Cameroon, South Africa, Tanzania, Zambia and Ethiopia, are believed to offer the most gripping opportunities for investors.

Informal retail will dominate sales in SSA countries with the exception of South Africa and Angola where 90 percent of sales are done through distribution channels such markets, kiosks, tabletop sellers and street hawkers.

Nevertheless, “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. In some countries such as Ghana, Nigeria and Zambia, many of the malls are anchored by South African retailers,” says Michael Mugasa, PwC partner in Kenya.

The anticipated growth in Africa’s consumer market provides ample opportunities for investors looking to invest in 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,” says Anton Hugo, retail and consumer industry leader, PwC Africa.

Edafe Erhie, PwC partner in Nigeria, adds, “Pressure on emerging market currencies coupled with a decline in oil and other commodity prices has seen pressure on government revenues. African retailers will need to focus their efforts on operational efficiency and managing the effect on their operations of volatile currencies.”

Africa’s more than one billion population, which is expected to increase to more than two billion by 2050, portends huge demographic dividend. Also, the working age population predicted to increase more rapidly than the entire population and the rising income levels in addition to rapid urbanisation are major megatrends that will continue to drive the retail and consumer sector.

According to leading retailers, changes in lifestyles are influencing consumer-buying behaviour, as most consumers are becoming more health 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.

African organisations are becoming dominant players in local markets and expanding their presence across the rest of the continent.

Political stability and government incentives are factors boosting local manufacturing. Although, manufacturing in Africa comes with numerous challenges.

Retailers and consumer goods companies moving into many African countries recorded some level of success as a result of their ability to implement supply chains capable of dealing with operational challenges.

“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.”

The dominance of informal trade and Africa’s large rural population makes distribution a complex exercise. However, as 90 percent of sales are made through informal channels, those that ignore this segment are missing out on a significant share of potential revenue.

“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,” Hugo adds.

CHINWE AGBEZE