• Africa is set to become the largest region for consumer spending in the next decade, with the majority of spend going to basic essentials, such as food, transport, education, and healthcare.
  • As spending increases, the epicenters of household income growth are shifting away from urban powerhouses like Johannesburg to smaller cities such as Nairobi and Yaoundé.

Africa will be the second largest region for consumer spending growth in the 2020s. Most of that spending will be focused on the basic essentials: food, transport, household goods, education, and healthcare. However, eating out, entertainment, and consumer goods will also experience growth as discretionary spending rises on the back of growing purchasing power.

In a sign of an emerging shift in the growth dynamics of the continent, most growth in consumer spending is coming from relatively smaller markets in value, like Kenya and Ethiopia, rather than the traditional powerhouses, such as South Africa. Both Kenya and Ethiopia are tipped to experience 8% annual growth in consumer spending from 2015 to 2030.

And so, the epicenters of growth in household income are shifting from metropolises like Johannesburg and Cape Town to smaller cities such as Nairobi, Mombasa, and Kisumu in Kenya and Yaoundé in Cameroon. Only a third of disposable income will be spent on food in Nairobi by 2030, as discretionary spending rises there. Overall in Kenya, bottom of the pyramid spending — defined as those with annual disposable incomes of less than $2,500 — will fall from 40% of the total in 2017 to only 5% in 2030.

However, in most African countries, the proportion of bottom of the pyramid consumers will grow much more slowly, so modern retail infrastructure may be sluggish in developing. The relatively slow spread of organized retail on the continent provides an opportunity for direct-to-consumer channels to emerge, whether they be digital or traditional.

Lipson is an example of the traditional. As it tries to penetrate hard-to-reach markets by selling direct from rickshaws.

At the same time, the phenomenal double digit growth in mobile subscriptions is driving m-commerce as a leapfrog technology. In addition, the development of subsea cables is also pushing down the cost of internet access to a level where middle class consumers can begin to adopt internet retailing.

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