Untapped opportunities exist for small and medium enterprises (SMEs) to produce fast-moving consumer goods (FMCG) in Africa.
This was suggested by Ram Ottapathu, CEO of Botswana-based supermarket chain Choppies, during the recent EY Strategic Growth Forum Africa in Johannesburg.
Choppies, listed on both the Botswana and Johannesburg stock exchanges, has over 130 outlets in Botswana, South Africa and Zimbabwe. It has also recently acquired a supermarket chain in Kenya, with further plans to expand to Zambia, Tanzania, Mozambique and Namibia. Choppies mainly caters for lower to middle-income consumers.
Ottapathu said there are examples of SMEs in Africa that have achieved remarkable success by manufacturing consumer goods. He highlighted a company in Zambia that, according to him, produces better quality snacks than a large multinational operating in South Africa.
Choppies has also developed its own breakfast cereal, manufactured by a local company that, according to Ottapathu, has managed to capture significant market share.
But he said there are too few such examples, especially in South Africa, where the FMCG category is dominated by a handful of large players. “What we don’t see here in Africa, especially this part of Africa, is there are no medium-scale enterprises who can supply value products… It is lacking.”
Ottapathu also believes well-known consumer goods brands demand too much of a price premium. Choppies, for instance, imports washing powder from China because the products of the multinationals are too expensive for its customers.
He also highlighted a lack of retail space as a challenge, especially in countries such Tanzania and Zambia. “There is not much funding for real estate development for the retail sector.”
Another hurdle is the difficulty associated with moving people and goods from one African country to another. “Even within the Southern African [Development] Community you can’t move goods freely.”