Africa offers growth

03 May 2011

JOHANNESBURG: Brand owners could gain considerable benefits from targeting Africa's growing middle class, a study has argued.

According to the African Development Bank Group, the amount of individuals within this demographic - that is, spending between $2 and $20 per day - has expanded by over 60% in the last decade, to 313m.

This equates to 34% of the regional population, and can be measured against the figure of 196m recorded ten years ago.

"They are creating demand, and it's driving growth," Mthuli Ncube, the African Development Bank Group's chief economist, told the Wall Street Journal.

Tunisia has the highest proportion of its residents present in the middle class, on 89.5%, while Liberia posts the lowest, registering 4.8%.

However, 61% of people living on the continent remain officially "poor", claiming an expenditure of less than $2 each day.

Equally, 21% only just fit into the more affluent profile, with an outlay between $2 and $4, leaving them vulnerable to periods of financial instability.

The same number, or 120m people, log expenses in the $4 to $20 range, and this audience should be a highly attractive one for marketers.

Retailer Wal-Mart has proven keen to tap into the possibilities afforded by Africa, signing an agreement to buy a 51% share of Massmart, a South African discounter.

Fast-food specialist Yum Brands, and technology giants Google and Microsoft, have also all boosted their African operations recently.

Nestlé, the manufacturer of Maggi and Nescafé, is opening a new plant in the Democratic Republic of Congo, a country which has witnessed civil unrest in the recent past.

Despite such instability, the Swiss multinational believes a sufficient weight of consumers are in the market for comparatively low-cost goods, like sachets of instant coffee.

"The potential is huge, but the business also has to be sustainable," Pierre Trouilhat, Nestlé's regional director for Nestlé, said. "The growth is now there."

One other major trend noted by the African Development Bank Group's was that, in 2008, around 100,000 of Africa's wealthiest citizens boasted a net worth reaching around 60% of the continent's GDP.

Data sourced from Wall Street Journal; additional content by Warc staff