Retailers cash in on Africa's growing middle class

Global and South African companies – especially pharmaceutical, fastmoving consumer goods (FMCG) and retail – are planning expansion into Africa over the next two years and supply chains need to adapt to meet the new requirements and leverage the opportunities. This was the message from Mark Cleeve- Edwards, executive: business development at Barloworld Logistics, during the launch of the 2015 supplychainforesight survey in Johannesburg recently. “While opportunities in South Africa have become more complex and constrained, opportunities in Africa have become potentially more lucrative, with diversification of commodities, services and products becoming the more prudent strategy for companies wishing to expand,” he said. Deloitte Consulting reported recently that Africa’s middle class had tripled over the past 30 years, and the current trajectory suggests that the African middle class will grow to 1.1 billion in 2060, making it the world’s fastest growing continent. This growth, coupled with the forecast GDP growth of over 6% which the International Monetary Fund (IMF) is predicting, is driving the potential for retail growth on the continent significantly through increased purchasing power and consumer demand. The 2014 AT Kearney African Retail Development Index ranked the top 10 countries in sub-Saharan Africa for retail expansion and highlighted Rwanda, Nigeria, Namibia, Tanzania and Gabon as Africa’s most attractive markets for retailers looking to expand. According to the index, African retailers such as South Africa’s Shoprite – which operates in more than 16 African countries – and Kenya’s Nakumatt group have done most of the expansion, but global retailers are moving in. Wal-Mart – which acquired South Africa’s Massmart in 2011 – plans to open 90 supermarkets across Africa in 2015, 2016 and 2017, said AT Kearney, adding that African expansion for retail companies put major added pressures on even the most seasoned professionals. “The route to market for products can involve any combination of rivers, mountains, deserts, jungles and f loods – not to mention road and railway difficulties and governance issues that can stymie the transporting of goods across borders,” reads the report. ”Yes, Africa presents a major opportunity, but capturing it will require some patience, hard work and a little ingenuity,” said AT Kearney. INSERT & CAPTION While opportunities in South Africa have become more constrained, opportunities in Africa have become potentially more lucrative. – Mark Cleeve-Edwards