Melissa Verreynne and Francois Conradie
What growing consumption demand in africa means for business
Explosive growth in Africans’ disposable income will result in a surge in consumer demand over the next few decades.
It is a given that Africa’s economic growth over the next few years will be rapid – continued commodity-fuelled growth combined with rents from new energy discoveries and Africa’s role in growing food for an expanding global population will ensure healthy increases in economic output for decades to come.
It is obvious that these revenues will boost per capita incomes and consumption demand, but wholesalers, retailers and marketers would do well to begin thinking with greater precision about what, specifically, these increasing incomes will be spent on. The best clue as to what Africans will spend their higher incomes on may be obtained by asking what Indians and Chinese spent their increasing incomes on when those countries saw per capita gross domestic product (GDP) rise quickly in the 1990s and 2000s.
Demographics
First, some detail about the characteristics of the African consumer market story may be useful. The main reason for the current growth in consumption demand on the continent is demographic. Africa’s population is growing, and fast. According to United Nations (UN) projections, Africa’s population will exceed India’s by 2023 and China’s by 2025. The continent is forecast to be home to close to two billion people by 2041, double the current figure. Thus, looking solely at the size of the consumer market, the potential of the African market is immense.
At the same time, this population is becoming richer. This trend results mainly from the change which is underway in the population’s age structure. Changes in public health policy and culture are pushing fertility rates down, especially in North Africa, so the shape of the population pyramid is changing. The base – the proportion of children in the population – is narrowing, and the proportion of people in the older cohorts is growing. As a result, the dependency ratio – the ratio of people in the economically active period of their lives to the young and the old whom those workers must support – is improving. This means that working Africans are supporting fewer dependents than ever before, and they are spending the extra disposable income that results from that situation on several categories of consumer goods.
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