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Africa Beckons, but Is Electronics Ready?

I never thought I would see the day that a major Western research firm would tout Africa as a leading growth target for companies serving the consumer market with hundreds of billions of dollars at play.

The economy of Africa, the world's largest — but largely forgotten — continent, is rising rapidly, and after years of being a basketcase for war, political chaos, and deep poverty, its leading nations are growing almost as fast as their Asian counterparts and offering international enterprises huge potentials for solid sales and profits expansion if properly tapped, according to a recent McKinsey Quarterly report.

Electronics equipment manufacturers should take note. Demand for communications equipment especially is roaring in Africa with many countries skipping entire generations of hardware and going straight for the latest devices. Most African users, for example, have dumped telephone landlines and opted instead for mobile phones. They are also rapidly transitioning from personal computers as the primary means for accessing the Internet to tablet PCs, which offer a higher level of portability and are also generally cheaper. Chinese suppliers have been quick to tap into these veins and are selling millions of no-name tablet PCs across the continent.

McKinsey noted several factors that are making Africa a compelling attraction for OEMs and component suppliers. The consulting firm said it sees “consumer-facing industries” on the continent growing $410 billion between 2012 and 2020 and “representing the continent's largest business opportunity.” Some of that growth will be concentrated in the electronics and communications infrastructure markets. The continent, McKinsey said, has the following characteristics that will help it continue to grow strongly over the next decade:

  • Explosive population growth:
  • Africa has the world's fastest-growing population and is projected to account for more than 40 percent of global population growth to 2030, according to the United Nations. Thanks to declining fertility rates, it is the working-age population that will have the highest growth rate. (In fact, by 2040, Africa's working-age population is forecast to surpass China's.)

  • A youthful market:
  • Africa has the world's youngest population — more than half its inhabitants are under 20 years old, compared with only 28 percent in China.

  • An emerging, optimistic consumer class:
  • By 2020, more than half of African households are projected to have discretionary income, rising from 85 million households today to almost 130 million. Africans share the optimism of that forecast: 84 percent of those we surveyed said they expect their households to be better off in two years.

  • Healthy urbanization:
  • With 40 percent of its population living in cities, Africa is more urbanized than India (30 percent) and nearly as urbanized as China (45 percent). By 2016, over 500 million Africans will live in urban centers, and the number of cities with more than 1 million people is expected to reach 65, compared with 52 in 2011.

  • A modernizing retail trade structure:
  • Fragmented, informal retailing remains the norm in most of Africa. However, there are signs that the formalization of retail will dramatically increase in coming years. In Nigeria alone, international-store openings are growing by 36 percent a year.

Such promising numbers should have retailers and manufacturers salivating over the possibilities of higher sales in Africa, but the promising financial numbers are also coupled with enormous challenges, including a general lack of knowledge about the continent and its potentials. Many Western companies are simply unaware of the growing sales opportunities, and those that are conversant with the continent simply lack the resources to exploit it or have a deep fear of its many known and unknown challenges. McKinsey said further:

    Africa's large, fast-growing population, combined with rising consumer disposable income, offers companies an enormous opportunity. Our research findings have important implications for enterprises new to the continent or for those seeking to expand there from an African base. The appropriate actions for each business will depend on a variety of factors.

In a future blog, I will identify and discuss some of the strategies suggested for serving the growing African consumer market and how electronic companies can leverage their current expertise and product offerings in the West to address the needs of the continent.

12 comments on “Africa Beckons, but Is Electronics Ready?

  1. Wale Bakare
    December 1, 2012

    Thanks Anna for the article.

    >> “consumer-facing industries” on the continent growing $410 billion between 2012 and 2020<<

    The success achieved so far in the use of communication gadgets in 2012 only in 2 or 3 Africa nations surpassed projections for ICT penetration in the region. Although, I foresee electricity generation, distribution and supply to residentials/industries as biggest panacea to electronics in few years – may be 3 – 5 years.

  2. Wale Bakare
    December 1, 2012

    As at 2008 ITU reports 300 million mobile phone subscribers with major telecommunication service firms in Africa, i.e pay as you go customers.  A research conducted by an independent researcher as at May 2012, Africa has about 644 million mobile phone subscribers, factbook  here.

  3. prabhakar_deosthali
    December 2, 2012

    OH AFRICA!  – That is something refreshing to the mind – always reading about China, Korea,India .

    Yes! Africa is a huge continent and a fast growing population but so far the Electronic Industry's view about this continent has been to treat it as a set of  underdeveloped  economies with people having no money to spend on the state of art products – to treat it as a dumping ground for obsolete products recovered from waste.

    Anna , you have now opened doors to this new outlook to this marketplace which is ready to embrace the latest  in electronics .

    Education of the masses is the key to groom this market especially the younger generation.

     

  4. Anna Young
    December 2, 2012

     @Wale, thank you for your contribution. Yes business is booming for Africa's technology based consumer goods market. I also share your optimism for a reliable electricity generation in Africa. It is imperative in this electronics technology growth market.

  5. Anna Young
    December 2, 2012

    Thanks for the link.  Wale, the sources of these technology based good is reported to be both global and local.  Reports have shown that sizeable proportions of goods are exported by China. Large proportion of its exports worth over $60bn a year, are technology based manufactured products. For example, communications equipment and other electronics machinery accounts for 40% of china's exports to the continent.  Asian companies, are also taking advantage of this market growth. They are making impressive inroads into the continent. What a transformation!

  6. Anna Young
    December 2, 2012

     Prabhakar, Africa a onetime dumping ground for western products surplus is rapidly emerging as a valuable market for electronics technology. What's interesting is, African consumer is dictating the demands for good quality devices combined with affordable prices tailored to the continents environment. Second hand electronics market is in decline. Reports have revealed that consumer expenditure in 2010 alone was worth more than $600bn – 8% of consumer spending in the emerging markets. this is projected  to increase over $1trillion by 2020. This is indeed the Rise of Africa.

  7. FLYINGSCOT
    December 2, 2012

    Does the bulk of Africa have the necessary infrastructure and stability to support a significant consumer class?  In the West we only hear of doom and gloom stories from Africa so it is refreshing to discuss the hope of Africa becoming a player on the global stage. 

  8. kjosefschmidt
    December 4, 2012

    Since World War II, suppliers have continuously gravitated towards lower cost regions. We first experienced it in the US as suppliers moved from the Rust Belt to the South in the '50s and '60s to avoid unions. Then we watched companies move towards Mexico and the Far East and now, suppliers are moving from the first tier cities in China to second and third tier cities. The question is not will the suppliers move to Africa but when. However, electronic suppliers are skilled risk managers and until the payoff exceeds the risk, they will reluctant to make a commitment. As of today, the social, political, and economic risks in Africa remain too high to make a serious investment.

  9. garyk
    December 5, 2012

    Barbara,

    Your Editor's BOLG is interesting. Your comment CHINA is Selling Millions fo tablet PC's across the continent. Does't this mean counterfeit PC's or technology and designs they stole from contract manufactures that they control in there country?

  10. Barbara Jorgensen
    December 5, 2012

    Hi garyk: I don't see that reference in the above blog or my editor's note this week, but I'll try to answer your question: there are reports of Chinese knockoffs of tablets and e-readers; I've heard less about PCs. Also, many PC brands manufacture in China and that doesn't necessarily make them counterfeit. Maybe I'm misreading your questions/comment?

  11. garyk
    December 5, 2012

    Barbara,

    You stated NO Name Tablet. What is a NO Name Table? It has tobe a copy of  some thing some one wants hidden!!!

  12. Wale Bakare
    January 6, 2013

    I think Africa has just embarked on the journey of technology boom. Although, dual carriage efforts are still needed from both the governments & other stakeholders to accelerate  the development and building a sustainable roadmap.

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