From Hype to Reality, Understanding Africa’s Consumer Evolution

Ground-breaking research commissioned by All Seasons Capital Management and conducted by NKC Independent Economists – uncovers trends in African consumer spending and related investment opportunities.

This cutting-edge research reveals that the African consumer is increasingly powerful, selective and differentiated. Commissioned by All Seasons Capital Management (ASCM) and conducted by award-winning research firm, NKC Independent Economists (NKC), the research identifies clear trends in Africa’s consumer spending on services, basic and luxury goods and alcohol through 2050 (see Graph 1).

Detailed analysis reveals the specific opportunities available to boost bottom lines of companies already operating, or considering expanding into Africa.

“The World Bank is on record as saying that Africa is on the verge of an economic take-off, much like China was 30 years ago and India 20 years ago,” says Thalma Corbett, Chief Economist and Head of Research at NKC.

“Although it will probably not be of the same magnitude as China, Africa and its investors will, however, have an opportunity to benefit immensely from demographic change over the next few decades as the growth of its working-age population outpaces that of its overall population provided, of course, that the correct policies are in place. The determining factors will be the pace of economic reform and job creation. Investors should be asking whether and where we’ll see the policy implementation needed to catalyse such demographic change,” Corbett adds. “We estimate that in 2010, 89.4% of Africa’s population earned less than $2,500 per annum in real terms. By 2050, this proportion is forecast to fall to 66.8%. Over the same period, the proportion of people earning $6,500 or more is expected to increase from 2.3% to 19.6%.”

ASCM Portfolio Manager of their Africa Fund, Murray Todd notes, “The implications for consumer-facing industries are striking. By combining NKC’s real GDP per capita forecasts with its consumer spending model, we are able to estimate at what income levels spending on different goods start.” The below graphic illustrates important consumer patterns across the African continent: 

Graph 1


Other key takings from the study include:

  • When the potential demographic window of opportunity is combined with the outlook for structural economic reforms and the prospects for job creation, NKC arrived at a list of 10 African countries most likely to benefit from demographic changes over the next two decades, namely (in alphabetic order): Egypt, Ethiopia, Ghana, Kenya, Mauritius, Morocco, Nigeria, Rwanda, South Africa, and Tunisia.
  • Some countries may have favourable demographics, but the potential benefits of these for economic growth are watered down by poor government policies or a high level of unemployment. Countries that can be classified in this category include AlgeriaGabon, and Libya.
  • If Sub Saharan Africa (SSA) follows the path of our baseline scenario*, the region’s GDP per capita will reach the level China attained in 2010 by 2041.
  • North Africa starts from a higher base than SSA, but is expected to see a slower take-off due to weaker economic growth prospects and a turbulent political environment during the period 2011-14. North Africa is expected to reach China’s 2010 real GDP per capita level by 2021 in our baseline scenario.
  • As income increases, people will tend to previously neglected dietary needs, and at a certain point, there will also be a quality shift, e.g. switching to better brand names, or including more meat in one’s diet. For the large majority of the African population the nutritional transition is currently still focused on quantity increase rather than quality increase.

The baseline scenario is the path we believe to be the more likely one; the optimistic view illustrates what can be achieved if the pace of economic and/or political reforms are faster than we anticipate and/or if there is a faster expansion in minerals production, telecommunications, banking etc. Finally, the pessimistic path is an illustration of what could possibly happen should reforms falter.