In my first article on the growth of the African Consumer I looked at the emerging middle class of Africa and the role mobile technology has played on the continent.  In this article I focus on the challenges that still exist and look at whether this current growth can be continued and sustained.

A lot of the media has focused on the rise and growth of the African continent and consumer, but even with this rise and growth there are still major problems that plague the continent.  There is growth but most of it is a jobless growth.  There is poverty, inequality, health concerns, consumers with lack of resources and capital being excluded from the formal economy (a large percentage of population is part of the informal economy and cash based), a narrow demand structure of those who are part of the formal sector, corruption, and weak infrastructure.

Soweto_township
Shanty Town in Soweto

Africa is Not an Homogeneous Continent

Also many do not understand that Africa is not a homogeneous region, it is highly fragmented, with many different countries (54 in all), with many different laws, languages, customs, business cultures, and varying degrees of education.  But even with all of these issues and concerns there is great hope and optimism for Africa in the near and long term future.  The biggest question is how to make sure the current growth is continual and sustainable.

Some of the key components of continued growth according to Steven Radelet in “Emerging Africa” is access to information, a better business enabling environment, and access to finance. Collaboration of private and public sectors coming together to will allow these three things to become a reality.

Africa is losing the moniker of the Dark Continent as technology is allowing more people to become informed.  I briefly discussed the use of the mobile phone for the betterment of lives in Africa in my last article.  There is an increase in digital consumers in mobile and this leapfrogging technology is disrupting the traditional and current business models.  Over 80 million people currently log into the internet through their mobile phones and more undersea fiber optic cables are being installed which will allow even more people to be connected in the near future.

Need for a Stronger Business Environment

Africa needs a stronger and better business enabling environment.  There is a need for harmonization and integration across markets that will allow the growth of inter Sub-Saharan African trade and scalable markets and more regional markets and trade blocks.

One of the major questions that confronts Africa is the creation of regional trade blocks and will these trade blocks allow Africa to become one market?  And does Africa have right institutions and frameworks to create regional trade blocks?  This is a question better answered by policy makers and politicians but it is something to continue to look at and monitor.

Continued growth is also part of the political and macroeconomic stability fostered by governments taking accountability.  Less corruption and more transparency along with democratic rights are important for sustained growth.

Becoming Manufacturers and Not Just Consumers 

Africans need to become manufacturers of what they consume for growth to be sustainable.  The creation of strong manufacturing and industrial base is vital to internal African growth.  Currently Africans are consumers of things they don’t produce and they need to be able to satisfy the needs of their growing and large domestic markets.

There is a need to change from an import/export model of growth in regards to revenue streams to more domestic growth being spurred by increasing population, urbanization, and increase in income and decline in poverty.  This can be spurred on by a collaboration of public and private sectors, increased financing, and the entrepreneurial spirit that exists in many African countries.

Prospects for Immediate and Long-Term Growth 

african manufacturing

So for the near to short term the major areas of growth and potential growth include retail, telecommunications, ICT (Information and Communication Technologies), financial services and banking, home and personal care products, agri-business and staple foods.

Retail can be a key contributor to job creation and in some countries there is already a high demand for retail space by domestic and international retailers.  Also it is important that products are affordable and of great necessity to those that will be consuming them.

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