In the wake of COVID-19, Africa is poised to move away from traditional models and become the fastest-growing, richest, and most sophisticated retail and consumer market in the world, according to Kearney.
With Egypt rising 19 spaces up to 7th place, and Morocco rising six spaces to 6th place, Kearney’s 2021 Global Retail Development Index (GRDI) shows how the consumer spending world’s centre of gravity is slowly shifting from the US and developed European markets to emerging markets in Asia, Africa and the Middle East.
But as growth in Asia begins to slow down, and fossil fuel-dependent governments, like those in Africa, increasingly turn to retail to diversify their economies, it is the continent of Africa that is emerging as the next big retail hotspot, driven by explosive growth in its young, urban and digitally savvy consumers.
Add to this, increasing mobile phone penetration, the creation of digital payment and shopping networks, favourable governmental regulations and spending initiatives, and significant investment by both foreign and domestic companies, and you have a recipe for transformation of the face of African retailing.
“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 urbanisation, and the emergence of an expanding middle class,” says Greg Portell, global lead in Kearney's consumer practice.
By 2050, the global population is expected to increase by 2 billion, and Africa will be home to the majority of these new lives with African nations such as Ethiopia, Ghana, Côte d’Ivoire, Rwanda, Kenya, Senegal and Morocco expected to grow faster than the regional growth and world average.
By this time too, Nigeria is expected to be the third-largest country in the world, and it is predicted that sub-Saharan Africa will enjoy the highest rate of disposable income growth on Earth, about 9% CAGR.
Take Ghana. After decades of being under penetrated and underserved, Ghana has emerged as west Africa’s up-and-coming retail destination with its capital Accra home to most of the jar retailers operating in the country. Not only does Ghana have a rapidly expanding middle class but it has the highest mobile penetration in West Africa, 55% by the end of 2019, with almost 70% of online orders here placed via mobile phones. In 2020, Ghana became the first African country to launch a universal QR code enabling instant merchant payments, and it boasts a proliferating e-commerce startup scene.
How the retail scene in Africa is changing
There are four classes of sub-Saharan Africa retail – informal, traditional, modern and illicit with modern retailing the least developed. Modern retail is currently dominated by regional players, primarily South African operators, including Shoprite, Mr Price and Pick n Pay, and some international players, providing rich investment opportunities for international players.
And some international players are already jumping. UAE’s Majid Al Futtaim, which is Carrefour’s exclusive franchisee, has announced plans to double down on African countries such as Kenya and Uganda, focusing on price, private label, and building customer loyalty.
Grocery retailing in Africa is witnessing rapid, scaled digitalisation driven by a vibrant technology and startup industry, among these third-party logistics firms and grocery e-commerce solutions. These include Uganda’s grocery and pharmacy bike-hailing app Safeboda; Ghana’s Big Samps Market, which utilises social media platforms to source and deliver groceries; Nigerian Omnibus, which is digitalising consumer goods and grocery supply chains; and new payments such as Nigeria’s Pay, a mobile money solutions provider.
Digitalisation of retail in Africa
E-commerce accounts for just 1% of the total African retail market, but it is expected to accelerate bolstered by rising smartphone/internet penetration, coupled with the world’s youngest population and an emerging urban middle class.
While South Africa, Nigeria and Kenya currently dominate the e-commerce landscape, the digital marketplaces in Ghana and Morocco are rapidly expanding.
Africa too is advancing with its mobile money transactions, which now accounts for some 50% of all global transactions. Retailers and central banks in various countries are working toward developing and facilitating digital ecosystems by reducing transactions ion costs on electronic payments, but gaps in e-payment infrastructure supply, logical inefficiencies and trust issues are slowing down growth opportunities, says Kearney.
Read the Global Retail Development Index