According to Deloitte, Africa’s GDP is bound to grow to $3.7 trillion by 2019, that is a 50% increase, in the next five years. This is attributed to the way the middle class is growing pretty fast and this is increasing the rate of urbanization as well as increasing the consume demand for goods and services.
Africa’s middle class is also expected to increase to more than half a billion people by 2030, says Deloitte, which broadly defines the continent’s middle class as those earning between $2 and $20 per day.
With this growth, Deloitte predicts that Africa’s economy will see mobile subscription penetration grow from 72 percent currently to 97 percent by 2017 as the continent adds 334 million new smartphone subscribers over that time frame, according to a new report by Deloitte titled “Africa: A 21st Century View.”
“Africa presents many opportunities at present and these are only likely to grow as the groundswell of economic momentum being witnessed on the continent gains further traction in coming years,” says Rodger George, Advisory Leader at Deloitte East Africa. “Much of Africa’s economic potential still remains untapped by international investors, particularly in the emerging consumer sector, but this is set to change in the next decade and a half.”
The report says that high growth economies like China, India and Brazil will soon slow down; and they will be looking to the fast growing African market for new growth opportunities. According to the International Monetary Fund’s 2014 World Economic Outlook, Sub-Saharan Africa’s GDP is expected to expand by 5.1 percent this year, led by markets such as Chad (9.6%), the Democratic Republic of the Congo (8.6%), Côte d’Ivoire (8.5%), Mozambique (8.3%), Ethiopia (8.2%) and Nigeria (7%).
George says that in the future driving force for Africa will be consumer opportunity facilitated by rising incomes, and urbanization boost. This transformation is coinciding with the growth of the African middle class, a demographic that is characterized by optimism, mobile connectivity and brand consciousness.
“Right now Africa is at a point where South East Asia was 30 years ago – on the cusp of a consumer boom,” says George. “Africa’s population is predominantly young with 680 million, or 60% of the continent’s total population, aged below 25. These younger Africans will play a critical role in the continent’s economic development not only because they will want increased connectivity and access to a wider choice of food, consumer goods and entertainment, but also as they bring a more innovative and entrepreneurial mind-set.”
“Notwithstanding the many infrastructural challenges that Africa faces, Africans have shown they are willing to innovate,” says George. “Africans have leapfrogged poor or no fixed line infrastructure moving straight to mobile, which has seen the fastest growth in the world over the last five years.”
Despite significant growth prospects, Africa remains complex and carries risk. There are 54 countries with different markets and challenges, and issues like a lack of infrastructure, poor governance, fragile security and unreliable logistics can make strategic planning difficult. However, Africa is making progress, with widespread democracy suggesting the dominant trend is positive.
“Our research shows Africa is not suffering from lack of demand, but a lack of supply,” says George. “However, there are no quick wins and businesses must be prepared to engage with the various challenges on a long-term basis while carefully weighing the risks and rewards if they want to reap the benefits of Africa’s emerging consumer economy.”