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“Africans are exceptionally optimistic about their economic future; 84 percent say they will be better off in two years, especially those who live in the sub-Saharan region,” says The Rise of the African Consumer, a report from McKinsey’s African Consumer Insight Center. It is said that Africa is a significant growth market that no consumer products business can afford to ignore, and the report suggests that the continent’s consumer-facing industries are expected to grow by 400 billion dollars by 2020.
McKinsey’s African Consumer Insight Center surveyed 13,000 consumers in 10 countries in 2011 and 2012, focusing on large cities such as Abuja, Accra, Addis Ababa, Alexandria and Algiers. The survey focused on five categories of household consumption: apparel, financial services, groceries, internet usage, and telecommunication. The findings of the survey state that internet usage on the continent is higher than anticipated; more than 50 percent of urban Africans say they have accessed the internet in the last four weeks which is similar to countries such as Brazil and China. Another presumption about the continent was that consumers are not quality and brand conscious and that companies can sell second grade merchandise without problems; but the report states that most African consumers are very much aware, and demand quality products.
African’s economic growth accelerated after the year 2000, making it the world’s second fastest growing region after Asia. The report reveals that 45 percent of the GDP growth in Africa before the financial crisis came from consumer-facing industries (retail/wholesale), retail banking, telecommunications, and tourism.
Africa has the world’s fastest growing population. In fact it is predicted that the continent’s working-age population will surpass China’s by 2040. Africa also has the world’s youngest population, with more than half of the whole population under 20 years of age.The survey states that the consumption habits of youth are quite different from those of their elders. Younger people are more likely to search for information online and tend to be brand conscious and follow the latest fashion trends.
Multinational businesses are beginning to take note of the fact that Africans are now willing to spend more, and the opportunities this presents. For example, the US clothing chain Gap recently announced it is entering the South African market, following openings in Egypt and Morocco. The Spanish retailer Zara also opened last year in South Africa, where the US retailer Wal-Mart purchased a majority share in local retailer Massmart.
Quality and brand matter to African consumers, but they must be delivered at the right price points the report. Price and promotion sensitivity is high, given generally low incomes: for example, 53 percent of Africans say they choose a grocery store based on price, and 49 percent say they choose an apparel store based on low price and promotion.
The report concludes by stating that Africa’s business and economic growth potential is widely acknowledged. The issue for companies now is how to obtain a better understanding of the market and its consumers.