Before moving to Nigeria for a relatively long period, I thought that testing the waters would be a good idea: would I adapt to a country so different to my own? I had many question marks: some were important issues, others were really minute. One of these minute issues was: will I find the toiletries that I’m used to…? I wanted to check that out in case I needed to take an extra stock with me.
The reality is that you can find essentially any consumer product – but at the same prices as in Europe! Which means that those items are a luxury for most of the population.
The potential for fast-moving consumer goods (FMCG) to grow in Africa seems to be there. In a recent industry report, KPMG identifies the sector’s growth drivers. I want to comment on those that relate to the population:
- Size of the population:
- Africa’s population is larger than any other continent except for Asia. Close to 1.2 billion people in 2015, it’s expected to approach 1.7 billion by 2030, and 2.2 billion by 2050.
- Compare this to the Western world: current populations of North America (0.4 billion) and Europe (0.7 billion) are expected to remain virtually at the same levels. My favorite question in relation to this: any doubts about where the future is?
- Spending power:
- This increases with the size of the middle class. The critical question here is: “what’s the middle class?”
- The Africa Development Bank defines it as people spending between $2 and $20 per day. That’s quite broad a range! This gives an estimate of 313 million people (34 % of the continent’s population). Others are more conservative: Standard Bank estimates the middle class at 15 million households in the 11 largest sub-Saharan Africa economies (source: New African Magazine).
- Population density:
- The largest city in Africa is Cairo with an estimated population of 12 million in 2014, and a metropolitan population of 22 million. Nairobi — with 3.5 million people and 6.5 if we include the suburbs — is # 10 according to the KPMG report, and # 14 according to the World Population Review.
- Beware! Disposable income may be higher in the rural areas than in large cities. For instance, Nairobi is home to Kibera, the largest slum in Africa. There, close to 1 million people live on less than 1 $ /day.
Opportunities to grow in FMCGs are there. The obstacles are there as well (e.g., insufficient infrastructure that drives logistics costs up). Most importantly, let’s not forget that taking advantage of these opportunities shouldn’t come at any cost. Economic development is not authentic unless it comes hand-in-hand with social development. Let’s not only ask: what’s in it for my company or for me as an investor. Let’s also ask: what’s in it for the millions of Africans who live at poverty? Is there a way that basic consumer products are not a luxury for them?
- A young population, a youthful mentality
- Launching consumer brands in sub-Saharan Africa
- Kenya’s middle class and economic growth
- Doing business in Africa: some practical advise
- The rich poor divide in sub-Saharan Africa