Sub-Saharan Africa is brimming with potential, being one of the few regions in the world with annual GDP growth of more than 5%.
AT Kearney’s 2015 African Retail Development Index (ARDI) reconfirms the potential of many nations throughout Africa – not just oft-discussed markets like Nigeria and Ghana, but also small, dynamic markets such as Gabon, the ARDI’s top-ranked market and home to sub-Saharan Africa’s highest GDP per capita, and also mid-sized and fast-growing countries such as third-ranked Angola.
Mirko Warschun, AT Kearney partner and leader of the firm’s consumer industries and retail practice for Europe, Middle East, and Africa, notes that Nigeria (ranked at number four) moved down the index, despite its market size and room for growth.
“Nigeria has massive room for growth in formal retail with 25 new shopping centres in development,” says Warschun. “True spending, however, remains comparatively low as the ‘true middle class’ is a lot smaller relative to the smaller countries ranked higher.”
With its tremendous potential and strong economic projections, however, Nigeria is still a market to consider.
While Tanzania (#at number five) has dropped a notch, it was the largest and most stable of the East African Community countries and remained an attractive retail market, says Warschun.
“Tanzania is in the early stages of development, and therein lies the opportunity. This unsaturated market has one of Africa’s fastest growing retail sectors, boosted by new shopping malls.”
Bart Van Dijk, AT Kearney partner and leader of the firm’s consumer industries and retail practice in Africa, believes it is instructive to think of Africa as a set of opportunities that can be augmented and added onto one another, rather than just one singular opportunity.
“How you pick among the opportunities depends on your offering,” he says. “Retailers with a basic offering should target the large cities and countries because scale will be important, while retailers with a wider assortment should target higher average income countries including the smaller ones.”
The ARDI is based on four dimensions: market size, market saturation, country risk, and time pressure, and ranks the potential and urgency of moving into each country accordingly.
The ARDI’s top 15 highlights some interesting developments. Two small countries – Gabon and Botswana – are ranked first and second, while Ethiopia, with Africa’s second largest population, barely cracks the top 15.