a perspective from boston analyticsa perspective from boston analytics rise of the african...

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A perspective from Boston Analytics

Rise of the African Opportunity

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means

electronic, mechanical, photocopying, recording, or otherwise—without the permission of Boston Analytics

Content

1

Introduction to Africa Today

Regional Assessment of Africa

Challenges of Accessing Consumers in African Markets

Strategies to Overcome Challenges

Appendix

Changing Consumer Market

Concluding Thoughts

Content

2





Appendix


Concluding Thoughts

Economic interest in Africa stretches back over 100 years

Africa in 1914 Key Points

3

In the nineteenth century, Europe’s major powers

battled it out for economic dominance of Africa

In 1880, Europeans controlled ~10% of the

African territory. By1913, Europeans ruled more

than 90% of the African continent

– In 33 years, European nations had added almost

10 million square miles - one-fifth of the land mass

of the globe - to their overseas colonial

possessions via Africa

The wave of Independence across Africa in

1950s and 1960s brought an end to the colonial

rule by Britain, France, Belgium, Spain, Portugal

and Germany

“On 7th January 1876, King Leopold II of Belgium read in The Times report of a Lieutenant Cameron, who

had just finished an arduous three-year journey across Africa which was widely assumed to be barren and

inhospitable, but Cameron described a ‘magnificent and healthy country of unspeakable richness ripe for

some enterprising capitalist that might take the matter in hand” (1)

Sources:

(1) The Scramble for Africa by Thomas Pakenham, Avon Books, 1992

(2) http://www.blackpast.org/gah/partition-africa

http://www.blackpast.org/gah/partition-africa

In more recent decades, its reputation has ranged from hopeless to

hopeful

4

Sources:

(1) Time

(2) Economist

Perspectives on Africa and its prospects have changed dramatically in the past decade from a

continent with no hope to one which is rapidly emerging on the international stage

1984

2000

20111992

2012

Note:

(A) Despite the fact that the African continent has over 1 Billion people, only seven countries in Africa have a population larger than California, i.e., Nigeria, Ethiopia,

Egypt, the DRC, South Africa, Tanzania and Kenya

Source:

(1) IMF World Economic Outlook Database

As a point of comparison, today Africa has roughly the same population as

India, but an economy the size of Brazil spread over a much larger land mass

and set of nations

5

Region Africa Brazil China India Russia

Population 2013 (M)

Population Density

(people per sq km of

land area)

GDP 2013 ($ B)

GDP per capita 2013 ($)

Area (M Sq. Km)

Compared to the BRIC countries,

Africa as a continent is large, less

densely populated and generally

poor

1,960

10,958

6,569

1,414

14,973

1,361 1,243

2,064 2,190

8,939

1,758 2,118

1,053

141200

29.4

8.5 9.33.0

16.4

35 23.7145.5

421.1

8.8

Its economy now appears to be on a growth path however, with real

GDP growth, improved infrastructure and improved health status

6

Parameter 1980‒1990 1990‒2000 2000‒2010

Economic Growth

Real GDP Growth 1.9% 2.5% 5.1%

Economic Diversification(A) 66% 66% 61%

Per Capita real GDP Growth -0.8% 0.0% 2.7%

Poverty Ratio(A) 76% 76% 70%

Unemployment Rate (Highest) 16.3% 15.6% 15.3%

FDI Inflows Growth 21.7% 13.0% 16.3%

Exports Growth -1.4% 3.5% 13.2%

Communications Infrastructure Mobile Subscribers (per 100 People)(B) 0.002 1.721 44.713

Health Status

Prevalence of HIV(B),(C) 2.21% 5.76% 4.84%

Infant Mortality(B),(D) 106.31 94.07 68.12

Life Expectancy (Years)(B) 50 50 55

Notes:

(A) Includes Kenya, Nigeria and South Africa

(B) For Latest Year

(C) % of Population between 15-49 years age

(D) Per 1,000 live births

Sources:

(1) African Democracy, A glass half-full, Economist, Mar 31st 2012

(2) Freedom in the World, Country Status by Year, Freedom House

(3) Lions go global: Deepening Africa’s ties to the United States, McKinsey Global Institute, August 2014

8 of the world’s 15 fastest

growing countries 2000-2013

were in Africa(3)

In addition, democracy is gaining a greater foothold in the region

Africa Democracy Ratings (2011)(1) Freedom Development in Africa(A),(2)

7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1975 1980 1985 1990 1995 2000 2005 2010 2014

Free Partly Free Not FreeNote:

(A) Freedom in the World, Freedom House’s flagship publication, is the standard-setting comparative assessment of global political rights and civil liberties

Sources:

(1) African Democracy, A glass half-full, Economist, Mar 31st 2012

(2) Freedom in the World, Country Status by Year, Freedom House

In terms of international partners, while the US contributes the

greatest in terms of humanitarian or development assistance to

Africa, China leads the way in terms of trade…by a long shot

8

Source:

(1) Economist.com/graphicdetail August 5, 2014

As current trade figures reflect, other emerging markets such

as China, India and Brazil have become significant trading

partners and represent formidable competitors in many

product categories. Indeed talk of a South-South connection

is emerging

0 2 4 6 8 10

Norway

Netherlands

Sweden

China

Canada

Japan

Germany

Britain

France

United States

Official Development Assistance (2012, $Bn) Trade with sub-Saharan Africa (2013, $Bn)

0 20 40 60

Brazil

Spain

Britain

Japan

Netherlands

France

Germany

India

United States

China 160

Content

9





Appendix


Concluding Thoughts

Africa is best thought of in terms of its parts however, rather than as a

single entity. Conventionally, Africa is divided into five regions with

North and Southern Africa being the most investment friendly to-date

10

A mineral-rich region, with Bauxite, Uranium, and Iron ore reserves

Dominates world cocoa production (~65% share)

Key Challenges: Underdeveloped infrastructure and difficult business environment

Key Country: Nigeria

Preferred investment destination in Africa

Have strong ties with the European market, esp. France

Benefits from historical ties to Arab world

Key Challenges: Recent political upheavals

Key Countries : Egypt, Libya

Agrarian economy, dominated by tea and coffee production

Key Challenges: Civil unrest & political instability, and underdeveloped infrastructure

Key Country: Kenya

Heavy dependence on oil

Least integrated region due to wars and poor governance

Key Challenges: Weak infrastructure, in terms of transportation, electricity, and water

Key Country : Chad, Congo

Most preferred investment destination in Africa

Ranks highest on ‘ease of doing business’ in Africa

Highly developed transportation and communication system. Highest literacy rate.

Relatively greater intra-regional trade

Key Country : South Africa

North

East

West

Southern

Central

We

st

No

rth

Ea

st

Ce

ntr

al

So

uth

ern

Source:

(1) Lions of Africa, McKinsey Global Institute

Region North East West Southern Central Total

No. of Countries 53

Area (M Sq. Km) 29.4

Population 2010 (M) 1,014

Density of Population

(Person/sq Km) (2010)35(B)

GDP 2010 ($ B) 1,705

GDP per capita 2010 ($) 1,681(B)

Major Markets

Algeria,

Egypt,

Libya,

Morocco,

Tunisia

Kenya,

Ethiopia

Ghana,

Nigeria

Angola,

South

Africa

Equatorial

Guinea,

Gabon

Key MNCs(A)

P&G,

Unilever,

Kraft-

Cadbury,

Nestle,

Coca Cola,

PepsiCo

Unilever,

Nestle,

Coca Cola,

PZ

Cussons

Coca Cola,

Kraft-

Cadbury,

Nestle, PZ

Cussons,

PepsiCo,

Unilever

Coca Cola.

Danone,

Kraft-

Cadbury,

Nestle,

PepsiCo,

Unilever,

Mars-

Wrigley

Coca Cola,

Nestle

583 200 319 517 86

North and Southern Africa are also the regions with the greatest

wealth; That being said, there is a great deal of growing interest in

East and West Africa where firms hope to enter and enjoy a first

mover advantage

11

Notes:

(A) Within the CPG industry

(B) Average across countries

Sources:

(1) Lions of Africa, McKinsey Global Institute

(2) World Bank Database

46 5028

163 297 302 140 113

5.7 6.4 6.1 5.9 5.3

5 14 16 10 8

24 21

North

East

West

Southern

Central

3,579 7643,6991,057671

Indeed, some describe a “cross” overlaying the continent and

suggest countries at the endpoints represent some of the most

attractive opportunities for multi-national consumer (A)

12

North

East

West

Southern

Central

Kenya

Ethiopia

Egypt

Ghana

Nigeria

South Africa

Note:

(A) Excluding Angola which is very often also listed in the top countries of interest to consumer products manufacturers

Source:

(1) Primary Research

Content

13





Appendix


Concluding Thoughts

In terms of consumer spending, while small, Africa has grown faster

than most other regions; of the money spent, over 50% is spent on

food, beverages and other consumer goodsGrowth in Global Consumer Spending Consumer Spending Split in Africa (2012)

14

10,294

15,827

8,403

11,545 5,318

10,801

526

1,202

830

2,006

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2004 2012

$ B

illi

on

America Europe Asia Africa Others

43%

17%

11%

6%

5%

3%

3%

12%

Food & Beverage Housing

Non-food Consumer Goods Healthcare

Telecom Banking

Education OthersSource:


CAGR

5.5%

4.0%

9.3%

10.9%

11.7%

The African consumer market is partly driven by growth in the

continent’s population which is expected to double by 2050

15

Sources:

(1) http://www.prb.org/pdf13/2013-population-data-sheet_eng.pdf

(2) http://www.unesco.org/new/en/media-services/single-

view/news/one_third_of_young_people_in_sub_saharan_africa_fail_to_complete_primary_school_and_lack_skills_for_work/#.UpcGOPu3Wj8

1.10.6

4.3

0.40.7

2.4

0.8

5.3

0.40.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

All Africa LatinAmerica/Carribean

Asia NorthAmerica

Europe

Po

pu

lati

on

(b

illio

ns)

Population (billions)

2013 2050E

The consumer market in Africa is expected to double in the next 40 years

– By 2050, ~20% of the world’s population would live in Africa

More than two third’s of Africa’s population is below 25 years of age

– This indicates a large working age population in Africa which will further drive the future economic growth of the

continent

Growth in the African Consumer Population

2.1% 0.8% 0.6% 0% 0%

http://www.prb.org/pdf13/2013-population-data-sheet_eng.pdf

http://www.unesco.org/new/en/media-services/single-view/news/one_third_of_young_people_in_sub_saharan_africa_fail_to_complete_primary_school_and_lack_skills_for_work/#.UpcGOPu3Wj8

In addition, increasing urbanization in Africa is expected to boost the

consumer market by increasing demand, enabling access and

attracting additional investments

16

Sources:

(1) Winning in Africa, Mckinsey and Company

(2) Lions on the move: The progress and potential of African economies, Mckinsey Global Institute

(3) The 2014 African Retail Development Index: Seizing Africa’s Retail Opportunities, AT Kearney

Percentage of African population living in cities has increased from 28% in 1980 to 40% in 2010

The rate of urbanization is similar to China and more than India; reportedly the fastest in the world at 3.6%

~50% of African population are estimated to live in cities by 2050

Africa has ~52 cities with more than ~1M population, more than India and North America

Urbanization will boost demand and attract more investments

30%40% 45%

73% 79% 82%

70%60% 55%

27% 21% 18%

0%

20%

40%

60%

80%

100%

India Africa China Europe LatinAmerica

NorthAmerica

Urbanization (2010)

Urban Rural

48 52 109 52 63 48Cities

with >

1M

people

Urbanization of Africa

The increase in

urbanization will

enable greater and

more cost effective

access to consumers

Sub-Saharan Africa has several countries with higher per capita

spend than that of China and India

Private Consumption per Capita, 2012 ($) (A), (B)

17

471 495 533 556 577 597 612 670 7381,005

1,195 1,222

2,016

2,370

2,906

3,744 3,8003,887

4,451

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Ke

nya

Co

ng

o,

Re

p.

Maurita

nia

Nig

eria

Co

mo

ros

Se

ne

ga

l

Zim

bab

we

India

Ca

me

roon

Leso

tho

An

go

la

Ch

ina

Sw

azila

nd

Ga

bo

n

Na

mib

ia

Eq

ua

toria

lG

uin

ea

Bo

tsw

ana

So

uth

Afr

ica

Ma

uritiu

s

Se

yche

lles

US

$

Note:

(A) Includes Sub – Saharan African countries, with the highest private consumption per capita

(B) Values at constant 2005 exchange rate

Source:


Private consumption in Sub-Saharan Africa ranges from as low as $124 in Burundi to more than $12,000 in Seychelles

It is higher in many countries, largely because of uneven concentration of wealth within a small percentage of population.

– For example, in Equatorial Guinea, wealth is highly concentrated and 70% of the population still lives under the UN Poverty

Threshold

12,466

African Countries

A rise in the middle class population in Africa has led to an increase in

disposable income and a subsequent growth in discretionary spending

18

Source:

(1) http://afritorial.com/newafrica/

The percentage of the population that is middle class in Africa has increased from 28% (~110M) to 35% (~300M) in the

last thirty years

– Middle class population as a percentage of total population is estimated to reach ~40% by 2050

Rise in middle class population has led to increase in disposable income and purchasing power of Africans

67% 65% 62% 60%

28% 30% 32% 35%

5% 5% 6% 5%

0%

20%

40%

60%

80%

100%

1980 1990 2000 2010

%

African Population Split by Income Levels

Poor (< $2 per day) Middle Class ($2-20 per day)

Rich (> $20 per day)

Growing Middle Class Population

http://afritorial.com/newafrica/

40% of CPG spend in Africa is controlled by the tier 1 consumers,

including Progressive Affluents and Trendy Aspirants

African Consumers: Nielsen Segmentation

19

Type of

Consumers

Sub-

Classification

Monthly CPG

Spending ($)

Average Monthly

Income ($)% of Total CPG

SpendKey Characteristics

Tier 1

Progressive

Affluents~190 ~1000

40%

– Older with families

– Well established

Trendy Aspirants ~175 ~850– Young and upcoming

– Well educated

Tier 2

Balanced Seniors ~125 ~625

28%

– Better educated, tend to be in mid-

thirties, married

Struggling

Traditionals~125 ~375 – Under educated/ low income

Tier 3

Wannabe

Bachelors~90 ~400

32%

– Labourers/ entry level employees

Evolving

Juniors~80 ~580 – Students/ unskilled labourers

Female

Conservatives~70 ~350 – Housewives/students/ labourers

Source: (1) The Diverse People of Africa, 2012, Nielsen. The data is from countries including Nigeria, Kenya, DRC, Zambia, Uganda, Tanzania,

Ethiopia, Mozambique, Angola, Namibia, Zimbabwe and Ghana

Key Points

Tier 1 consumers are wealthier, more urban and relatively well-educated consumers with high income and CPG spend

– They drive growth of modern trade and online retail channels, and are also more open to new and expensive brands

Tier 2 consumers are Africa's middle aged and middle income populations, with average CPG category spend

– They primarily focus on the needs of their families and focus on affordability

Tier 3 consumers, the largest segment within Africa, consists of consumers who spend much less on CPG categories

than the average

Within Sub-Saharan Africa, the top global 50 CPG firms have focused

their investments primarily in five countries, with over 50% operating

in South Africa and Nigeria

20

Note:

(A) Presence based on review of office or manufacturing locations or evidence of significant distribution/share in country

Sources:

(1) OC&C Global 50, 2013

(2) Annual Reports

(3) BA Analysis

Global 50 CPG firms’ presence in Sub-Saharan African Countries 2012(A)

21

1511

8 8

2117

14

11

7

73

15

12

0

5

10

15

20

25

30

35

40

South Africa Nigeria Kenya Ghana Angola Sub-SaharanAfrica

Sub-SaharanAfrica ExcludingSA and Nigeria

Nu

mb

er

of

Glo

bal 50 C

PG

Fir

ms

35 or 70%

26 or 52%

18

15

11

36

29

Mix of US/Non-US

firms in sub-Saharan

Africa is similar to

overall Global 50

US Firms

Europe/Other

Firms

There is evidence that global 50 CPG firms present in Africa are reaping

the benefits - in the form of higher growth rates and strong returns

21

Notes:

(A) Presence based on review of office or manufacturing locations or evidence of significant distribution/share in country

(B) Includes all firms listed as present in Nigeria, Kenya, Ghana or Angola, and selected reviewed other Sub-Saharan African countries

Sources:

(1) OC&C Global 50, 2013

(2) Annual Reports

Growth and Return in Nigeria

Selected

CPG

Firms

Sales 2011 CAGR of Sales

2010-11

Operating Margins 2011 ROCE 2011 (Pre-Tax)1

Global Nigeria Global Nigeria Global Nigeria Global Nigeria

$13.4b $670m 13% 14% 4% 12% 11% 92%

$94.8b $630m 6% 20% 14% 22% 16% 41%

$64.8b $350m 10% 15% 14% 15% 22% 85%

Content

22





Appendix


Concluding Thoughts

The African opportunity is poised with multiple challenges however

Challenges of Accessing Consumers in Africa Market

23

Environment Challenges

– Differences across countries on multiple parameters

– Lack of infrastructure

– Low level of intra-region trade

– Bureaucracy and corruption

– Uncertain policy environment

Source”

(1) BA Analysis

Environment

Business

Market

Business Related Challenges

– Lack of managerial talent

– Lack of strong manufacturing and distribution local

partners/acquisition targets

– Lack of local information

– Proliferation of counterfeit goods

Market Related Challenges

– Significant share of population in low income group –

low purchasing power

– Strong dominance of traditional trade

– Underdeveloped capital markets

It is hard to generalize in Africa; the countries are very diverse,

as they are in other emerging regions of the world

Index of Intra-Region Variances among Nations on Key Economic Parameters

24

0.0

1.0

2.0

3.0

4.0

5.0

6.0

GDP GrowthRate

EconomicDiversification

Above BoPPopulation %

Urbanization % ConsumerSpending

Working AgePopulation %

Literacy Rate UnemploymentRate

Africa Americas Asia Middle East Europe Oceania World Average

African nations show smaller variations across nations on key economic parameters compared to Asia, Middle East and

Overall World

However, variations on most metrics are higher compared to advanced regions such as Americas and Europe highlighting

the diversity within Africa and need for a country specific strategy and not a single strategy for the continent

Challenge: Differences across Countries

Sources:



(3) BA Analysis

E

BM

Indeed, each country within Africa presents a unique story in

terms of its business, economic and demographic features

25

African Market

GD

P G

row

th

Ab

ove

Bo

P

Po

pu

lati

on

(%

)

Pe

r-ca

pit

a

Co

nsu

me

r S

pe

nd

Wo

rkin

g A

ge

Po

pu

lati

on

(%

)

Lit

era

cy R

ate

Un

em

plo

ym

en

t

Ra

te (

%)

Urb

an

iza

tio

n

Eco

no

mic

Div

ers

ific

ati

on

Ea

se

of

Do

ing

Bu

sin

ess

Algeria B C D D D A D D D

Angola D A C B B C C A C

Benin C D D D C A C C C

Botswana B D D D C A D B B

Burkina Faso D B D A C C D A A

Burundi C D C D C B D D D

Cameroon A D D D D B D A A

Cape Verde C C C C C A B B C

Central African Republic B D D D D A D D D

Chad D B A B A C A B D

Comoros D C C C C D C C D

Congo C B B B C B A C C

Côte d'Ivoire D A A A C D A C C

Democratic Republic of the CongoA C C B B C C C B

Djibouti B D C B C D C C B

Egypt D B A A C C A C C

Equatorial Guinea D A B A B A B C D

Eritrea A D D C D A D A B

Ethiopia C A A A B C B A A

Gabon D D D C D B C A B

Gambia B C D D D A D C D

Ghana B C C B A A C D A

Guinea D A B A B C B B C

Guinea-Bissau C B C B A C D A A

Kenya D A B A A B A A A

Lesotho C C D C D A B D D

African Market

GD

P G

row

th

Ab

ove

Bo

P

Po

pu

lati

on

(%

)

Pe

r-ca

pit

a

Co

nsu

me

r S

pe

nd

Wo

rkin

g A

ge

Po

pu

lati

on

(%

)

Lit

era

cy R

ate

Un

em

plo

ym

en

t

Ra

te (

%)

Urb

an

iza

tio

n

Eco

no

mic

Div

ers

ific

ati

on

Ea

se

of

Do

ing

Bu

sin

ess

Liberia D B A A A D A B B

Libya B D D D D B C D D

Madagascar A D C B A D A D A

Malawi C B A A A B B A B

Mali A A A B B D B C C

Mauritania A D B C D C B C B

Mauritius B B B C A D C B A

Morocco D A B B B D A B D

Mozambique C B A A A C A B A

Namibia A B B D A D B B A

Niger D A A B A D C A C

Nigeria A C B C B B B A B

Rwanda C C C C B A C B B

Senegal A C D C D A A D D

Seychelles C A A A B B A C B

Sierra Leone A D A D C B A D A

South Africa B A A D D B A B C

South Sudan B B C B C A B D C

Sudan A A A B B C B A A

Swaziland B A B A A D C A C

Tanzania C C D D D B D D D

Togo B C B C A D D D B

Tunisia A D A D D D D D D

Uganda B C B A B B D C C

Zambia A B A C B C C B A

Zimbabwe A B C A C C B B B

d Countries in Highest Quartile c Countries in Second Highest Quartile

b Countries in Third Highest Quartile a Countries in Bottom Quartile

Notes:

(A) Economic Diversification is share of Manufacturing and Services in Total GDP

Sources:

(1) IMF, World Bank

(2) BA Analysis

Challenge: Differences across Countries E

BM

With respect to consumer spending, of the 53 countries in Africa,

four represent more than 50% of the total consumer spending

Share of Countries in Africa Consumer Spending (2012)

26

19%

18%

10%6%5%

5%

3%

3%

3%

3%

26%

South Africa Egypt

Nigeria Algeria

Morocco Angola

Sudan Tunisia

Ethiopia Kenya

Other 45 Countries

South Africa in the South, Egypt in North and Nigeria in West are the top three countries in terms of consumer spending

Kenya – which only contributes 3% to Africa’s consumer spending is the largest market by consumer spending in Eastern

Africa

The smaller 45 countries only contribute about $300 B out of a total of $1,200 B of consumer spending across Africa

Sources:

(1) BA Analysis


Total = $1.2 T


BM

> 50% of consumer

spending

38

93

75

121

73

101 104

100

78 91 92

109 109 98 100 94

105

198

35 46

28

46 42

179

110 151 107 101

113

98

95 86 80

176

61

90 90

109 100 97

78 84

138

113

138

112 116

30

-

50

100

150

200

250

Ce

ntr

al A

fric

an R

epub

lic

Gab

on

Eth

iopia

Kenya

Rw

anda

Tan

za

nia

Ug

and

a

Alg

eria

Egypt

Lib

ya

Mo

rocco

Ango

la

Mo

za

mb

iqu

e

Na

mib

ia

South

Afr

ica

Zam

bia

Zim

ba

bw

e

Ca

mero

on

Ca

pe V

erd

e

Côte

d’Ivoire

Gam

bia

Gha

na

Nig

er

Nig

eri

a

Pri

ce I

nd

ex (

So

uth

Afr

ica =

100)

Chocolate Index Sugar Conf Index

Furthermore, there are often wide disparities in prices across

African regions with highest variations in Western African

countriesVariation of Retail Price Per Kg for Chocolate and Sugar Confectionery in Different African Countries

27

Prices for same products vary between different African nations highlighting the need for in-depth country specific

intelligence and potentially individual strategies

The least amount of variations were noticed between Southern African nations which reflects the fact that South Africa

acts more like a region and trade flows more freely

Source:

(1) Eurromonitor

Challenge: Differences across Countries

East Africa North Africa Southern Africa West AfricaCentral

Africa

E

BM

The prices can also vary dramatically across players highlighting

different marketing strategies of CPG companies across

countriesVariation of Price Per Kg for Snickers and Dairy Milk in Different African Countries

28

The above chart compares the prices for Snickers (Mars) and Dairy Milk (Mondelēz) chocolates in the select countries

While Mars and Mondelez price similarly in some markets (e.g., Egypt and South Africa), they are very different in others

95

115

100

144

191

100

70

100

84

142

-

50

100

150

200

250

Egypt Nigeria South Africa Kenya Cameroon

Pri

ce I

nd

ex (

So

uth

Afr

ica =

100)

Mars Snickers Mondelez Dairy Milk

Note:

(A) The above example of prices for chocolate brands has been used as an example to highlight price differences across African countries for same products

Sources:

(1) Data for Kenya, South Africa, Cameroon and US has been derived from store visits

(2) Data for Nigeria and Egypt has been obtained form Euromonitor

(3) Data for Philippines has been obtained from Nielsen

(4) Data for India has been obtained from www.chocohouse.in (accessed on 5 August 2013)

(5) Data for Mondelēz price in Cameroon is for Dairy Milk Fruit and Nut


BM

With the exception of a few countries, road network is poor in most

African nations

Road Density (Km of Road/100 Sq. Km Land Area) Paved Road (% of Total Road))

29

- 25 50 75 100 125 150 175

Ghana

South Africa

Kenya

Côte d’Ivoire

Zimbabwe

Nigeria

Togo

Benin

Egypt

Morocco

Zambia

Tunisia

Cameroon

Tanzania

Senegal

DRC

Namibia

Congo

Algeria

Libya

Botswana

Angola

Ethiopia

Mozambique

Gabon

Eritrea

Sudan

0% 20% 40% 60% 80% 100%

Egypt

Algeria

Tunisia

Morocco

Libya

Sudan

Senegal

Botswana

Zambia

Eritrea

Togo

Mozambique

Zimbabwe

South Africa

Nigeria

Tanzania

Namibia

Ethiopia

Ghana

Gabon

Cameroon

Angola

Benin

Côte d’Ivoire

Congo

Kenya

DRC

Notes:

(A) Top 27 countries only included

Source:


Challenge: Lack of Infrastructure

UKBrazil IndiaChina Brazil India China UK

E

BM

Almost all African countries with the exception of South Africa

rank low on global logistics Index

30

Challenge: Lack of Infrastructure

LPI RankSelect

Countries

LPI Cumulative

ScoreCustoms Infrastructure

International

Shipments

Logistics

Competence

Tracking &

TracingTimeliness

1 Germany

4 UK

28 China

34 South Africa

54 India

62 Egypt

65 Brazil

74 Kenya

75 Nigeria

90 Russia

100 Ghana

104 Ethiopia

142 Cameroon

International Logistics Performance Index (LPI) 2014(A),(1)

Notes:

(A) Scores range from 1-5 with 5 being the highest score;

(B) Top most ranked countries in Africa included

Source:

(1) Logistics Performance Index: 2014, World Bank

African Countries

4.12

4.01

3.53

3.43

3.08

2.97

2.94

2.81

2.81

2.69

2.63

2.59

2.30

4.1

3.9

3.2

3.1

2.7

2.9

2.5

2.0

2.4

2.2

2.2

2.4

1.9

4.3

4.2

3.7

3.2

2.9

2.9

2.9

2.4

2.6

2.6

2.7

2.2

1.9

3.7

3.6

3.5

3.5

3.2

2.9

2.8

3.2

2.6

2.6

2.7

2.5

2.2

4.1

4.0

3.5

3.6

3.0

3.0

3.1

2.7

2.7

2.7

2.4

2.6

2.5

4.2

4.1

3.5

3.3

3.1

3.2

3.0

3.0

3.2

2.9

2.9

2.7

2.5

4.4

4.3

3.9

3.9

3.5

3.0

3.4

3.6

3.5

3.1

2.9

3.2

2.8

E

BM

The time and cost involved in inland transportation of goods are

also very high

Average Transit Time (Mombasa-Nairobi)(A),(1) Share of Logistics Cost (Mombasa-Nairobi)(A),(1)

31

41%

17%

15%

13%

4%4%

3%3%

Sea Freight Shipping Port Handling

Container Freight Station Charges Clearing Agent Fees +Vat

Inland Routing Costs Indirect Costs of Delays

Direct Costs of Delays Shipping Lines Charges

It takes ~30 hours and costs ~ $9,844 to transfer a 20 foot container from Mombasa to Nairobi

Driver delays such as rest and personal errands would normally not be necessary for such a short distance, but the

various regulatory delays force the driver to rest a night during transit

The shipping line charges include fees such as delivery order fee, bill of lading fee and piracy risk surcharge

0

5

10

15

20

25

30

0 100 200 300 400

Tim

e (

Hrs

)

Distance (Kms)

Goods transiting 430

km from Mombasa to

Nairobi take ~ 30 hours

on an average. The

same distance in the

US takes ~ 6 hours

Weight Station (3 hrs.)

Police Checks (2 hrs.)

Driver Delays (11 hrs.)

Weight Station (3 hrs.)

Unloading (2 hrs.)

Notes:

(A) Logistics Costs and Average Transit Time of a 20 Foot Container, Mombasa - Nairobi

Source:

(1) CPCS Transcom (2010) Analytical Comparative Transport Costs Study Along the Northern Corridor Region

Challenge: Lack of Infrastructure E

BM

Africa forms a small share of global international trade; intra-

region trade is very low compared to other regions

Global Merchandizing Trade in Different Parts of the World (2013)

32

While rising relatively faster than others, African merchandise trade still

accounts for a very low share of world trade

Intra-African trade remains a very low percentage of African trade with the

world. Most of the intra-region trade is through land locked countries

where its on its way to other destinations

0%

20%

40%

60%

80%

100%

Sh

are

in

Desti

nati

on

Reg

ion

Europe Asia America Middle

East

Africa

OceaniaIntra-region Other Regions

69%

54% 56%

6%12% 8%

31%

46% 44%

94%

88%

92%

Exporting Region

Challenge: Low Level of Intra-region Trade

Note:

(A) Includes all goods and commodities; excludes services

Source:

(1) Trade Map

% of Total Global Trade

E

BM

The lack of Intra-Africa trade poses a

challenge for firms hoping to have a

launch pad in Africa from which it will

expand to other markets

One reason for low level of intra-region trade is the existence of

multiple economic/custom unions which do not function well

and add complexity to trade

33

Regional Economic Communities in Africa

Botswana

Lesotho

Namibia

South Africa

Mozambique

Djibouti

Eritrea

Ethiopia

Sudan

Comoros

Seychelles

Mauritius

Madagascar

Angola

DR of Congo

Cape Verde

Liberia

Gambia

Ghana

Guinea

Nigeria

Sierra Leone

Benin

Burkina Faso

Côte d'Ivoire

Guinea-

Bissau

Mali

Niger

Senegal

Togo

UEMOA

ECOWAS

Cameroon

Central African Republic

Chad

Congo

Equatorial Guinea

Gabon

CEMAC

SADC

ECCAS

COMESA

Burundi

Rwanda

Kenya

Uganda

EAC

Algeria

Libya

Mauritania

Morocco

Tunisia

AMU

Malawi

Zambia

Zimbabwe

Swaziland

Notes:

(A) The above schematic is a direct adaptation from Accenture study on African consumer market to highlight the multiple economic/custom unions existing in Africa

(B) Please refer to appendix for acronyms definitions

Source:

(1) The Dynamic African Consumer Market, Accenture, 2011


There are more than 14 trading blocs in Africa with overlapping membership. Of those SADC,

ECOWAS and EAC (where they share a language and moving closer to a shared currency) work

best

Lot of goods are traded informally and elude the customs

E

BM

Poor regional

trade also stifles

overall growth,

since for many

small countries in

Africa, regional

trade is required

to experience

economic

diversification, a

key driver in

economic growth

Within intra-region trade however, South Africa acts as the

trade hub

Major Exporters to Africa Region (2013)Share of Major Countries in Intra-region Exports to

Africa

34

100%

Europe, 40%

Asia, 30%

Intra-region, 11%

America, 11%

Middle East, 7%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Total Africa Imports Share of Regions

South Africa, 50%

Nigeria, 6%

Algeria, 6%

Zambia, 4%

Angola, 3%

Morocco, 3%

Congo, 3%

Mozambique, 3%

Others, 21%

A significant share of the intra-region trade in Africa is contributed by South Africa followed by Nigeria and Algeria

Nigeria’s share of intra-regional trade is smaller than its external trade, reflecting the dominance of hydrocarbons in the

country’s exports

Challenge: Low Level of Intra-region Trade E

BM

Source:

(1) Trade Map

More than half of South Africa’s intra-region trade is with its

neighbouring countries; Indeed, the SADC is one of the

strongest trading hubs in Africa

Regions in AfricaShare of Countries in Intra-Africa Exports of South

Africa

35

17%

15%

15%

9%

7%

5%

4%

4%

3%

8% 4% 4% 2% 2%

0% 5% 10% 15% 20% 25%

Zambia

Zimbabwe

Mozambique

DRC

Angola

Nigeria

Kenya

Tanzania

Ghana

Others


North

East

West

Southern

Central

E

BM

Source:

(1) Trade Map

Much of Africa’s intra-regional trade is unaccounted for since it

takes place via informal markets

36

Although there are no reliable statistics available, adding informal cross-border trade to official figures for intra-African

trade would increase the share of intra-African trade in total trade

In the Southern African Development Community (SADC) area, its estimated that informal cross-border trade could

amount to an additional $17.6 B a year, equal to 30-40% of formal trade

In 2009 and 2010, Ugandan total informal exports to the Democratic Republic of the Congo, Kenya, Rwanda, the Sudan

and the United Republic of Tanzania were worth $790 M and $520 M, respectively

Furthermore, estimates of informal cross-border trade in West Africa show that it could represent 20% of GDP in Nigeria

and 75% of GDP in Benin

Destinations: Eritrea, Djibouti

Merkato Market

Addis Ababa, Ethiopia

Kantamanto Market

Accra, Ghana

Mboppi Market

Accra, Ghana

Destinations:Burkina Faso, Togo Destinations: Chad, CAR(A), Gabon

Notes:

(A) Central African Republic

Source:

(1) UNCTAD

(2) BA Analysis

Challenge: Low Level of Intra-region Trade E

BM

Examples of Informal Trade Markets Which Facilitate Intra-regional Trade

With the exception of five countries, all African nations rank low

on global corruption perceptions index Global Corruption Perceptions Index (CPI) Scores

37

0 10 20 30 40 50 60 70 80 90 100

Botswana

Cape Verde

Seychelles

Rwanda

Mauritius

Niger

Ethiopia

Tanzania

Mauritania

Mozambique

Sierra Leone

Togo

Comoros

Gambia

Chad

Equatorial Guinea

Guinea-Bissau

South Sudan

Somalia

CPI ranks countries based on how corrupt their public sector is perceived to be, where a score of 0 means highly corrupt and 100

means very clean public sector

While over the years, indicators related to human development and sustainable economic development have improved in Africa, there

has been noticeable deterioration with regards to the rule of law and safety

Only five Sub-Saharan African countries score above average scores in 2013 survey. Issues include stealing, looting government

coffers, rigging elections, etc.

United StatesChinaIndia

To

p 5

Afr

ican

Co

un

trie

s

Bo

tto

m 5

Afr

ican

Co

un

trie

s

Me

dia

n A

fric

an

Co

un

trie

s

Note:

(A) List represents top five, bottom five and those right in the middle of all African countries

Source:

(1) Corruption Perceptions Index, 2013, Transparency International

Challenge: High Rate of Bureaucracy and Corruption

World Average

E

BM

“Policy Instability” is also identified as one of major challenges

associated with working in an African country

Challenges of Doing Business in Sub-Saharan Africa

38

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Access to Financing

Corruption

Inadequate Supply of Infrastructure

Inefficient Government Bureaucracy

Tax Rates

Inadequately Educated Workforce

Inflation

Policy Instability

Poor Work Ethic in National Labor Force

Tax Regulations

Restrictive Labor Regulations

Crime and Theft

Foreign Currency Regulations

Insufficient Capacity to Innovate

Government Instability

Poor Public Health

% of Responses

As per the Executive Opinion Survey conducted by the World Economic Forum, policy instability is one of the key challenges of doing

business in Africa. For example:

– In Nigeria, imports of sugar confectionery were suddenly and without defensible rationale banned in 2000 which resulted in the exit of then major

lollypop player – Chupa Chups. However, the ban has now been lifted

– Similarly, import of fruit juice was also banned in 2002, and import duty for juice concentrates was reduced to 5% in the same year to push local

manufacturing

– Zambia, recently suddenly banned the use of American dollars in local transactions—a needless extra hassle for firms operating there

Challenge: Uncertain policy environment E

BM

Source:

(1) World Economic Forum Executive Opinion Survey (2010)

Benin

Botswana

Burkina Faso

Burundi


Chad

ComorosDjibouti

Guinea

Lesotho Liberia

Madagascar

Malawi

Mali

Mauritania

Mozambique

Namibia

Niger

Rwanda

Senegal

Sierra Leone

Swaziland

Togo0

3

6

9

12

15

18

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cameroon

Ethiopia

Gabon

Ghana

Kenya

Sudan

Tanzania

Tunisia

Uganda Zambia18

28

38

48

58

Algeria

AngolaMorocco

Nigeria

South Africa

80

130

180

230

280

330

380

39

A significant portion of the African population lives below

poverty line

Challenge: Significant Share in Low Income Group E

BM

Population Living in Poverty in African Countries (LYA)(A),(1)

Global Average (42%)

Oil contributes

significantly to Nigeria’s

GDP, the profits from

which do not trickle down

to the population

Note:

(A) LYA = Latest Year Available.

Source:

(1) World Bank Database Bubble size indicates population in Million

Population below poverty line (% of total)

GD

P in

US

$

Nigeria is particularly noteworthy given its population and very

large % which live at the bottom of the pyramid(A)

BoP Percentage of Population(A,B), (1,2)

Notes:

(A) LYA – Last year available.

(B) Bottom of Pyramid segment is defined as people earning less than $2.5 a day (PPP).

Sources:

(1) World Bank.

(2) 2013 World Gazetter projections

(3) Individual national government statistics

(4) BA Analysis.

32%

39%

64%

76%

77%

88%

90%

93%

97%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Egypt

South Africa

Ghana

Uganda

Kenya

Ethiopia

Nigeria

Tanzania

Congo

% of total population

African Countries with Highest BoP Percentage Total Population (M)

75

46

177

87

43

35

26

53

85


BM

40

Note:


(B) Ratio of Consumer Spend to GDP per Capita is taken to show that countries with high oil money tend to have concentration of wealth with few people which results in low overall

consumer spend

Source:


When trying to assess the wealth of a population, it is important to

note countries which rely upon high-value exports often have

lower consumer spend than more diversified economies, making

GDP per capita a misleading indicator in many African countries

41

Algeria

AngolaChadCongo

Equatorial Guinea

Gabon

Libya

Nigeria

30% 50% 70% 90%

Share

Reliance on Oil and Household Spend in Africa

Pe

r C

ap

ita

Co

ns

um

pti

on

as

% o

f P

er-

cap

ita G

DP

(B)

African nations with high reliance on

oil and other high-value exports tend

to have high GDP per-capita but

relatively low consumer spend


BM

Benin

Botswana

Burkina Faso

Burundi

Cameroon

Cape Verde


Côte d'IvoireDemocratic Republic of

the Congo

Djibouti

Egypt

Eritrea

Ethiopia

Gambia

Ghana

GuineaKenya

LesothoMadagascar

Mali

Mauritania

Morocco

Mozambique

Namibia

Niger

Rwanda

Senegal

Sierra LeoneSouth Africa

South SudanSudan

Swaziland

Togo

Tunisia

Uganda

Zambia

Zimbabwe

0%

20%

40%

60%

80%

100%

120%

0% 5% 10% 15% 20% 25%

Share of Mining in GDP (%)

African markets are overwhelmingly characterized by traditional

trade

Modern vs. Traditional Retail Trade (2010) Definition

42

80%

85%

5%

20%

36%

45%

35%

34%

25%

15%

14%

10%

10%

8%

7%

4%

3%

0%

20%

15%

95%

80%

64%

55%

65%

66%

75%

85%

86%

90%

90%

92%

93%

96%

97%

100%

0% 20% 40% 60% 80% 100%

UK

US

India

China

Brazil

Libya

Tunisia

South Africa

Morocco

Kenya

Egypt

Angola

Algeria

Nigeria

Cote d Ivoire

Ghana

Sudan

Ethiopia

Modern Trade Traditional Trade

Traditional Trade (TT) is defined as all that trade that

flows through traditional outlets, such as kiosks, corner

shops, local mom n pop stores, and open markets, or all

trade except that which flows through retail chains, hyper

markets, supermarkets, etc. is modern trade (MT)

Key Points

TT is characterized by a large complex network of

independently owned retailers and distributors carrying

primarily local or regional brands

It can be difficult to penetrate for both national and multi-

national firms given its highly fragmented nature, yet it

serves as the conduit for reaching the largest percentage

of the consumer population

Some manufacturers also report, despite its high

distribution costs, they can reap greater margins from TT

than MT retailers who negotiate hard on price

Common TT Categories

Food and Beverages Home Décor and Furnishing

Clothing and Textile Personal Care

Consumer Durables Footwear

Jewelry and Watches Books, Music and GiftsSources:

(1) Business Monitor International

(2) BA Knowledge Repository

(3) Planet Retail Research (2011)

(4) Feed the Lion, FMCG Opportunities in Africa, A.D. Little Report, 2014

Se

lecte

d A

fric

an M

ark

etsChallenge: Strong Dominance of Traditional Trade E

BM

Informal trade, a sub-section of traditional trade which consists of

hawkers and table tops, is a very strong channel in Africa

Informal Retail Outlets in African Nations

43

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Nigeria South Africa Kenya Cameroon

Informal retailers act as an important delivery channel of goods to consumers in Africa

These are mostly small make-shift structures such as table tops, hawkers, spaza shops, etc. which are usually located

around bus stops and crowded public areas

Serving both cities and smaller towns, they primarily sell items such as snacks, beverages, fruits, bread, cigarettes,

confectionery etc.

Smokers, students, drivers, passers –bys are the main customer group for table tops and hawkers

Challenge: Strong Dominance of Traditional Trade E

BM

Source:

(1) BA Analysis

While South Africa has one of the highest rates of modern

trade penetration, Nigeria at least with respect to grocery

stores is expected to witness high growth in this area

Retail Environment

Presence (Number of Outlets)

South

AfricaNigeria Kenya

Modern Trade (MT) % of Grocery Retail 62% 5% 25%

Current

Total No. of

Stores

Global Retail Chains

3,000

9 0

Regional Retail Chains 7 55

Local Retail Chains 30 150

Total 3,000 46 205

Projected

Total No. of

Stores

Global Retail Chains

3,500

50 1

Regional Retail Chains 56 100

Local Retail Chains 40-50 250

Total 3500 156 351

Note:

(A) Projected total represents the total number of outlets of each type expected in the next 5-8 years for each country respectively

Source:

(1) BA Analysis


BM

Much of the planned

expansion in modern

trade in Nigeria is

coming from South

Africa retailers

44

Despite ambitious projections, Nigeria is unlikely to see a

dramatic increase in the total % of all trade represented by

modern trade in the near future Evolution of Modern Retail(1)-(4)

45

Modern retail in Nigeria has been expanding rapidly over the past few years driven by Shoprite, Africa’s biggest retailer,

Spar, Europe’s largest retail network, and Massmart, South Africa’s second-largest retailer

However, even if modern retail market in Nigeria continues to expand it won’t phase out or replace the informal markets

completely which still and will continue to dominate the retailing .

1% 2%

10%

25%

55%

67%

74% 75%80%

83%

0% 2%5%0% 1%

34%

64%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Sh

are

of

Mo

de

rn R

eta

il

USA India China Nigeria

Sources:

(1) http://www.bain.com/Images/INDUSTRY_BRIEF_Ahead_of_curve_in_emerging_markets.pdf

(2) http://sg.nielsen.com/site/documents/2010RetailandShopperTrends2010.pdf

(3) http://www.kaminibanga.com/professional/articles/brand-equity/27-modern-retail-advantage-consumer-2004.html

(4) http://publications.gc.ca/collections/collection_2013/aac-aafc/A74-1-103-2013-eng.pdf


BM

It took 10 years and the

contribution of many

different factors for

China to reach 30%

modern trade penetration

Domestic credit from banks to private sector is relatively lower

in African nations compared to other developing markets,

stifling investment and growth opportunities

46

Algeria

Angola

Cameroon

Côte d’Ivoire

Egypt

Ethiopia

Gabon

Ghana

Kenya

Libya

Morocco

Namibia

Niger NigeriaRwanda

South Africa

Tanzania

Tunisia

Uganda

Zambia

Brazil

China

India

United States of America

0%

5%

10%

15%

20%

25%

30%

35%

40%

0% 20% 40% 60% 80% 100% 120% 140%

Co

mm

erc

ial L

en

din

g R

ate

s

Domestic credit to private sector by banks (% of GDP)

Access to Capital in Selected African and Other Markets (LYA)(A),(1)

Note:


Source:


Challenge: Underdeveloped Capital Markets E

BM

Africa as a region ranks lowest in the Global Talent Index (GTI)

developed by Economist Intelligence Unit

GTI Regional Scores

47

Africa has a significant shortage of management and specialised skills

Talent shortage is putting a strain on investment in Africa as educational institutions fail to produce the quantity and quality

of skills required to meet growing business needs. 75% of the CEOs operating in African countries surveyed by PWC

outlined a lack of available talent as a threat to their growth

Even when talent is identified, e.g., through a head hunter to fill senior positions, multinationals note they are only available

at a very high price, comparable to European executives

Many believe the shortage of available managerial talent has become much worse since the entry of multinational telecom

firms over the past ten years in Africa who offered higher wages and more senior titles in order to recruit professionals

from other industries. Professional services firms, such as accounting firms, similarly followed suit.

0 10 20 30 40 50 60 70

North America

Western Europe

Asia

Latin America

Eastern Europe & Central Asia

Middle East

Africa

Challenge: Lack of Managerial Talent E

BM

“I have designed my

strategy and have the

funding, what I need now

is people. I can’t find the

people I need to run the

business” – Africa and

Middle East Regional

Director for Global

FMCG Player

Source:

(1) World Bank

Indeed, in most Africa countries, educational levels fall behind

developed and developing nations

48

102%

99%

112%

113%

137%

112%

111%

109%

102%

85%

79%

0% 50% 100% 150%

USA

Russia

India

China

Brazil

Kenya

Cameroon

Ghana

South Africa

Nigeria

Ethiopia

% of Gross

School Enrollment (% of Gross Population) (LYA)(A),(B),(1)

Primary Secondary Tertiary

Notes:

(A) Gross enrolment ratio. Total enrollment in an education group (primary, secondary, tertiary), regardless of age, expressed as a percentage of the population of official education

group age. GER can exceed 100% due to the inclusion of over-aged and under-aged students because of early or late school entrance and grade repetition

(B) LYA = Latest Year Available

Source:


Se

lect K

ey A

fric

an C

oun

trie

s

Challenge: Lack of Managerial Talent

96%

89%

63%

81%

106%

60%

50%

61%

102%

44%

25%

0% 50% 100% 150%

USA

Russia

India

China

Brazil

Kenya

Cameroon

Ghana

South Africa

Nigeria

Ethiopia

% of Gross

95%

76%

18%

27%

26%

4%

12%

12%

15%

10%

3%

0% 50% 100%

USA

Russia

India

China

Brazil

Kenya

Cameroon

Ghana

South Africa

Nigeria

Ethiopia

% of Gross

E

BM

Identifying and gathering reliable data on Africa is a challenge

due to the lack of credible data, inconsistent research standards,

and few quality research vendors

49

Challenge: Lack of Information

Ability to

Effectively

Conduct Primary

Research In-

Country

E

BM

Credibility &

Reliability

Recentness of

Data

Availability of

Fieldwork

Agencies

Data

Ava

ila

bilit

yD

ata

Co

lle

cti

on

Africa overall suffers from a lack of credible data. Given the relatively small size of the

markets that exist within many countries, few research firms have invested the effort

needed to provide robust analysis of such things as market size, player shares, retail

segmentation, etc. Instead, data must be gathered first-hand and triangulated in order to

come up with reasonable and defensible estimates

Data from secondary sources is scattered and lacks uniformity. National governments

serve as the primary source of macro-economic and demographic data in many countries.

Not only is their data often considered suspect and self-serving, it is also very often

outdated, particularly in countries with rapidly emerging economies

Primary research is an evolving industry in most countries in Africa. There are few long

standing firms and most of them are trained only in the most conventional types of

consumer market research

Finding a reliable, well trained research firm who follows international protocols, while is

also creative and flexible enough to address the unique characteristics of each market is a

great challenge

While respondents in Africa generally do not expect the same honorarium as those in

other more developed nations, such as the US and Europe do, it can sometimes still be

difficult to recruit and conduct interviews as well as gather useful insights – Given the lack of communications infrastructure, e.g., reliable phone lines in Ethiopia, it can be

very time consuming to simply recruit and schedule interviews

– Some respondents unfamiliar with primary research are suspicious regarding how the

information might be used and may not appreciate the interviewers need for specific and

detailed information

– There are approximately 2,100 languages spoken in Africa with languages spoken per country

ranging from 1 to more than 100 (1)

Source:

(1) The challenges in conducting market research in Africa, SIS International Research, September 2008


Counterfeit goods are seen across product categories and

appear to becoming more prevalent

50

Sources:

(1) BA Analysis

(2) http://www.north-africa.com/naj_economy/industries_markets/1septtwentyfive47.html

Challenge: Proliferation of Counterfeit Goods

Wood glue in Ethiopia

Genuine

Imitation

Adidas shoe in Algeria

In Algeria, from 2010-2011

the amount of counterfeit

products seized by

customs officials rose by

84.5%

E

BM

It is difficult to estimate the size of the counterfeiting industry since it is based on seizures but in East Africa alone it is

believed nearly $500 million has been lost in revenue due to counterfeit goods. Indeed many firms feel as though their

real competitors in these markets are not those known to them, but those making counterfeit goods

Sony music systems in Kenya

While most counterfeit products were

originally electronic goods and medicines

they now range from food products to

industrial goods

While in some cases,

counterfeit products are exact

replicas of genuine products, in

other case it is just the look and

feel of a dominant brand which

is copied

Content

51





Appendix


Concluding Thoughts

Successfully entering and expanding in Africa often requires a

very different approach

52

Recommendations to Combat Challenges

Challenges Recommendations

Wide

Differences

across

Countries on

Multiple

Parameters

Each African country requires a unique approach and strategy.

Companies should select markets based on clearly defined criteria which

go beyond macro-economic parameters and appreciate local market

dynamics, consumer learning, etc.

Invest appropriately in learning about the local environment. Adapt the

business model and offerings to the markets, if needed

Lack of

Infrastructure

Invest in own infrastructure if critical to business and economically

feasible (e.g., captive power in Nigeria)

Optimize cost in non-critical areas to offset investment in infrastructure

and maintain profitability

Appreciate and incorporate in product development any unique

environmental issues which might impact consumption (e.g., inconsistent

electricity for electronics, refrigerators for food)

Invest in supplier relationships to manage raw material and supply chain

deficiencies

Low Level of

Intra-Regional

Trade

Identify true regional trade hubs to ensure maximum reach in market

Conduct robust analysis of local players to identify strong partners for

entry and expansion

Follow growth of modern trade via major modern retail chains to expand

across countries if modern trade is key to business

Bureaucracy

and Corruption

Identify a local contact or partner to manage all regulatory and policy

affairs

Uncertain

Policy

Environment

Engage in scenario planning in order to prepare for sudden changes

When feasible and warranted develop strategy to work with local policy

makers

Identify means to minimize investment risk rather than avoid it

Environment

BusinessMarket

CPG/FMCG companies need to be cognizant of local market

differences when building their African strategy

53

Rather than develop an “Africa” or pan-Africa strategy, many firms now recognize they must treat each

country differently, identify and prioritize the top opportunities and then pursue each with a strategy

which reflects the local dynamics

– For example, for the same company, the retail strategy in South Africa may focus more on modern

trade, while in Nigeria, the focus may be on traditional trade. The same company may have lower

distribution costs, but lower margins with modern trade in South Africa, but the opposite in Nigeria

Response

Global Strategy Cluster Strategy Country Level Strategy

All markets are same Markets can be clustered in

different groups based on

similarities

Each market is different and

should be treated in different

way

Relevance to Africa MarketLow High

Response: Differences across Countries E

BM

In order to address the lack of infrastructure in Africa, some

companies, such as Diageo, invest in their own infrastructure

and partnerships in order to support the sale of their products

54

Diageo invested in its own infrastructure to overcome challenges related to power, water

supply, and consistent supply of commodities in Africa

Currently Africa accounts for nearly 13% of Diageo’s total net sales. The continent

contributes 30% of Diageo’s global sales growth and 40% of its global operating profit

increase

Key Points/Examples

Africa represents Diageo’s largest group of emerging

markets in terms of net sales. The company employs over

5,300 people through the production, distribution and

promotion of its brands

Diageo invested in Africa to create integrated supply

chains: it built production sites with their own power and

water supplies

It invested in local suppliers, in developing a sales force

and in working jointly with distributors to enhance their

capabilities

Diageo sources 70% of grain for its breweries and spirits

production facilities locally. It invests in developing

agriculture locally. Not only does this allow them greater

control over their inputs, it helps them better manage their

foreign exchange volatility

Sources:

(1) http://www.diageo.com/en-row/CSR/Pages/resource.aspx?resourceid=1078

(2) http://blogs.hbr.org/2012/06/how-to-succeed-in-africa/

Response: Lack of Infrastructure E

BM

Response

“You really need to be able to generate at least 80 percent of your

own power requirements by yourself either by embracing solar

energy which some companies are doing or buy powerful generators.

Power is a real challenge to industrialization in Nigeria.”

— Nestle Business Manager, Nigeria

Multiple companies have adapted to the lack of infrastructure

by changing their product formulations

Key Points/Examples

55

Promasidor is an African dairy and beverage company

headquartered in South Africa

– In 1979 Promasidor launched Cowbell brand of powdered

milk with an objective to make milk accessible to all Africans

– Promasidor replaced the animal fat with vegetable fat in its

Cowbell milk powder to give it a longer shelf life, thereby

diminishing the dependency on cold supply chain

– Promasidor‘s small sachet packs reduce the price point, but

also provide an added benefit of enabling children to pour

the powdered milk directly on their tongues and avoid

concerns about finding fresh water

Unilever has developed a low-cost climate stable

margarine which doesn’t require refrigeration in order to

combat the lack of cold chain in Africa

P& G’s Ariel brand of detergent in Africa is designed to

lather quickly thus reducing the water needed to wash

clothes

Promasidor tailored its product in Africa to overcome challenges related to supply of

freshwater and availability of milk

Unilever has redesigned a wide range of products from food items to household products to

address the lack of refrigeration and water in Africa

Similarly, P&G has introduced household products which address the lack of clean water

Sources:

(1) http://www.africanbusinessreview.co.za/reports/promasidor

(2) http://www.promasidor.com/about_products.php


BM

Response

While Promasidor was the first

powdered milk firm to develop a

more shelf stable product in

response to the lack of cold chain,

many firms with other products

have followed suit, changing either

their packaging or formulation

Unilever’s Shelf Stable

Blue Band Brand

P&G’s Quick Lather

Ariel Brand

Promasidor’s Cowbell

Brand

The high rate of mobile phone penetration in Africa has

provided many firms with an opportunity to overcome other

infrastructure limitations

Key Points

56

Mobile phone penetration in Africa is widely reported to

be higher than 80% and smart phone penetration ~18%

Mobile phones are being used to transfer money, buy

products online and manage money through such things

as credit, savings, and insurance programs. Mobile

money transfers alone are expected to exceed $200

billion by 2015 according to the World Bank

– Tanzania is reportedly the leader in M-Commerce (Mobile

Money Services) across the Sub-Saharan African markets,

followed by Kenya, South Africa, Ghana, Nigeria and

Uganda

– Tanzania also leads in Mobile Payments for airtime top ups,

merchants, bills and salary payments by 60%, followed by

South Africa 19% and Ghana by 6%

– Multiple new innovative M-Commerce products are being

built now on the M-PESA platform which can be operated on

simple no-frills phones

Safaricom introduced the M-Pesa concept in 2007 in Kenya which is a mobile-phone

based money transfer and micro-financing service

MTN Ghana has launched the Mobile Money Bill Payment service to facilitate

payment of electricity and DSTV (satellite TV service) bills for subscribers

Sources:

(1) OC&C Global 50, 2013

(2) Africa's mobile boom powers innovation economy, BBC.com, June 30, 2014

(3) Mobile penetration landscape in Africa, SSCG


BM

Response

“Before camera phones, I had to travel to remote places to collect the payment

confirmation receipts from distributors/retailers, or wait for the payment to be

transferred to my account to dispatch goods.. Now, I ask my customers to take

picture of the payment confirmation receipt and send it to me through phone and

the goods are dispatched right away”

– Area Sales Manager, Dangote group, Nigeria

There are currently over 600 Million

mobile phone users in Africa. 1/3 of third

of Kenya’s GDP takes place through

mobile transactions

For the most part, the firms which grow in Africa accept rather than

fight the characteristics which define these markets, in terms of trade,

the consumer population and local financing

57

Challenges Recommendations

Significant share

of population in

low income

group – low

purchasing

power

Design strategy to lower product price and ensure reach

Work with distribution partners who have proven record in

reaching low-income consumers

Identify and use innovative means to reach out to lower

income customers, including possibly partnering with other

manufacturers who have good reach and complementary

products rather than developing own distribution

Strong

dominance of

traditional trade

(TT)

Segment, prioritize and address relevant TT segments

Identify right set of distribution partners with ability to reach TT

outlets

Underdeveloped

capital markets

Identify, evaluate and possibly employ alternative means of

access to capital

Environment

Business

Market


Similar to other emerging markets, the most common response

to the large low-income populations in Africa, is offering

smaller SKU sizes

Key Points/ Examples

58

In South Africa, Danone and local dairy group Clover launched a project selling

individual pots of vitamin-enriched Danimal yoghurt for 1 rand (~ $0.14) for the BoP

segment

In Nigeria, to target the lower income groups, PZ Cussons introduced three different

pack sizes for “Zip” detergent and five pack sizes for “Morning Fresh” cleaners

In Nigeria, Reckitt Benckiser offers a bottle of Harpic for 120 naira (~ $0.75) in order

to combat the otherwise high cost of the product

Nespray, an instant milk powder from Nestle, contains calcium, zinc and iron - all

essential for children. It is sold in a 250g pouch that costs only a few rand (< $0.50)

In Nigeria, P&G sells Ariel by the ounce, enough for a couple of wash loads. Most

people buy it from the street side vendors of Lagos, where a 1-ounce packet of Ariel

costs $0.10. Diapers are marketed as one-a-day items: "One Pampers equals one dry

night". A pack of 10 sells for $ 2.30

Consumer product companies launch small SKUs or lower priced (value for money)

offerings in African markets (similar to the strategy adopted in other emerging

markets such as India)

Companies use innovative grass root distribution models to reach out to BoP

customers usually in rural and underdeveloped areas

Source:

(1) http://upetd.up.ac.za/thesis/available/etd-07292012-144042/unrestricted/dissertation.pdf

(2) Primary Research.

(3) BA Analysis.

Response: Significant Share of Population in Low Income Group

Response

E

BM

“In marketing goods to low-income shoppers in Africa, P&G tries to keep in mind their budget constraints and even

the coins they carry, considering the fact that most of the customers are often paid a daily wage. The idea is that

small sales will lead to bigger sales, which eventually will make a difference for P&G.”

– Sales Manager, P&G

The large presence of traditional trade and smaller sized

retailers typically requires companies to work with multiple

entities to ensure their products reach the final retailer

59

Source:

(1) BA Primary Research

Jobbers

International/Local Production Unit

Local Entity Distributor

Sub-distributor

Micro Stores

(Kiosks)Retail Chains Groceries

TT Outlets

(e.g., Dukas)Forecourts

Wholesalers

Dir

ec

t S

ale

s T

ea

m

Emerging markets of Africa requires a multi-pronged distribution approach

The first step to identifying the key channel entities involved in the distribution of a

product category and designing an effective route-to-market strategy is to identify

the target retail segments and trace back their means of procurement

Response: Strong Dominance of Traditional Trade

Response

E

BM

Since there are very few large distributors in Africa,

companies must work with and rely upon a large network of

distributors to ensure coverage


60

To expand its coverage in Nigeria and penetrate rural areas, Promasidor has

established a large fragmented network of 600 distributors in Nigeria (it is one of

the largest distribution network in Nigeria) which in turn reach out to other sales

channels – wholesalers, retailers, table top stores and others

– Promasidor’s market leadership ensures that its distributors stay loyal to it. The

company provides attractive margins, marketing support and fridges to some of its

distributors

Heineken uses a 3-tier distribution structure in Nigeria (super key distributors,

wholesalers and bulk breakers), reaching almost 400,000 retail points

– 25% of Super Key Distributors (SKD) have NB–exclusive warehouses enjoying

preferential trade terms

– Large sales force to secure exclusive SKD to retail delivery

– Customer bonding programme including credit facility, bonus rebates, seasonal

promotions, pallets, annual customer award and birthday gifts

Nestlé delivers directly to spaza shops (informal convenience stores) in South

Africa which make up about 30% of the national retail market. Many of these are in

remote areas and owners often cannot afford delivery vans. Nestlé has set up 18

distribution centres that deliver to spazas. It charges them the same prices as

bigger outlets

Promasidor uses a large network of distributors to penetrate TT trade in Nigeria

Heineken and Nestle deploy multi-level distribution networks in Africa to create

strong presence in traditional trade

Sources:

(1) A continent goes shopping, The Economist, August 2012

(2) Nigeria: Huge country, huge beer market potential, Heineken, Amsterdam, November 2009



Response

E

BM

In order to strengthen the capabilities of traditional trade outlets

and gain greater favor with them, some manufacturers provide

complementary business services


61

“Golden Store” program to improve channel

partner economics

– P&G employees help improve and remodel independent

stores in rural areas in Nigeria

– P&G overhauls the outside appearance and the inside

design of remote stores, and provides software and other

expertise to help boost and track sales

– In exchange, logos of P&G brands are prominently

displayed outside the stores, products are given preferential

shelf space and store owners become ambassadors for

P&G products

Coca-Cola provides South African retailers with advice on shelving and

merchandizing as well as free drink coolers

In South Africa, SABMiller has helped illegal taverns convert into licensed outlets by

assisting with the application process and leading information workshops. SABMiller

has also made all license applicants eligible for training in customer care, stock

management, book keeping, credit control, and responsible alcohol use

P&G provides multiple business services to retailers in exchange for preferential

treatment

Source:

(1) OC&C Global 50, 2013


Response

E

BM

“We have created over 120 new successful

entrepreneurs with sustained training and marketing

support in rural and semi-urban areas over the past five

years.”

– Manoj Kumar, MD, P&G Nigeria

CPG/FMCG firms must be proactive in order to address the business

challenges they face in Africa

62

Challenges Strategies

Lack of

managerial talent

Define clear processes and KPI (key performance indicators) for

local teams

Invest in training and development of local team, if need be

Build in retention plans to ensure you are not training for

competitors

Lack of strong

manufacturing

and distribution

local partners/

acquisition

targets

Build your list based on local market visit and channel feedback

Segment and understand exact type of partner sought, given

local market definitions (importer, distributor, wholesaler, etc.)

Identify and sequence criteria to ensure you do not “boil the

ocean” and metrics are relevant given local environment

Think strategically and creatively, e.g., find partners dealing in

multiple brands and products to ensure penetration, Piggy back

on other people's network to reduce investments

Invest in local partner for capability and growth

Lack of local

information

Quickly identify and evaluate local sources of information

Treat market intelligence as an asset. Invest in market

information

Have plan for continuous intelligence development

Identify areas of collective research where you can cooperate

with competitors. Promote industry associations

Environment

BusinessMarket


Some manufacturers are actively engaging in developing the

necessary managerial talent

Key Points

63

Diageo’s Africa Early Career Programme is a development

programme offering roles and experience from day one. The

company recruits people across African nations and provides

positions in supply chain, finance, HR, sales and marketing

The three-year programme includes both functional training and

leadership development. Functional training helps trainees gain

skills, knowledge and experience while leadership training

encourages thinking, and drives change

People spend time with sales force out in the field to increase

their commercial awareness to understand brands, customers,

etc.

Diageo launched a pan-African graduate program to accrue hundred graduates

each year to ensure a pipeline of talent going forward

Source:

(1) http://www.diageo-careers.com/en-row/graduatesandmba/opportunitiesandprogrammes/Africa-Early-Career-Programme/Pages/default.aspx

Response: Lack of Managerial Talent

Response

E

BM

To close “the last mile” of distribution, some firms build their

own partners

64

Coca-Cola’s MDCs of manual distribution centers are independently owned, low-cost

businesses created to service emerging urban and rural retail markets where classic

distribution models are not effective or efficient

The MDC model identifies and engages independent entrepreneurs, who receive business

training and in some situations financing

Started in Ethiopia, Coca-Colas now runs more than 32,000 MDCs in more than 15

countries in Africa, employing over 19,000 people and generating more than $950 M in

revenues for Coca Cola

Source:

(1) Developing Inclusive Business Models, Harvard Kennedy School and International Finance Corporation.

(2) http://www.thesupplychainlab.com/blog/photo-library/coca-cola-micro-distribution

(3) Developing Inclusive Business Models, Harvard Kennedy School and International Finance Corporation.

(4) http://www.businesscalltoaction.org/wp-content/files_mf/1286826974CocaColaCaseStudyFORWeb.pdf

Micro Distribution Centers – Concept(1–3)

MDCs Transporters

Retail outlets

Distribution of product is mostly

manual (e.g. by pushcarts) to keep

costs to a minimum

A central point for warehousing of

products, with a manageable coverage

area and defined customer base

(typically about 150 retail outlets)

MDCs typically serve low-volume outlets located in

more difficult to reach areas, with limited cash flow

and high service frequency requirements

Response: Lack of Distribution Partners

Response

E

BM

Similarly, firms have invested in mobile micro point of sales

to ensure adequate reach

Key Points

65

Danone set up a separate network of distributors called ‘Dani

Ladies’ to promote its low cost dairy product designed in

partnership with dairy partner Clover

– "Dani Ladies" are trained to sell in open-air markets or door-to-door in

townships

– Danone provides a uniform, a cooler box, a trolley, support and

training, but the saleswomen must pay for the product in advance after

a pilot credit system was deemed unsuccessful

FanMilk in Africa directly employs around 1,500 people in

production and administration and creates income opportunities for

more than 20,000 vendors and street hawkers. Employees and

vendors of FanMilk are generally the breadwinners of families

Both Danone and FanMilk have successfully used mobile carts to close the last mile

and reach end consumers in difficult to access places which have little infrastructure

Sources:

(1) Danone Sustainability Report 2006

(2) Dani Ladies on front line of push to sell to poor, Reuters, June 2007

Dani Ladies in South Africa

Response

Response: Lack of Distribution Partners

FanMilk Vendor

E

BM

Companies facing multiple challenges sometimes resort to

completely different models

66

Jumia, an e-commerce site in Africa has responded to challenges with inter-regional trade,

managerial talent and infrastructure by:

Creating an extensive network of transportation vehicles to fulfill orders and make

delivery to end consumers across Nigeria, using regional warehouse for order

fulfillment outside Nigeria

Sourcing talent from among the pool of non-resident Nigerians who have received

education form renowned institutions globally, and are looking to come back

Implementation of cash on delivery model to address lack of payment infrastructures

Key Points/Examples

Jumia started with Nigeria, and, within a short span of time, opened warehouses in other

important African countries such as Egypt, Morocco, Kenya and Cote d'Ivoire

– Jumia also expanded to other African countries such as Uganda, Tanzania, Cameroon, Ghana;

– Jumia supplied goods to some of the above countries from warehouses established in larger

countries such as Kenya and Nigeria

Jumia ensures timely delivery of goods in all 36 states of Nigeria, building trust among the

consumers; this is possible only through significant investment in supply chain

infrastructure

To address the challenge of finding right managerial talent, Jumia recruits young and

passionate Nigerians from all over the world, who wish to return to their home country

In addition, Jumia is also funded by seasoned investors that helps them gain access to

right people in the industry to work for them

One of the main reasons why e-commerce didn’t grow rapidly in Africa until now is the

absence of reliable payment infrastructures and low usage of credit cards. Jumia solved

this implementing cash on delivery service for its products wherein its employees collect

cash at the time of delivery from the consumer directly

Sources:

(1) Company websites and annual reports

(2) http://www.howwemadeitinafrica.com/

Responses: Lack of inter-regional trade, managerial talent and infrastructure E

BM

Response

“We’ve done two things. One is we’ve

raised money from very smart investors

who can get us access to top-notch

talents. And the second thing we’ve done

is we’ve gone around the world to find

Nigerians who want to come home. We’ve

gone to recruit at Harvard Business

School, at MIT, at Oxford, at London

Business School” -Company Founders

“For all of its consumer potential, the

evolution of Nigeria’s online retail industry

has been hampered by an absence of

payment infrastructure and a relatively low

penetration of credit cards. Jumia, “Africa’s

Amazon”, solved this by sending out its

products on bikes and collecting cash

payments” - How we made it in Africa

Content

67





Appendix


Concluding Thoughts

Concluding thoughts

68

Africa represents one of the last frontiers in terms of underpenetrated emerging markets. Compared to

other emerging markets, we are in early days of understanding, prioritizing and exploiting the opportunity.

It is alluring because, for some, it represents a chance to enjoy a first mover advantage, an opportunity

that is not available in most product categories in other emerging markets any more. For others, it

represents an opportunity to continue to grow as other international opportunities become more

saturated.

In any case, Africa’s story is a forward looking story of “promise”, as the factors needed to create and

sustain a market for international products are just beginning to come together and coalesce. In order to

truly emerge as a viable market, it still needs active investment from manufacturers in ways that are

unfamiliar and sometimes unheard of in other more developed nations. These investments can range

from investments in the supply chain to investments in distributors and in some cases, retailers, as well

as in new product developments.

Furthermore, while there are a few commonalities across countries in Africa, the size and attractiveness

of the opportunity differs greatly by country. Africa needs to be seen as a set of individual countries from

which manufacturers and retailers must cherry pick opportunities, and not as an entire continent ripe for

entry. In order to succeed, manufacturers and retailers, must do their homework, tailor their strategies to

the unique characteristics of each market, accept and work with the realities of underdeveloped markets,

provide sufficient support and make a commitment for the long hall. As early research shows, rewards

are available for those who do the above.

Content

69





Appendix


Concluding Thoughts

Definition of LPI index

70

The Logistics Performance Index is an interactive benchmarking tool created to help countries identify the challenges

and opportunities they face in their performance on trade logistics and what they can do to improve their performance.

The LPI is based on a worldwide survey of operators on the ground (global freight forwarders and express carriers),

providing feedback on the logistics “friendliness” of the countries in which they operate and those with which they trade.

They combine in-depth knowledge of the countries in which they operate with informed qualitative assessments of other

countries where they trade and experience of global logistics environment. Feedback from operators is supplemented

with quantitative data on the performance of key components of the logistics chain in the country of work.

Source:

(1) World BankAp

pe

nd

ix

By 2020, Africa will comprise 17% of the world’s population and 3% of

the global GDP

Share of World Population Share of World GDP

71

60% 59%

15% 17%

14% 13%

11% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2020

Asia Africa America Europe Others

34% 32%

30%27%

28%33%

3% 3%5% 5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2020

America Europe Asia Africa Others

Ap

pe

nd

ix

By 2050, three African countries will make the list for the top 12 most

populated countries in the world, when none made the cut in 1950

72

Note:

(A) Bangladesh didn’t exist as a country in 1950, Historical estimates made using modern borders

Source:

(1) UN: The Economist

Ap

pe

nd

ix

China

India

United States

Russia*

Japan

Indonesia

Germany

Brazil

Britain

Italy

France

Bangladesh

*

0 1 2

China

India

United States

Indonesia

Brazil

Pakistan

Nigeria

Bangladesh

Russia

Japan

Mexico

Philippines

0 1 2

India

China

Nigeria

United States

Indonesia

Pakistan

Brazil

Bangladesh

Ethiopia

Philippines

Mexico

Congo

0 1 2

1950 2013 2050

forecast

Most Populous Countries (in billion)

73

Lagos

Kinshasa

Cairo

Alexandria

Abidjan

Ibadan

Kano

Casablanca

Cape Town

Addis Ababa

Harare

Nairobi

Giza

Dar Es Salam

Dakar

Luanda

Tripoli

Algiers

Omdurman

Accra

Rabat

Conakry Kaduna

Khartoum

Douala

Durban

Johannesburg Pretoria

Soweto

Lusaka

Mogadishu

Brazzaville

Yaoundé

Maputo

Lubumbashi

Port

Harcourt

Free Town

More than 3Million

More than 2 Million but less

than 3 Million

More than 1 Million but less

than 2 Million

Population of African Cities

West Africa, led by

Nigeria, has the

maximum number of

cities with population

exceeding 1 million

The largest cities exist along the coast and are predominantly in West

Africa

Ap

pe

nd

ix

Source:

(1) 50 Largest Cities in Africa, The African Economist, December 2012 data

Large population cities in Africa (2012)

Most of the major markets in Africa have nearly 30% or more

population in the age bracket of 25-54 years

Age Structure

28%

43%

32%

42% 43%

28%

17%

21%

18%

19% 19%

20%

43%

29%

38%

33% 31%

38%

6%4%

7%4% 4%

7%

5% 3% 5% 3% 3% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Algeria Angola Egypt Kenya Nigeria South Africa

0-14 years 15-24 years 25-54 years 55-64 years 65 years and over

Ap

pe

nd

ix

Source:

(1) CIA World Factbook

Africa looks more like India than other emerging markets in terms of

the below additional demographic points of comparison

75

Region Africa Brazil China India Russia

Share of Urban

Population (2011)

Share of Working Age

Population

Above BoP Population

40% 85% 51% 31% 74%

55% 68% 74% 65% 72%

Source:


37% 89% 73% 31%100%

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Colonization was widespread and dominated by the French and

English

76

Source: http://rachelstrohm.com/category/1-topics/maps/page/3/

Africa is home to anywhere between 1000 to 2000 languages

Languages in Africa

Source:

(1) http://www.nationsonline.org/oneworld/african_languages.htm

(2) http://www.alp.fas.harvard.edu/content/african-languages

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Niger Congo B

Niger Congo A

Nilo Saharan

Afro Asiatic

Khoisan

Austronesian

Overview

Africa is home to nearly one-third of the world's languages with

anywhere between 1000 to 2000 languages present on the

continent

At least 75 languages in Africa have more than one million

speakers

Most of the languages are oral with little availability in written

form

Language Families in Africa

Niger-Congo – Largest language family in the world, with more than 1350 - 1650

languages

– Mainly used in Western, Central, Eastern and Southern Africa Examples

include: Swahili, Hausa, Yoruba etc.

Afro Asiatic – Second largest language family in Africa, with around 200-300 languages

– Mainly used in Northern regions of Africa such as Morocco, Algeria,

Tunisia, North Nigeria

Nilo Saharan – Consists of about 80 languages Spoken in Eastern and North Eastern

regions of Africa such as Kenya, Tanzania, Uganda, Sudan etc,

Khoisan– Believed to be oldest of the language families present in Africa, and

consists of 40-70 languages

– It is mainly found in Southern Africa

Austronesian– Languages belonging to this family are mainly spoken in Madagascar

Language Spread

http://www.nationsonline.org/oneworld/african_languages.htm

http://www.alp.fas.harvard.edu/content/african-languages

English is used as the business language in many key African

markets such as Nigeria, South Africa, and Kenya

Business languages in Africa

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English

English and French

Portuguese

Other

French

Arabic

Arabic and French

Source:

(1) http://www.nationsonline.org/oneworld/african_languages.htm

Business Language Spread

http://www.nationsonline.org/oneworld/african_languages.htm

Christianity is the most widespread faith in Africa followed by 57% of

the population; it is more common in South and Central Africa

Religions in Africa

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76%

13%

14%

29%

9%

57%

0%

20%

40%

60%

80%

100%

1900 2010

Traditional Islam Christianity

Traditional religious beliefs primarily include worship of ancestors, spirits,

gods, animals, land, inanimate objects, and/or natural phenomena

Christianity refers to belief in Jesus Christ as the son of one God

Islam refers to the belief in Muhammad as the prophet of Allah, the one God

In Africa, over the last century, Christianity has grown significantly to

become the most widely followed belief

Key Points

Over 200 times as Many Muslims as Christians

Up to 200 times as many Muslims



Up to twice as many Muslims

Approaching even numbers of Christians and Muslims

Up to twice as many Christians

Up to 10 times as many Christians



Over 200 times as Many Christians as Muslims

Countries where

Christianity out

numbers Islam

Source:

(1) http://www.pewforum.org/2010/04/15/executive-summary-islam-and-christianity-in-sub-saharan-africa/

Africa consists of four major ethnic tribes – Bantu, Arabs, Swahili and

Ashanti

Ethnic Tribes in Africa

Source:

(1) http://www.thomas.k12.ga.us/userfiles/431/Classes/1490/africanethnicgroupswith%20maps.pdfAp

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Bantu

Swahili

Bantu people originated in what is now Cameroon and Nigeria,

and then migrated southwards in Southern Africa

The tribe consists of over 60 million people sharing common

language family, comprising of over 400 Bantu languages

There is a mix of all three religious beliefs – Traditional,

Christianity and Islam

Swahili people are found on the east coast of Africa - mainly

coastal regions from Somalia to Mozambique

Swahili as a cultural group has only about ~1 million people

but there are ~90 million speakers of Swahili

Swahili in Arabic means "coastal dwellers"

The tribe often comes across as a mix of Arab and Bantu

cultures

Ashanti

Ashanti are a major ethnic group found in Ghana (West Africa)

with ~10 million people

They speak their own language (Twi )

Ashanti are a matrilineal society where descent is traced

through females

Arabs

Arabs originate from the Arabian Desert and speak Arabic

They are found mostly in North Africa, Saudi Arabia, Iraq, and

Iran

Arabs are predominantly Muslim and believe in Islam

Consumer Spending in Select Sub-Saharan African Countries

Share of Countries in Consumer Spending in Select Sub-Saharan Africa Countries (2012)

81

16%

11%

9%

9%5%5%

5%

5%3%

3%

3%

3%

23%

Total: $359 B

Angola Sudan Ethiopia Kenya GhanaCameroon Tanzania Uganda Mozambique ZimbabweZambia Senegal Others

Angola, Sudan, Ethiopia and Kenya are the topmost countries in terms of consumer spending

Note: The data depicted is for 30 select Sub-Saharan African countries and excludes North Africa, South Africa and Nigeria

Sources:

(1) BA Analysis


Definitions of acronyms used in the presentation

82

UEMOA: West African Economic and Monetary Union

CEMAC: Central African Economic and Monetary Community

ECCAS: Economic Community of Central African States

COMESA: Common Market for Eastern and Southern Africa

EAC: East African Community

ECOWAS: Economic Community Of West African States

SADC: Southern African Development Community

AMU: Arab Maghreb Union

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l Disclaimer: No part of this presentation may be reproduced, stored in a retrieval system, or transmitted in any

form or by any means—electronic, mechanical, photocopying, recording, or otherwise without the permission

of Boston Analytics.

All materials in this presentation have been sourced from Boston Analytics’ databases. For detailed sourcing

information contact Boston Analytics.

Contact: Kimberlee Luce

Designation: Senior Vice President

Email ID: [email protected]

Boston Analytics (A division of Pythhos Technology (P) Ltd.)

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