Young consumers now drive Kenya’s economic growth

RETAILER NEWS

DailyNation.co.ke - May 10th, 10:09

A new report shows consumers are taking charge of Africa’s economic growth, with an increasing number of urban Africans spending a large share of their disposable income on groceries and clothing.
 

The report, based on a study conducted by global business consulting firm McKinsey and Company, also lists Kenya among the continent’s top 10 fastest-growing consumer markets, along with South Africa, Nigeria, Libya and Ethiopia.

The growth of a youthful working population in these countries is expected to bring the African economic growth at five per cent annually over the next decade. The World Bank put the continent’s growth at 4.9 per cent in 2011.

The next 10 years

It is projected that food and consumer goods will account for $185 billion (Sh15.44 trillion) of Africa’s total gross domestic product over the next 10 years.

Foods and beverages, which offer the most lucrative opportunities, currently yield $406 million (Sh33.9 billion), but this figure is expected to increase to $543 million (Sh45.34 billion) over the next decade.

The report, known as “The changing face of the African consumer” also shows that increasing business in the wholesale and retail sectors will increase the value of consumer-related industries to over Sh400 billion over the next 10 years.

The survey was conducted from September last year to February this year and involved 15,000 households in 10 cities in the most rapidly growing African economies.

Thirty per cent of those interviewed said they spend their disposable income on groceries, while 10 per cent said they spend it on clothing and six per cent on telecommunications.

This is higher than in Brazil, Russia, India and China (Bric) where groceries absorb 23 per cent of people’s incomes, clothing takes 10 per cent and telecommunications four per cent.

Africa continued to record the highest Internet penetration, blazing the trail for the Bric countries which have previously been used as a yardstick to compare the rate of the continent’s growth to the rest of the world.

Kenya and Senegal ranked first in terms of Internet penetration, with Kenya consumers riding on the back of cheap Internet-enabled phones. Senegal’s penetration is attributed to the wide availability of cyber cafes.

The report further shows that growing African economies have produced some of the highest profit margins in the world, but it warned that this would be diluted in the near future.

“Profit margins in Africa are some of the highest in the world, but the gap will narrow going forward as more big companies set shop in the continent,” said Mr Damian Hattingh, a partner at McKinsey.

The developments are expected to usher in a change in the perception international companies have of Africa. Many are already scouting for partners within the continent to help them start operations within the continent.

“The consumer opportunities are real and reaffirming … and consumer goods companies are opening up fast in many African economies and are expected to fuel long-term growth,” indicated the report.

Fast-growing economies

Other countries in the loop of fast-growing consumer economies are Egypt, Morocco, Angola and Senegal, with McKinsey saying the growth in these countries has created several opportunities for global conglomerates, including Walmart and KFC.