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18 Sep 2018 Updated 21 Nov 2019

Africa

Digitalisation and Manufacturing Key to Capturing Africa’s Rising Consumption

Africa Singapore Business Forum 2018 | Plenary Discussion 2: Consumerism - Capturing Africa’s Rising Consumption

Africa’s spending is projected to hit US$4 trillion in the next few years, backed by strong consumer and business growth. Manufacturing output is also expected to double. With the continent currently housing the largest youth population in the world, young Africans are setting consumer trends, said panellists at the Africa Singapore Business Forum (ASBF) held on 28 and 29 August 2018. They noted that young Africans are keen to consume global brands and quality products at affordable prices. The continent will see more global players enter the market through joint ventures, partnerships and acquisitions.

ASBF2018 03 Panel
From left: Mr Tauriq Brown, Director, T6 Studios Ecommerce Consultancy & Director, South African-Thai Chamber of Commerce (Moderator); Mr Haresh Aswani, Managing Director, Tolaram Group; Mrs Juliet Anammah, CEO, Jumia Nigeria Ltd; Mr Peter Cilliers, Principal, Tana Africa Capital and Professor Edward Kieswetter, Lead Independent Director, Shoprite Group & Non-Executive Director, GEMS Education, Africa

Here are four things to take away:

1. The consumer market has shifted to a more tech-savvy generation

Digitalisation has changed the way Africans consume, especially with regards to payment.

“Six years ago, when e-commerce was starting in the market, the average African was not ready to pay online because of the issue of trust. Today, we see a shift from payment-on-delivery to online payment,” said Mrs Juliet Anammah, CEO of Jumia Nigeria. She added that more Africans are turning to mobile phones as a means of accessing digital services.

“Today, 70% of Jumia’s customers are accessing the platform through the mobile app on their smartphones, and we see these trends continuing into the future.”

2. Know your consumer

Mrs Anammah also noted that the rise in social media, especially Instagram, has changed consumer behavior. When youths buy online, they are not just buying a product but a story. She said: “What they want to see is the content and story behind the product. Therefore, the product description becomes almost like a life-changing story. What does the product do for the customer? How does it contribute to the experience of the customer?”

ASBF2018 03 Edward
Professor Edward Kieswetter shared that data analysis and value extractions are a good way to track consumer wants, price points and affordability.

For example, Shoprite sells peanut butter in 50g sachets knowing that consumers can better afford them compared to 500g jars.

“Don’t approach your market in averages. Know exactly which goods need to be discounted and sell them in the right sizes,” he advised, adding that it is not about disposable income but affordability. “If you price it correctly, you’re in the game. Even the poorest people want to walk into a store knowing that there is something on the shelf that they can afford to buy.”

3. Opportunities in logistics and data security

As e-commerce gain traction, companies face an imminent problem: How can they deliver the product not just from the factory to the distribution centre, but all the way to their customer’s doorstep? Logistics is therefore important and Africa needs investments in that area, said Mrs Anammah. And as more Africans shop online, it is crucial to have better broadband coverage and data security.

ASBF2018 03 Juliet

“We need very crisp and secure identity management. SIM card registrations, VPN, bank accounts—they all need to be harmonised. A lot of African markets are not harmonised, and their information is sitting on different databases. If each customer has one single ID and has access to data, there will be huge potential for businesses,” she said.

4. Local manufacturing a natural hedge against risk

For companies looking to hedge against foreign exchange risk, Mr Pieter Cilliers, Principal of Tana Africa Capital, suggested local manufacturing as an option. “We have a strong preference for businesses that use local content and manufacture and sell within the same market,” he said.

Mr Harkishin (Haresh) Aswani, Managing Director of Tolaram Group, agreed and advised businesses to focus on the resources Africa has to offer.

“Take Nigeria for example. There’s no one doing coal mining business, and we have huge reserves of coal in Nigeria. So companies can tap on the whole resources within Africa itself and become net exporters.”

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