Just a few years ago, consumer spending in Africa passed the US$1tn mark. The continent’s impressive growth trajectory at that time – in particular, the robust growth in Africa’s 30-largest economies – caught the attention of consumer businesses worldwide. Indeed, the consumer-facing sector has been pivotal in Africa’s growth story, accounting for almost half of the continent’s GDP growth between 2010 and 2014.
But because of the recent slowdown, some executives have begun to question whether Africa’s once-roaring economy and burgeoning consumer sector still hold promise. Is Africa truly worth investing in? Can multinational companies succeed in the region? Is the African consumer opportunity still as attractive as it once seemed? Our unequivocal answer is yes – but companies will need to adopt increasingly sophisticated approaches to compete effectively. In this article, we share our latest perspectives on Africa’s outlook to 2025 and what it will take for consumer-goods companies to thrive in the region.
A temporary slowdown
Consumer spending across the continent amounted to $1.4tn in 2015, with three countries – South Africa, Nigeria, and Egypt – contributing more than half of that total. Food and beverages still constitute the largest consumption category, accounting for as much as one third of Africa’s household spending in 2015 (and close to 40% of household spending in lower-income countries such as Ghana, Kenya, and Nigeria), but discretionary categories already make up a substantial share of consumption. Spending on nonfood consumer goods – including clothing, motor vehicles, and household goods – accounts for a further 15% of consumption.
However, due in part to currency devaluations and a sharp downturn in oil-exporting economies, spending growth has slowed. Out of the 15-largest consumption markets in Africa, which constitute 90% of the continent’s total consumption, 12 experienced a slowdown in consumption growth between 2014 and 2015 – the exceptions being Ethiopia, the Democratic Republic of Congo, and Tanzania.
Clearly, the African consumer is under financial pressure.