Africa Could be Retail’s Next Frontier
Stephen Garner
Senior Editor
Africa might be the next big continent retailers need to win over.
According to Kearney’s new Global Retail Development Index (GRDI) of 2021 research report, Africa will be “retail’s next gold rush” as Asia’s growth slows. “Driven by growing, young, urban, and increasingly more affluent populations, Africa’s aggregate potential as an emerging retail market far outweighs problems associated with investing in what can still be risky and challenging individual nation-state economies,” the report said.
Kearney, which is a global management consulting firm with offices in more than 40 countries worldwide, said in the report that by 2050 the global population is expected to increase by 2 billion, and Africa will be home to the majority of these new lives. African nations such as Ethiopia, Ghana, Cote d’Ivoire, Rwanda, Kenya, Senegal, and Morocco are expected to grow faster than the regional growth and world average.
What’s more, the population of sub-Saharan Africa (SSA) alone is expected to double by 2050, with Nigeria expected to be the third-largest country in the world. High population growth rates are also forecast for the Democratic Republic of the Congo, Ethiopia, Tanzania, and Egypt.
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Based on an average annual growth rate from 2020–2025, United Nations Urban Agglomerations data projects that, with growth rates ranging from 5.14% to 6.46%, Africa will be home to 17 of the world’s 20 fastest-growing cities, four of them in Nigeria. Other cities on the list include Gwagwalada, Kabinda, Lokoja, Uige, Bujumbura, Songea, Potiskum, Bunia, and Tete. Urban centers such as Lagos (Nigeria), Kinshasa (Democratic Republic of the Congo), Luanda (Angola), Dar es Salaam (Tanzania), Nairobi (Kenya), Accra (Ghana), Kumasi (Ghana), and Kampala (Uganda) also have a place on the list of the world’s fastest-growing cities.
But the challenges—corruption, widespread poverty, security concerns, supply chain issues, lack of infrastructure, active conflicts, archaic governmental retail policies and practices, and isolation—are as real as the potential, reported Kearney. “Testing the waters through a minority investment in a local retailer is the suggested—and sometimes only—way to enter these markets,” the report said. “Identifying local skilled labor for management positions is the recommended labor strategy.”
Looking across markets, Kearney’s report noted that fossil fuel-dependent governments see retail as a way of diversifying their economies away from oil dependency. It also shows how the consumer spending world’s center of gravity is slowly shifting from the United States and developed European markets to emerging markets in Asia, Africa, and the Middle East. The pace of that development is directly linked to the innovation, penetration, and acceptance of consumer and retail technologies, from simple mobile phone connectivity to sophisticated and secure electronic payment systems.
“This year’s GRDI report illustrates how much, and how fast, markets can change and the critical role consumers play in driving that change,” said Greg Portell, global lead in Kearney’s consumer practice, in a statement. “What we see in Africa, for example, are multiple examples of modern retailing, underpinned by digital technologies and cooperative governmental policies, leapfrogging traditional models in response to the opportunities created by dramatic population increases, escalating urbanization, and the emergence of an expanding middle class.”
