Africa Middle Class is rising - True or False?

Article written by Mr. Hemal H.R. Mehta, first published on LinkedIn 04/03/2017

Hemal H. R. Mehta - Director of Sales and Marketing at Koira S.A.R.L. part of Koira Holdings West Africa

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To me especially being from the FMCG industry is the most interesting subject of discussion – Is the Middle Class of Africa really “burgeoning” or it’s just another balloon!

If you ask me who has seen cities like Conakry, Dakar, Bissau, Freetown, Monrovia, Abidjan, Accra, Lagos, Nairobi, Dar Es Salaam, Douala, Maputo evolving since I first set my feet in 1997, yes there has been a natural and obvious change! Change in Infrastructure, Telecommunications, standard of living that I observe! A good colleague of mine, part of my team from my Africa posting days back in turn of century, who was the Sales and Marketing executive drawing US$ 500 salary on a whole today gains around US$ 2000 per month, can afford a decent house for rentals, his wife also works as a banker, they render good private school education to their two children, they have a small saloon good brand of car, they also support their parents and they do go to branded international franchisee of hypermarket on weekends to shop their necessities. To me this is a representative case of a growing medium class. I see a plethora of such cases whether people working in banks, airlines, courier offices, hotels – I see more education, more smartness, more ambition. I also see that the flights from Doha to Lagos, from Dubai to Accra, from Abu Dhabi to Nairobi are pretty full and with of course good amount of domestic and regional travelers. I also see that international fast food chains and QSRs are no longer just a sight in Johannesburg or Cape Town but also in Accra, Lagos, Dakar, Nairobi etc. I never face an internet speed or data package issues anymore when I travel to Africa. I see Taxi apps successfully operational in many African cities. I can today book hotels even in interiors of African cities through creditable hotel booking apps. And being someone very specific on my meal choices, I see a plethora of dining and meal options almost in all cities of Africa that I have traveled to!

Yes, till today Africa has its own challenges – social and economic, but then who doesn’t have it today!  I guess as an expat traveler and business executive to Africa in last two decades I sincerely am a witness that gone are days and the brand image of Africa as a continent wracked with poverty; where electricity even is a challenge; where corruption soaks up development; where political instability and tyrannical governments undermine investor confidence; and where expats get kidnapped……and so on! What I see and in general read is the imminent boom in consumer spending which is set to rise to US$ 1.4 trillion by 2020.  

Africa as we read and desk research has the fastest growing middle class in the world. Some 300 million++ people, 35% approx. population spend US$ 2.2 a day, which is seemingly 100% rise in less then two decades. The definition as I understand of a Middle Class in Africa is people who spend equivalent of US$ 2/- to US$ 20/- a day – an assessment based on cost of living for Africa’s one billion people. It is a fact of life that many living on US$.2 to US$.4 a day could easily slip back to poverty, and there is a huge chunk of this segment, but still one would percolate down to a stable 125 million stable medium class population which is like 13%. It is estimated that by 2060 the medium class number will be 1.1 Billion.

Amidst these trends it is observed that families are now smaller; they are owning their homes; and the man and wife both work and manage a family lifestyle. The rate of family savings is thought to be almost 30% and today’s so called African consumer is more aware, confident and ambitious.

One also needs to understand that middle class in Abidjan or Maputo or Tunis is not a medium class in London or Singapore or Dubai, so there ought to be differences. Some may also argue to this that a pack of a branded biscuit costs the same in a supermarket in Enugu in Nigeria as it costs in Kuala Lumpur or Muscat?! So African Economies and Governments with time will need to display stability and prove that they are not vulnerable to global ups and downs and possible one route is to figure out how they can sustain and have a consistent growth, strengthening their nation based on their natural resources, their local talent.  It will need to create industries that generate employment and healthy wages.

We need to understand that Africa may be still the poorest continent in the world, but Africans have had enough of being world victims! The time has come and is here to stay! Having said that it will need to be ensured that the rising middle class can be still vulnerable, and that may slow down the impetus of reform or even worse, reverse it! But then when one sees success stories of wonderful transformations in Kigali, Abidjan, Freetown, Monrovia, Accra - the future looks more positive and optimistic!

African Market Penetration

Getting your consumer products into Africa is not easy. There are a number of very important considerations and the basic rule "one size does not fit all" applies.

The African markets certainly continues to offer companies an opportunity for long term sustainable growth.

The African market is a complex one with vast differences across countries, regions - North, South, East & West and the people across the continent in terms of their culture, aspirations, perceptions, needs and wants . No company can be successful in penetrating this market if they do not understand the intricacies of each of these, often trying to match their existing product range into an African country with very little success.

Markets need to be analysed, route to market needs to be understood and the consumer buying behaviour of each country needs to be defined and only then, product can be developed for that particular market.

One size does not fit all.

More about Africa:

The middle class estimated at 350 million in 2018 continues to grow at a very rapid rate.

There are certain barriers to entry which getting into this market difficult, including; lack of understanding about the market and how it operates, market information, economic issues, availability of finance or currency, communication in different languages, complexities of channels of distribution (route to market), cultural difference and more.

Channels of Distribution (route to market)

Understanding the route to market can be one of the most difficult areas of distribution in Africa. The starting point is to partner with a suitable distribution company who understands the channels and has the ability to reach them. Coverage and numeric distribution are key to gaining long term sustainable growth. Then you need to know through which channels you want to take your products. Do you want your products to retail through modern trade or traditional trade.

To increase the chances of being successful, it is better to use a company like OpenBox who have the experience, knowledge and established relationships.

Contact us and we will help you.

www.openbox-es.com