Can Africa’s youth change the course of retail?

One cannot be castigated for believing that Africa’s biggest export is economic refugees. But those who aren’t jumping the fence are quietly ushering in a significant swell in retail. For them, it is not the fast moving trains into Europe that appeal but rather fast selling brands.

At 200 million, Africa’s 15-24 year olds already hold the key to the retail revolution and have been contributing in spend and spirit. According to African Economic Outlook, in just two decades from now, this number is likely to double to 400 million. Add to this a few other compelling stats and together you have three-fifths of the population that is under the age of 25. 

A promising youthful and trendy consumer segment is a premise on which many brands are built and retailers ride, but given Africa’s own challenges in terms of rising unemployment and lack of opportunities, the question everyone wants answered is, whether this “demographic dividend” will ever pay-out.

According to Professor Roger B Mason, Wholesale and Retail Leadership Chair, Cape Peninsular University of Technology, “Africa’s problems are not exceptional, but rather perceptional. Compared to the rest of the world, the unemployment figures in the region are only marginally higher. Six of the world’s 10 fastest growing economies are in sub-Saharan Africa.”

“This could well be Africa’s Goldilocks moment where everything is just perfectly poised for growth”

This confidence is, in part, derived from the impressive and sustained economic growth in many economies on the continent. Africa’s economic pulse was quick to recover from the financial meltdown that defined 2009, led by sectors like telecom and retail. Of significance as we come closer to the Retail Congress is the acceleration of retail which is a sign of promise and enlivened expression by Africa’s youth.

Looking ahead, a critical question is whether retailers look at this as an economic take off or an event to be milked. Retailers with a long-term view and harbouring returns commensurate with risks understand that social and demographic trends drive domestic consumption. Among them, the rapid urbanisation and the burgeoning middle class has created a “new consumer” in African cities with discretionary spend.

Unlike in many parts of the world, retailing is not confined only to big cities in Africa. In vibrant economies like India and Africa for example, retail is a big market opportunity across formal and informal sectors, both urban and rural. In fact, in Africa a small vendor simply uses a cell phone as an order book, payment gateway and a call centre to mimic the size and scale of a large retailer.

Mobile technology has been a real game changer for youth and retail, with many who refuse to jump the fence using technology as a life line to entrepreneurship. Simply put, if the youth are not buying on a cellphone, they are selling. Retail has become a sector that wins irrespective. 

Africa’s growing young population is clearly in the crosshairs of global retailers. Consumer facing sectors like telecoms, consumer goods, banking & entertainment have seen an onslaught of global brands vying for attention and spend - for a good reason. Half of all Africans are under the age of 20, while those between the ages of 16-34 account for 65% of the entire continent’s trillion-dollar consumer spend.

“In the not so distant future, Africa’s prospects will be driven by a consumer market, and not resources and minerals. It is not difficult to see why, as Africa’s growing young population continue to be better educated and better off,” Mason adds.

Better education has also meant that the younger generation are prudent about choices they make about marriage and starting a family. These choices translate to well managed finances, giving them freedom to indulge with responsibility. Retailers understand that consumption based on such sound principles can only grow and stay sustainable. 

By all measures, retail in Africa has the wind beneath its wings and if retailers are able to respond to the interests and tastes of the younger generation, they are virtually guaranteed a share of the money and mind. It is evident the sector is brimming with potential, however winning in Africa will require more than just knowing that the sector’s future is bright.

*Roger Mason will be speaking at the Retail Congress Africa in Cape Town on 3-4 November 2015.