The overwhelming narrative of ‘Africa Rising’ is size: big continent, lots of people, plenty of growth.
But size presents its own challenges. Sometimes small is good. Nigeria will have more than 300 million consumers by 2030 and may be among the ten largest economies in the world by 2050. But it comes with complications and reaching all those consumers is a long haul.
Using our proprietary database, Trendtype looked at data for 50 countries in Africa by six factors:
- The size of the population
- The size of the economy
- Quality of governance and ease of doing business
- Market accessibility and how easy it is to move goods into the country and distribute them
- Living standards and the underlying size of the consumer class
- How connected consumers are
This enabled us to establish what was making individual countries more or less attractive and what plays into the favour of the large number of smaller markets that will never offer the size of opportunities that Nigeria, Egypt or DRC do. For market planners, there are effectively three to four distinct groups of markets – fast entry niche markets, major investment markets, and around 20 markets which are longer haul investments, lacking both the short term ease or the mid term growth opportunities.
Africa’s future hubs
The best performers on risk and governance have an opportunity to become the next Singapore or Dubai – international trade hubs that thrive on enabling business and growth. Among smaller countries, six countries stand out: Mauritius, Rwanda, Botswana, Ghana, Namibia and Cape Verde. Rwanda and Mauritius, for example, are both positioning themselves as future financial services hubs. Ghana, Namibia and Rwanda are positioning themselves as future transport or logistics hubs. Botswana has ambitious plans to become the global diamond hub for the diamond trade. Ghana has aspirations of becoming the African IT hub.
Market accessibility does not neatly track economic maturity
One feature of African markets is that retail consolidation and logistics performance does not neatly track economic maturity. Among South Africa’s satellites, retail is far more consolidated and formalised – partly as a result of long time South African investment – than elsewhere. Additionally, urbanisation and the quality of the logistics infrastructure play a big part. One of the most accessible markets is Côte d’Ivoire, which still has a strong retail network left over from its days as a middle class powerhouse, and which has already attracted considerable investment to improve its logistics infrastructure. Among the less headline markets, Morocco, Botswana, Namibia and Tunisia all offer better market accessibility. In fact, this is a major point of difference between North Africa and sub-Saharan Africa.
Reaching the consumer class
Sheer weight of population will mean the largest markets will eventually have the largest consumer classes, and certainly will have the monopoly on the wealth centres. But, for example, using living standards as a measure of wealth we see that more than 20 countries in Africa have a larger consumer class – as a share of the population – than Nigeria. In sub-Saharan Africa, Mauritius, Cape Verde, Botswana and Gabon have among the highest concentrations of the consumer class. We can also see an emerging cluster of in West and Central Africa of new consumer classes: Ghana, Senegal, the Republic of Congo, Cameroon and Côte d’Ivoire.
Emerging digital natives
It is easy to underestimate the pace of change as a new generation of digital immigrants and digital natives emerges: only 2% of people in Mali have access to the internet, but more than a quarter of the population owns a smartphone. In Sudan four in ten people have 3G coverage. In fact, connectivity is one area where sub-Saharan Africa is starting to outpace more developed North African markets. Among the niche markets with high levels of tech penetration, Botswana, Mauritius and Ghana stand out. But that is only half the picture – Kenya is fast positioning itself as the leading tech hub outside South Africa and is a global leader in mobile payments. A key plank of Rwanda’s growth plan is to roll out internet access as widely as possible, including to often overlooked rural consumers. Sudan and Zimbabwe have well developed mobile infrastructures. We expect to see digital infrastructure and uptake to have a huge impact on market attractiveness and for there to be an intense race among up to 10 countries to become Africa’s digital leader.
Where are the most attractive niche markets?
One country consistently stands out: Botswana. Although not without its own issues, Botswana’s stability, market accessibility and infrastructure consistently make it the leading niche market in Africa.
But economic growth is starting to pivot away from North and Southern Africa and towards East and West Africa. In West Africa, Nigeria’s gravitational pull makes Ghana and Côte d’Ivoire especially important as potential regional hubs. Greater regional integration in East Africa potentially places Rwanda in a leading position to act as the hub of the network. Nonetheless, Botswana and Mauritius remain the most stable countries in Africa in which to do business – factors which could become more important as the digital economy and financial services take off.
Ben Longman is managing director of African market intelligence company Trendtype.