Africa’s markets are never quite what they seem as revealed by the latest Nielsen Africa Prospect Indicator (APi) which shows that amidst relentless change, country prospects are stabilizing on the continent. This is evidenced by the fact that only two markets changed position on the latest APi ranking update, with Kenya remaining in top position, followed by Cote d’Ivoire.
According to the latest results Nielsen Executive Director Intelligence Global Markets Ailsa Wingfield comments; “Looking at the broader macro prospects, it is clear that Sub-Saharan Africa’s momentum will take longer than expected to flourish, with the initial 3.3% SSA GDP forecast for 2019, downgraded to 2.8%. With this slower growth comes subdued advances in consumer prosperity and demand, and business growth will need to be boosted in non-commodity dependent countries, which provide nuggets of opportunity.”
When drilling down to individual country performance, it becomes clear that top performer Kenya, is characterized by strong economic and consumer prospects, however, its business and retail prospects have deteriorated and GDP growth rates are lower with the economy losing steam in Quarter 1, 2019.
Second ranked Cote d’Ivoire’s greatest challenge is its consumer potential which weakened further in the latest quarter. Only 17% of Ivorian retailers feel that consumer spend is increasing and just 15% think that consumers are increasingly willing to try new products.
Tanzania remains steady in third place on the APi ranking with improved retail prospects although these are countered by a weaker business outlook due to restrictive investment regulations and policies.
Ghana in fourth position is forecast by the International Monetary Fund (IMF) as having one of the fastest growing economies in the world. Companies share this positive outlook, rating Ghana as Africa’s second best business prospect, with improved growth expectations. Ghanaian consumer prospects have also increased significantly, with 36% of retailers of the opinion that consumer spend is increasing, compared to only 11% a year ago.
Nigeria retains fifth place which represents its best level in the last three years, and its economic recovery is set to gain further momentum in 2019, with business prospects improving in parallel.
Looking at how businesses rate country growth prospects, the SSA average is moderate for the year ahead, and has remained unchanged for four consecutive quarters. Ethiopia leads the country growth expectation list followed by Ghana, Kenya, Uganda, Cote d’Ivoire and Nigeria, all ahead of the SSA average. While only six markets are regarded as having a ‘good’ growth outlook, businesses back their own growth options more highly. Own business growth expectations exceed country growth expectations in two thirds (12) of Africa’s markets.
Nigeria and South Africa show the biggest discrepancy between country and own growth outlook, where own growth expectations are markedly stronger. Companies maintain a strong conviction that these two core markets remain crucial to success and that growth is achievable despite adverse macro factors.
Africa’s consumers are marked by disparate spending intentions and purchasing pressure points. For example, Ivoirians pay 33% more than Nigerians for a common basket of goods and only 15% of Ivoirians are more willing to try products, compared to 44% of Nigerians, despite a GDP per capita of 1.6 times higher than Nigerians. Ivoirians’ purchase decisions are however not primarily based on price. They are firmly entrenched in familiarity and trust, with 84% of consumers saying they choose products with this in mind. For this reason, brand propositions must establish awareness and confidence to gain users and grow spend, not merely provide cheaper alternatives.
In Nigeria, despite higher inflation and lower incomes, consumers are adventurous when it comes to experimenting with new products which provides a window of opportunity to reach and resonate with consumers based on their more positive spending intentions.
This shows that cash constrained consumers don’t only need better price points or are risk averse, but also want value and quality assurances from those they have confidence in. Brand, marketing and retail initiatives will therefore demand very different strategies in different countries.
Overall, the retailer growth outlook is the most favorable it has been in three years, with Tanzania, Cote d’Ivoire, South Africa and Uganda ahead of the average. That said, the ease of doing business remains challenging. Manufacturers therefore need to work with retailers to bolster sales through optimal stock supply, relevant product portfolios, favorable pricing points and beneficial trading terms.
Smaller players are providing formidable competition on this front in the prolific informal channels. As a result, the top 10 manufacturers account for approximately 55% of sales in Kenya, Nigeria, Ghana and Cameroon but are growing at less than 5% per annum, while smaller manufacturers are growing ahead of 15%.
Wingfield adds; “With temperate growth, business expectations are centered on core countries for success, but now more than ever, strategies need to be flexible, adaptable and focused on consumers.”
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