Retail Opportunities in Africa

Africa is full of opportunities. It is the emergence of the new middle class and the increase in average incomes which turns Africa into one of the most promising markets in the world. The population of the middle class, according to World Bank has grown to about 20 million. They live mainly in the more developed countries like South Africa, Nigeria and Ghana. With this development the consumption patterns in these countries are changing. The middle class people are trying to improve their comforts and with increase in their incomes they can afford more products now. As a result shopping malls and retail stores are increasing in number. Africa’s growth rate has been exceeding 5% per annum over the last decade. International companies are aware of the enormous potential of these markets and they do not hesitate to invest. However there are some challenges. One of the major challenges is that local retail shops are impenetrable to competition as they provide credit facility to their customers and have a close relationship with them. Bulk of food to African cities is being provided by small scale family firms. Although there are few big scale large scale farmers who produce specifically for the market, most small scale farmers produce for sustenance and sell only the surplus.

So a new firm entering this market should be inexplicably optimistic as there is a need for leadership. The returns might not be attractive if we look at short and medium terms but looking at the long term returns should be our objective. Beyond business returns there is an opportunity to influence communities. Although there are huge differences across market in Africa but there are some common challenges. So a company must ensure that it builds the right portfolio of products, builds its capacity of people and engage the community in its development. It is with this thinking in mind, we present our findings on how Africa is opportune to new companies.

Target Market

A large part of Africa still suffers from underdevelopment and political instability. Most of the middle class population from this part is moving to developed countries like Nigeria, South Africa and Zambia. Apart from this there are people who are below middle class and cannot afford to move to better places. It is the people who are above poverty line and who are residing in these developed countries that a company should be targeting.

Consumer preferences

The consumption patterns of the African nation are changing with the emergence of the new middle class. In Algeria there is a shift in the cooking and eating habits of the consumers. As a result there has been a growth in the sales of packaged food. It was about 12% in the year 2008 and is expected to grow at the same rate. While there has been a reduction in the catering business due to the global meltdown, retail sales in Egypt have increased by around 20%.This has been due to expansion of the international chains, increase in the variety of products offered and an increase in the level of income of consumers. The demand for packaged food has increased as more women are entering the work sector. The diffusion of large retailers in Morocco has been slow in comparison to other countries. This is due to the fact that the consumers still prefer to buy their food from local food shops. They buy meat from Butcher shops, vegetable from produce shops and milk products from dairy shops. This trend is changing, however slowly. Crime rate is at an all time in Namibia. The consumers do not have many options. Convenience is what a consumer looks at in South Africa. As they have busy lives they want convenience and value for money. A store beside a petrol station, having a pharmacist in the outlet itself is what is attracting customers. In Kenya although the economy is growing rapidly, a major chunk of the population still lives on less than a dollar a day. However the other half is already being targeted by major retailers. For example: Nairobi accounts for more than 70% of the grocery market. Food industry is one of the largest industries in Tanzania. The competition has increased due to entry of the private players. As a result consumers have more options now. There have been price riots in Mozambique recently. The prices of basic cereals are skyrocketing as a part of it was imported from Russia and Russia recently banned exports. It will take time for the situation to come back to normal. Mauritius is one of the most developed countries in Africa. It has a huge diversification in its population and as a result the consumer preferences vary a lot. However, as in case of South Africa, people look for convenience. Nigeria is a fast moving economy. Professionals involved in its development are characterized by their youthfulness, high earning power, adoption of western lifestyles and leisure spending. Ethiopia is market by its limited production capacity of food. As a result a lot of processed and canned food is often imported. Most of the food supplied locally is by pedestrian vendors and street stalls. Similar is the case with Ghana. Although there are some retailers present but people prefer to buy from the ubiquitous small shops that are present on every street corner.


Currently retailers are scattered across the continent. There are some major retailers who are operating in more than 5 countries but mostly there are small retailers who operate only in a few countries. Africa struggles with food items. Therefore a large percentage of food items are imported from other countries. However imports are limited to countries that have a decent level of consumption. The food reaches the consumers via retailers and wholesalers.

Some of the major retailers in Africa are Shoprite, Pic ‘n Pay and Massmart. Carrefour has its presence in North Africa. Though some of them have even more than 100 stores but there is a lot of opportunity for growth.

Government policies

Every country is affected by its Government’s policies. The government is supposed to work for the welfare of its people. But that is an ideal world. In the real world there are numerous factors that affect the government’s policies. Especially in a continent like Africa the government’s policies have been affecting markets for a long time now. It can also be said that in the case of Africa the government policies have been hampering the market growth. We have selected some countries as part of our research to show how government policies in those countries have been affecting growth of the markets.

  • Algeria

There aren’t any major food retailers in Algeria as of now. However Algeria signed the Arab trade agreement early last year. This is bound to increase competition from other Arabian countries.

  • Morocco

Morocco signed a FTA with the US in January, 2006. This agreement provides US exporters new opportunities of exporting consumer oriented products in the long term.

  • Namibia

The state of affairs in Namibia is worrisome. More than 50% of its stable food is imported. There is no competition as such. An important development in the fisheries section, which is one of the most important in Namibia, was that the total allowable catch was increased from 5000 to 135000 tonnes for the last season

  • Tanzania

There is food insecurity in the country despite of production of an agricultural surplus. This is due to limited agro-processing facilities and post-harvest losses. The total of these 2 equals about 40% of the total losses. The current environment has provided opportunities for private sector to participate actively to bring the country’s situation back to normal.

  • Mauritius

Mauritius is the gateway to Africa. It has a transparent legal structure, political stability and good governance it is ranked 17th is the world when it comes to ease of doing business. Apart from being a major port it has an ever expanding network of double taxation treaties which makes it a major route of investments into China, India and South Africa.


There is a need for an improvement in the entire supply chain. The supply chains have not been fully established as a result of which there are huge transport and storage losses. The market is growing so there is a need to inform key audiences. Work is to be done with processors to improve the production cost, nutritional value, packaging and marketing of food products. There are hygiene concerns. The nutritional values should be communicated to the target audiences. Portioning and packaging of food has to be improved to match the consumption patterns. Most countries have just a few retailers. The consumers’ preferences are changing. From basic food requirements to convenience and comfort in some countries there is an ample scope for improvement. There is a huge potential market for protein products that is still untapped in the African market. It may not be targeted as a single entity. People might not be willing to leave their comfort zones to go and buy a single product. So other products have to be included. Reaching the breakeven point may require a longer time. It is also important to get the right people in the team and engage the community along with the growth of the company.