Despite high inequality, South Africa has long been considered a bastion of wealth in Africa. Luxury brands see it as an established market for high-end goods.
As wealth outside of South Africa grows, fashion houses and other luxury producers are looking to reach this largely untapped market.
But while high-end consumers tend to be more resilient to economic shocks than most, the slowdown in emerging markets is being felt by luxury retailers globally. Analysts predict a corresponding slowdown of expansion into African markets.
“Despite the resilience of millionaires, recent economic issues have definitely been felt Luxury brands turn to Africain the luxury sector, particularly apparel and clothing brands,” says Andrew Amoils, analyst at New World Wealth.
Although many stand-alone designer stores have opened in African capitals over the past few years “this trend will probably tail off over the next year due to the downturn,” he adds.
It should not come as a surprise that luxury retailers have increased their outlets in Africa. There are now around 16,000 millionaires in Nigeria, 50,000 in South Africa and 6,500 in Angola. Other markets are expected to expand at pace, with Côte D’Ivoire forecasted to see the fastest growth of high net worth individuals.
“There are roughly 160,000 millionaires living across Africa, with combined wealth just short of $700bn, and they are extremely keen to spend it,” said Jeremy Nel, managing director of South African-based luxury marketing firm Luxury Brands. These high net worth individuals generally travel extensively and visit luxury shopping hotspots in London and New York, he adds.
These new millionaires are responsible for luxury retail sales in Africa reaching $4bn in 2014, according to Euromonitor. It is still the world’s smallest least developed luxury market, but is projected to grow by 31 percent by 2019.
Cultural factors are also helping drive sales of luxury goods. Heavily branded, so-called ‘blinged-up’ goods are big sellers in markets like Nigeria due to the high social status these goods convey.
The region’s big luxury markets correspond with major commodities exporters who have been hard hit by the downturn in prices. Oil, for instance, is currently hovering around $43 a barrel.
Nigeria and Angola, which both see petroleum making up more than 90 percent of their exports by revenue, are highly sensitive to shocks in commodity prices. The IMF cut its growth forecast for sub-Saharan Africa to 4.25 percent for 2015.
South Africa remains the undisputed regional luxury leader. Johannesburg’s Diamond Walk at Sandton City Mall is home to 11 high-end boutiques, including Burberry, Louis Vuitton, Dolce & Gabbana and Jimmy Choo. Italian menswear brand Ermenegildo Zegna became the first high-end fashion house to enter Nigeria’s capital city of Lagos in 2013.
An exclusive luxury shopping centre, called the ‘Sky Gallery’, is under construction in Angola’s capital city of Luanda. Prada, Gucci, Armani and Hugo Boss are some of the brands that are expected to open their first Angola stores at this location.