Africans are increasingly moving to cities, making it easier for companies to target certain consumer groups. Although the demographic make-up of the continent is extremely favourable, success is not guaranteed. Firstly, there are vast differences across countries – North Africa is for example far more developed than sub-Saharan Africa, while the retail market opportunities in (say) Nigeria will be very much different from that in Tanzania due to differences in consumer tastes, culture, income, and demographics. Secondly, it is important to distinguish between opportunities at the national and at the city level. Data at the national level can often be misleading, as a city’s GDP per capita can vastly exceed the national average due to the greater concentration of wealth in urban areas. Finally, simply because a country has favourable demographics does not mean that this will necessarily translate into higher levels of economic growth and consumer spending. The crucial deciding factor will be economic policy, reforms, and job creation. In theory, an increase in the proportion of the working-age population relative to the total population (the so-called demographic dividend) is potentially beneficial for consumer spending as it frees up resources. But this will not happen if there is a high unemployment rate in the working-age population.
Thankfully, apart from Africa’s favourable demographics, there is also a favourable outlook for economic growth, despite the current challenging global environment. As a result, the purchasing power of the continent’s large consumer market is expected to increase significantly over the medium- to long-term. This presents lucrative opportunities for investment in consumer-focused industries, including retail. According to a report by the African Development Bank (AfDB), some 122.7 million Africans are now classified as ‘middle class’ (daily per capita expenditure of between US$4 and US$20), 30 percent higher than in 2000. The AfDB further estimates that there are a total of 190.6 million people on the continent that spend between US$2 and US$4 daily, many of whom will join the middle class over the next decade.