Africa is home to more than one billion people, presenting a massive potential consumer market. Moreover, population growth remains rapid, and the United Nations (UN) Population Division forecasts that the continent’s population will surpass the 1.5 billion mark by 2026 and the two billion mark 15 years later. 

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 (SSA), while the retail market opportunities in countries will differ due to variances 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 some 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. 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.

Africa’s retail sector remains relatively under-developed at present, with most shopping being done at traditional shops. The formalisation of the sector will be a key trend underlying the sector’s expansion in the coming decade.

The lack of physical infrastructure has been one of the main constraints to the entry of formal retailers, as there are simply not enough shopping centres available at present, while bureaucratic obstacles and land issues further complicate matters.

At present, most African consumers – especially south of the Sahara desert – remain extremely poor and spend most of their money on food and other necessities. This makes for a promising outlook for fast-moving consumer goods (FMCG) companies given the large market to cater for. Crucially, an increasing number of consumers are on the cusp of the US$1,000 annual income level, which will allow for the expansion of consumption beyond just the basics.

Retailers will be looking to take advantage of the large market at the low end, while gradually starting to offer these consumers higher-value products.