Consumer confidence climbs in Kenya
According to the latest Nielsen Consumer Confidence Index (CCI) results for Quarter 3, 2016, Kenyan consumers are feeling positive. This study that of the three sub-Saharan African countries (Nigeria, Kenya and Ghana), Kenya replaced Nigeria with the highest consumer confidence score - rising six points from the previous quarter to 120. This is the third consecutive quarter when this figure has increased.
Nielsen East & West Africa MD Abhik Gupta commented: “The backdrop to this positive sentiment is the resilience of the Kenyan economy, in particular its currency the Kenyan Shilling (KES), which despite its recent depreciation, remains solid as compared to other emerging market currencies. This is due to the country’s stringent monetary tightening and its low level of dependence on hydrocarbons (oil) and minerals exports.”
This broader positive macro and business outlook has carried through to the Kenyan CCI, which shows that immediate-spending intentions amongst Kenyans increased 13 percentage points from the second quarter, rising to 53 percent of respondents who said now is a good or excellent time to spend. Personal finance-sentiment also increased in the second quarter, jumping five percentage points to 72 percent. Meanwhile, job prospect sentiment decreased five percentage points from the second quarter to 56 percent.
In terms of whether now is a good time to buy the things consumers want and need, 53 percent said yes, while 37 percent said not so good. As per normal, a minority (37 percent) said they had spare cash while 63 percent said not.
In terms of what they would use this spare cash for, the highest number seek to bolster their financial future with 53 percent saying they would invest in shares of stock/mutual funds. As with previous quarters, enhancing the value of tangible assets remains a priority, with 52 percent set to use their spare cash on home improvements and decorating. Long-term financial security also remains a concern, with 44 percent putting money into savings and 43 percent investing in a retirement fund.
Additionally, Nielsen’s most recent Africa Prospects Indicator (APi) Report showed the country had remained in second place and recorded an improvement on its macro ranking, which factors in economic growth performance, in relation to the size of the economy, and its business ranking. This suggests that countries like Kenya currently provide more stable investment destinations than the larger economies of Nigeria, South Africa and Angola.
Gupta added: “As consumers increasingly express favourable sentiment for the country and their own outlook, there are opportunities for manufacturers and service providers to tap into this increased intention to spend.”
Billionaire Kumar Birla Champions Regional Supply Chains
As the head of the Aditya Birla Group, a US$46bn firm that operates in 36 countries, Kumar Mangalam Birla is no stranger to splashy strategic moves. Yet his recent announcement that he no longer wants to acquire globally distributed supply chains stood out. While many companies have struggled to cope with shipping backlogs, his firm has chosen to pivot and focus on regional networks. Said Birla: ‘We wouldn’t look at a company or a business where you source in one corner of the world and sell in another’.
He cited protectionism, the pandemic, and the limited movement of products and people around the world as ABG’s primary causes of lost profits. And they aren’t alone. Over the past year, 900 of the U.S. and Europe’s biggest IT, defence, and financial services firms have lost an average of US$184mn apiece.
An Era of Global Disruption
Over the past few decades, low shipping rates and rapid delivery times have lulled multinational firms into a false sense of security. In the early 2000s, companies chose to take on significant global supply chain risks in exchange for increased profits. First, it made sense to manufacture higher-value goods, such as electronics, in low-cost regions throughout Southeast Asia, India, and Africa. Second, first-tier suppliers started to outsource the manufacturing of specific components to second-, third-, and even fourth-tiers—leaving supply chains with extremely limited visibility.
So when COVID-19 disruptions struck certain regions, companies were caught unprepared. Usually, these events come few and far between. But over the past ten years, we’ve seen a number of ‘black swan’ events that have thrown the supply chain industry into chaos. Here’s a quick history of the most significant events in recent years, thanks to the MIT Sloan Management Review:
- 2010. China creates export quotas for rare earth elements.
- 2011. The Tōhoku Earthquake hits East Japan; flooding sweeps throughout Thailand.
- 2016-present. Trade wars between the U.S. and China hurt suppliers.
- 2020-present. COVID-19 pandemic shuts down international shipping ports.
Now, Kumar Birla is one of many who want to re-evaluate how we run our supply chains. Though his company has acquired 40+ companies in the last quarter decade, Birla intends to build up local hubs rather than expand operations.
Why Pursue Regionalisation?
Combine Chinese economic dominance, global supply chain vulnerabilities, and major government policy shifts around the world, and you have a storm brewing on the horizon for big multinational firms. As Brookings noted, ‘the biggest risk for trading opportunities in the developing world is growing protectionism in more advanced economies, often dressed up as national security protection’.
Altogether, from the U.S. to the European Union, governments are trying to protect their domestic supply chains, secure adequate stockpiles of materials, and build world-class local networks. Consider Biden’s recent executive order, which seeks to bring semiconductor manufacturing back to home soil, or Japan’s bid to open more memory chip fabrication factories near Tokyo. The Aditya Birla Group intends to react in kind. Said Birla: ‘We’re looking at regionalism as a very big theme’.
Will Others Follow Suit?
In the post-pandemic economy, global businesses must decide whether to expand or contract. On one hand, the Alibaba Group’s Cainiao Smart Logistics Network recently launched a direct flight between Hong Kong, China, and Lagos, Nigeria. On the other, the Japanese government is desperate to make its chip manufacturing domestic. Indeed, as two supply chain strategies diverge in a post-pandemic world, the one businesses take may make all the difference.
Yet Birla is confident that regionalisation is the right call. According to his words at the Qatar Economic Forum, even necessary cross-border transactions should be smaller in scope. And as the Bloomberg Billionaires Index now lists his net wealth at US$10.4bn, up 52% from 2020, he may have the cash to test his theories out. ‘Regional hubs, regional presence, regional employment, catering to regional demand’, he stated. ‘We’re a global company rooted in local economics’.