Across sub-Saharan Africa, consumer demand is fueling the continent’s economies in new ways, driving hopes that Africa will emerge as a success story in the coming years, comparable to the rise of the East Asian Tigers in the second half of the 20th century.
After seeing years of uninterrupted economic expansion across Africa, governments, analysts and investors are focusing on this fast-growing continent’s shoppers and workers, rather than just the usual upswing in commodity prices that have driven past cycles of boom and bust.
The African Development Bank (ADB) projected, in its latest annual report in May, that foreign investment in Africa would reach a record US$80 billion this year, with a larger share of the money going to manufacturing and not just the strip-mining of resources.
“The development is real, and on the back of that, there’s a lot of commercial opportunity that’s emerging,” said Simon Freemantle, senior political economist at Standard Bank in Johannesburg.
At times messy and difficult to quantify, Africa’s economies give both pessimists and optimists plenty of statistical ammunition to support their narratives of the future. Growth is uneven, inequality is rising in many corners, millions of people still live in extreme poverty and with violence simmering in the Central African Republic, South Sudan and elsewhere, it is easy to fall back on the old pessimistic plotline of sub-Saharan Africa.
The middle class has expanded rapidly across the continent, but the population has grown so quickly that the absolute number of impoverished Africans has increased at a similar rate. Sushi restaurants in Dakar, Senegal, and fancy coffee shops in Kigali, Rwanda, do not improve the lives of subsistence farmers in the hinterland.
Yet confidence can be taken from the success with which African countries have been able to tap into international capital markets of late. In spite of recent terrorist attacks, Kenya sold US$2 billion worth of bonds to international investors last month, which will be used, in part, to pay for infrastructure projects; two months earlier, Zambia received a US$1 billion offer.
Exports from sub-Saharan Africa leapt from US$68 billion to more than US$400 billion from 1995 to 2012. A total of US$300 billion of that came from natural resources, the extraction of oil, natural gas, precious metals and diamonds. Angola pumps 1.8 million barrels of oil a day, which is why its capital, Luanda, hosts fancy designer boutiques.
However, some of the most rapid growth is now coming from other sectors. In South Africa, for example, the broader economy has been sluggish, but the black middle class now spends more money than the white middle class.
For decades, this country’s long-neglected black consumers spent their money on the far edges of the economy, buying necessities such as soap, salt and milk at informal convenience stores called spaza shops. During the hard years of apartheid, Itumeleng Mothibeli’s grandparents ran one such shop in a peri-urban community to which blacks had been exiled under the racist system.
Now Mothibeli manages 14 shopping centers spread across four provinces of South Africa for the Vukile Property Fund. The company targets the long-shunned township market for its high volume, turnover and foot traffic. Instead of the one-story brick stand adjacent to his grandparents’ house, these are enormous Western-style shopping malls that are doing brisk business.
“In the old days, you had cathedrals in the middle of towns,” Mothibeli, 30, said as he drove a gold Toyota Corolla company car into the parking lot of the Daveyton Mall. “Now you have shopping centers.”
The ADB gave the Africa Rising debate a significant jolt in 2011 with a report declaring that the African middle class had grown to 350 million people in 2010, from 126 million in 1980. The Organization for Economic Cooperation and Development put the figure in 2010 at a mere 32 million, “or roughly the same as Canada.”
Middle class is a fraught, even political, expression. In the US, it conjures the image of a suburban house with a white picket fence and a car in the garage. The ADB, on the other hand, defines someone as middle class if they earn US$2 a day or more.
“The future is about that lower middle class that’s expanding quickly,” said Staffan Canback, managing director of the consultancy Canback & Co, who has been involved in business in Africa for decades. He was talking about the people with enough money left over for small packets of detergent, or who can save money for brand-name shoes.
“You’re starting to see a middle class even in a place like Angola,” Canback said. “There’s a long way to go, but I think it’s incorrect to say that it’s only a few families that make all the money and that no one else makes money. That’s definitely not true.”
Businesses alert to the opportunities are setting up shop in Africa. In April, Marriott closed a deal to buy the 116-hotel Protea Hospitality Group, based in South Africa. Clothing companies like Forever 21 and Sweden’s H&M plan to open their first shops here also. Wal-Mart Stores, Inc’s South African arm, Massmart, has stores in a dozen African countries, including Uganda and Mozambique, and plans to expand into Angola next year.
Last year, Honda opened its third motorcycle subsidiary in Africa, based in Kenya, including a new assembly plant. Heineken plans to invest nearly US$700 million a year in Africa to keep up with the demand of the continent’s beer drinkers.
The Chinese shoemaker Huajian is spearheading the construction of a US$2 billion special economic zone in Ethiopia that will focus on light manufacturing.
Perhaps no country illustrates the pitfalls and opportunities quite as starkly as Nigeria. Even as the country is projected to grow at a swift 7.3 percent clip this year and next, the kidnapping and murdering by Boko Haram militants, who operate with impunity in Nigeria’s northeast, transfix the world.
Adewale Opawale, executive director at Strategic Research and Management (STREAM) Insight, a market and social research company in Lagos, said he had witnessed drastic change, not just in the number of cars on the streets and airplanes taking off from the international airport there, but in the way that people do business.
Consumers are moving from running around with cash for purchases to using their Internet-enabled cellphones (many with more than one mobile phone) to place orders from online retail chains that have started to cash in on the country’s rising middle class.
“It’s loads of opportunity in the Nigerian consumer market,” he said. “Nigeria is on track to become one of the 20 largest economies in the world.”
The commercial gains are not spread equally across society or across the continent. A study of the top African brands found that of the top 25, all but one — Kenya’s Safaricom — came from Nigeria or South Africa. Seven of the top 10 brands were South African. How the spoils of growth are shared is as important as the national averages that mask deep inequality. The goal is a broad-based improvement in the lives of the masses, which has proved elusive.
“The question of how the poor fared in the period of rapid growth in the last decade in Africa is a subject of controversy,” ADB chief economist Mthuli Ncube said. “The precise relationship between poverty and growth in the long-term depends crucially on a growth pattern that is accompanied by structural shifts, where labor moves from low productivity to high productivity sectors.”
That means more reliable jobs in manufacturing and services and fewer subsistence farmers. That has been a goal for leaders across Africa since the dawn of the postcolonial period.
Whether the continent’s governments are up to the task, there is no question that the individual, entrepreneurial drive is present and pushing Africa ahead.
“There’s just this amazing determination to get places,” said John Simpson, director of the Unilever Institute of Strategic Marketing at the University of Cape Town.
“It’s a relentless desire to make more, to get better, to have a better lifestyle,” he said.
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