Africa is on the verge of a retail boom

With a population of over 1.02 billion (15% of global population), retail spend of almost $0.9 trillion (N144trn) in 2013 and economies expected to grow at 5.3 percent in 2014, Africa is fast establishing itself as a ‘retail frontier.’

This is not only because more was spent on retail in nominal terms, but because more retail focused investments flowed into the continent. More brands, which where hitherto not in mass circulation were introduced and new versions of products already in circulation were also introduced.

Early 2013, the South African retail market got a boost when the world’s largest retailer, Walmart, expanded its international business with a 51 percent stake in South Africa’s retail and wholesale giant, Massmart. The $2.4 billion deal gave Walmart access to 50-million new customers, while using Massmart’s footprint to expand into other African countries.

In 2013, Imara S.P. Reid Stockbrokers, a Johannesburg-based investment bank, announced that South Africans, which had invested in retail through it, had committed as much as $2.5 million to retail endeavours in sub-Saharan Africa. In Nigeria, the Minister for Trade and Investment, Olusegun Aganga, hinted that the economy has attracted over N205.4 billion worth of fresh investments into the retail sector in the last two years.

Mid 2013 saw the announcement by French retail giant, Carrefour that it will set up shops in West Africa, especially in Ghana and Nigeria. Though, the retail outlets will be fully operational in 2015, moves began to actualise the project in 2013.

Before the year closed, South Africa’s Spar Group Limited, in partnership with an Angolan company, opened a store in Luanda, Angola’s capital. The Fouani Group, which retails electronics, also opened new shops across Africa, especially in Nigeria.

Apart from these investments, Western producers along with their local partners (retailers) increased their brand offerings and established new supply chains across Africa.

 In Nigeria, Black & Decker launched over 20 household machines, black|Up Paris, a maker of personal care products, launched four beauty products, in conjunction with Montaigne Place, a Lagos-based retailer, while Maybelline New York, also a personal care products manufacturer, formally introduced its products into the country.

The IT and electronic section of the retail market received a barge of new releases from Apple, Blackberry, Samsung, Techno, LG, Nokia and Panasonic. This amounted to more raw materials for local retailers and millions of dollars in spending for customers who could afford new brands. The impact of these changes will be felt more in 2014, though there are some positive indications, already.

Factors that have traditionally been identified as retail trade drivers continued to fuel its growth in 2013.According to the African Development Bank (AfDB), rapid population growth and urbanisation; poverty reduction and the steady growth of the middle class; improvement in Africa’s business environment and lower trade restrictions have all contributed to the rise in retail trade in Africa.

The aspirational behaviour of Africans and availability of a verity of products have also been identified as important retail drivers, as products which were hitherto not available on the open market are now available.

Currently, the World Bank classifies half of Africa’s 54 countries as either middle or high income countries. Some 122.7 million Africans are now classified as ‘middle class,’ 30 percent higher than the number of people who made up that class 13 years ago. By 2060, the number of middle-class Africans is expected to hit 1.1 billion.

The same factors which fuel retail in Africa also fuel it in Nigeria. According to the UN’s Population Division and Euromonitor, Nigeria is one the largest retail market in Africa, accounting for over 15% of Africa’s GDP and armed with a population of 167 million (7th largest in the world). Its population will hit 229 million in the next decade.

According to Nigeria’s Trade and Investment minister, in the last two years, consumer spending has been well in excess of $100 billion a year.

We expect that this retail revolution would not only provide better consumer experiences across Africa but also open up opportunities for self and paid employment for Africa’s bulging youth population.