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The New Business Frontier: How to Thrive in Sub-Saharan Africa

3/22/2024
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In the new consumer reality, where the focus is firmly on affordability, value, and the cost of living, sub-Saharan Africa emerges as a region rife with opportunities. To fully embrace these opportunities, businesses need to prepare for the evolution of the youth cohort, offer and take advantage of homegrown offerings based on local demands, and embrace technological innovation as an enabler for financial inclusion.

Africa's youth: Demand for affordable goods

Limited income levels across sub-Saharan Africa remained a concern in 2023, severely impacting those at the lowest income deciles. This impact is especially felt among consumers aged 15-29, representing 28% of the population. This cohort is just starting their professional journey. Hence, their incomes are low and particularly sensitive to macroeconomic turbulence, such as high inflation. Consequently, the youth expenditure in 2023 was focused on essential goods and services, leaving little space for discretionary spending.

While the gap between essential versus non-essential expenditure in Nigeria is a compelling snapshot of the region, one company has successfully serviced this country's rapidly growing youth segment. Airtel's cost-effective mobile services have effectively been targeting 15-25-year-olds with affordable connectivity solutions, helping the brand to build a strong presence within the region.Chart showing Nigerian Consumer Expenditure by Essential Goods Versus Non-Essential Goods in 2023

As the region continues to experience a rise in its youth demographic and a persistent cost-of-living crisis, enterprises must be proactive in anticipating consumers' search for affordable goods and services. This will meet current consumer demands, build loyalty and establish your brand as a reliable partner.

Winning with value by going local

While affordability remains top of mind for sub-Saharan African consumers, features like “locally sourced” are perceived to be generally more trustworthy and accessible than imported products.

In South Africa and Nigeria, one in three consumers expressed their preference for locally-sourced goods and stores owned by locals, while a further third of consumers prioritised quality goods and services

Source: Euromonitor Voice of the Consumer: Lifestyles Survey, fielded January to February 2023

Chart showing Sub-Saharan African Consumer Values in 2023South Africa's largest grocery retailer, Shoprite, has gained significant success with its commitment to locally-sourced goods that benefit and empower local enterprises and producers. Thanks to the retailer's extensive sourcing of locally-produced goods, it supports the local economy and maintains loyalty by meeting local consumer demands with best-in-class local goods.

Using technological innovation to strengthen financial inclusion

Digital solutions are being boosted by the growing possession rates of smartphones across the region.

By 2040, 90% of households within the top five consumer expenditure markets in sub-Saharan Africa will own a smartphone, up from 73% in 2023. Consumers in Ethiopia will be the most active adopters, as possession rates will increase from 66% in 2023 to 89% by 2030.Chart showing possession rates of smartphonesSupported by strong demand from the youth segment, increased smartphone possession facilitates greater access to digital finance services, while access to digital payments allows greater convenience, security and accessibility. The evolution of mobile money services provider M-Pesa across the region, for example, has empowered a range of consumers with the ability to conduct digital payments which greatly promotes financial inclusion.

Africa's youth segment is tech-savvy and eager to use technological solutions that promote accessibility and affordability. By targeting this group and enabling greater technological innovations, financial inclusion is promoted, and it can be an effective tool that supports increased purchasing power and allows for greater consumer expenditure among consumers in sub-Saharan Africa.

Sub-Saharan Africa: How to win

  1. Prepare for the youth cohort's evolution: A growth surge is anticipated within Africa's youth segment. Their requirements can be adequately met by providing affordable, needs-based solutions and broadening product offerings to cater to underserved communities.
  2. Drive growth with homegrown offerings: To reap the robust benefits, businesses and brands must champion locally-produced goods and adapt production processes and supply chains, closely aligning with the local consumer market.
  3. Promote technological innovation as an enabler of digital inclusion: Providing for and allowing consumers to leverage technological innovations such as digital payments allows for flexible and convenient payment solutions. As consumer demand is met, digital inclusion should be promoted as it enables greater purchasing power and supports consumer expenditure.

Learn more about consumers in sub-Saharan Africa in our report, Affordability, Value and the Cost of Living: Spotlight on Sub-Saharan Africa, to get an in-depth analysis of the potential market strategies for companies operating or planning on entering the sub-Saharan African market.

 

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