Growing Consumer Class in Africa

consumer class
The face of the economy is changing in Africa. According to the New York Times, the continent’s rapidly expanding consumer class now drives growth. With consumer demand powering nations, there is hope that Africa will be able to experience the same swift growth that East Asian countries have enjoyed.

Over the past 10 years, Africa has expanded rapidly. Recently, though, governments, companies and investors have focused more on the potential consumers and markets in the continent rather than simply its resources.

The new attention given to African shoppers can be seen in the annual report released by the African Development Bank in May 2014. The report details that foreign investment will reach a record high of $80 billion in 2014, and that the majority of the investment went towards manufacturing, not resource stripping industries.

Though the redirect of investment toward consumers is promising, predictions of growth and increased prosperity in Africa are still difficult to quantify. Across the continent, economic advancement differs and extreme poverty and inequality remain pressing issues.

Although the middle class has expanded in almost every nation in Africa, the number of people living in poverty has also increased because of explosive population growth.

Despite the difficulties, Africa’s ability to attract foreign capital is increasing. For example, in June 2014 Kenya sold over $2 billion in bonds to international corporations, which it will use to strengthen the country’s infrastructure. In May, Zambia made a similar sale for over $1 billion.

In sub-Saharan Africa, exports have increased from $68 billion in 1995 to over $400 billion in 2012. A majority of the export-based growth comes not only from natural resources, but also from other sectors of the economy, such as manufacturing and services.

Increased growth in various sections of the economy has allowed the middle class to expand. The manufacturing and service industries are able to offer higher paying positions to more people, who then have more money to spend. According to the African Development Bank, the middle class in Africa numbered around only around 126 million in 1980 and has recently increased to over 350 million people.

Increased prosperity within the continent has enabled people to move from only buying domestic essentials, like food, soup and cooking oil, to purchasing merchandise from the global market, like clothing and cell phones. It is projected that consumer spending will grow from the 2008 figure of $860 billion to over $1.4 trillion by 2020.

The strong purchasing power in the new African consumer class has many businesses looking to tap into this economic opportunity.

The large corporation, Marriott, has already made deals to buy out Protea Hospitality Group from South Africa. Clothing companies such as Forever 21 and H&M have also begun to open stores in Africa. Wal-Mart plans to expand its stores from its locations in already 12 different African countries. These are only few in the long list of companies opening their doors to the African shopper.

The rise of the African consumer class offers a promising future for the continent. Although Africa still must contend with many pressing social and economic issues to reach the growth experienced in East Asia, the rise of the middle class is an essential step.

Kathleen Egan

Sources: New York Times, Wall Street Journal, African Development Bank,
Photo: Economist