Growth of the African FMCG sector

Despite the

decline in

economic

growth over

recent years, the sub-

Saharan African (SSA)

region’s long-term outlook

as a consumer market

remains positive. This is

according to an inaugural

report – entitled ‘So Much

in Store’ – on retail and

consumer businesses

launched by consultancy

PriceWaterhouseCoopers

(PwC) last month (March).

According to the report,

Africa’s economy has seen

modest growth in the

wake of falling commodity

prices, slowing revenues

and volatile currencies.

“The moderation in

growth impacts a range

of industries and sectors,

including retail and

consumer products that

must contend with rising

costs and a fall in prices,”

says Anton Hugo, PwC

retail and consumer leader

for Africa

He adds that despite

the decline in growth, the

long-term outlook remains

positive. “The economic

growth predicted for

2016 and beyond in some

African countries, and the

growth expected in Africa’s

consumer market, provides

major opportunities

for retail and consumer

companies looking to the

future,” he comments.

Hugo says that the

continent has risen

to prominence as an

investment destination

and the role of retail

and consumer goods has

become more significant.

According to him, there

is also a growing movement

towards local production

in the SSA region, which

could boost demand

for consumer goods.

Hugo points out that the

successful growth of the

African FMCG sector is

dependent on a resilient

supply chain.

“A critical success

factor for retailers and

consumer goods companies

moving into many African

countries has been their

ability to implement supply

chains that deal with the

operational challenges

that exist,” says Hugo,

commenting that given

the size of the SSA region,

supply chains tend to be

complex and expensive.

“Other obstacles include

poor transport, inadequate

local supply capacity and the

dominance of informal retail

trade which, coupled with

a large rural population,

makes distribution a

complex exercise,” says

Hugo.

He cautions however that

as 90% of sales are made

through informal channels,

those that ignore this

segment are missing out on a

significant share of potential

revenue. “There are also

many examples of companies

that have introduced

innovative ways of

improving their distribution

in various countries,” Hugo

points out.