AFRICA TODAY IS LIKE CHINA IN THE 1980s

In the 1980s, China was far from the economic heavyweight it is today, but it was already in the midst of the economic reforms that would help make it the world’s largest economy by some measures. Today, plenty of retailers, especially luxury brands, have capitalized on China’s new consumer class. And while there are still opportunities to grow sales in the country, brands are already looking for the next China.

The region most likely to fill that role is Africa—sub-Saharan Africa to be exact, according to a new report by A.T. Kearney, a global strategy and management consulting firm.

“Sub-Saharan Africa will be the big story by 2040,” the report states, comparing it to China in 1987. “It’s going to be a bumpy road getting there, but in another 30 years it could be the biggest, fastest, strongest, and most attractive region for retail in the world.”

“This is definitely unprecedented,” Mike Moriarty, a partner at A.T. Kearney’s retail practice, tells Quartz. In the more than ten years that A.T. Kearney has been compiling its Global Retail Development Index, sub-Saharan Africa, which includes all the African countries south of the Sahara desert, has never before showed such potential.

The index, which ranks the top 30 developing countries for retail investment, makes its claims based on a mix of variables, including each country’s market size, how saturated the market already is, the speed at which it’s developing, and how risky it is to invest in.

Sub-Saharan Africa, it says, “presents exciting opportunities that are just starting to open up, supported by rising household incomes, fast urbanization, and a growing middle class.”
The signs of luxury’s arrival in Africa are already appearing. In 2013, Ermenegildo Zegna, the Italian heritage tailoring label, became the first luxury brand to open a retail store in Nigeria. At the time, chief executive Gildo Zegna said the region could become “a kind of new frontier for luxury.”

In Angola’s capital city, Luanda, a soon-to-open shopping mall will feature stores by brands including Zegna, Gucci, Prada, and Armani.

Those brands are poised to take advantage of a projected boom in Africa’s consumer spending. Consulting and research firm McKinsey estimates that households in Africa will spend $1.4 trillion in 2020 (pdf) if GDP growth stays consistent, compared to $860 billion in 2008. That’s not guaranteed (paywall) of course, but it’s certainly possible.
Nigeria and Angola are two of the African nations that made A.T. Kearney’s list, along with Botswana. The report notes that three more countries—Zambia, Namibia, and Ghana—are on the brink of breaking on to it. If that were to happen, sub-Saharan Africa would comprise 20% of A.T. Kearney’s index of countries with the greatest retail potential.

There are caveats. While Nigeria and Angola have some of the fastest-growing middle classes in the world, both still have significant wealth gaps, not to mention economies that are heavily reliant on oil (paywall)—and therefore subject to its volatility. Nigeria is currently struggling through a fuel crisis that has paralyzed the country. Botswana, the top-ranked African country, has a population of just over 2 million—not a huge customer base. Political instability and economic corruption remain serious issues in much of sub-Saharan Africa.
Still, Moriarty says sub-Saharan Africa is “really just coming into its own.” Retailers would be smart to notice.

Source: qz.com