Africa, the future bet of Luxury?
I would start with the obvious but it's always good to remind it : Africa is not "a" market, it's a continent, and in that sense, hosts a multitude of very different cultures & economic growth levels, along with huge inequalities but also a growing urbanization, young consumers accessing technology and a more and more travel-educated, status-seeking middle/upper middle class, making it a complex yet fascinating and promising playground for luxury brands.
According to the AfrAsia Bank Africa 2021 Wealth Report,
The total individual wealth held on the continent amounts to US $2 trillion of which approx. 40% of this is held by HNWIs (those with US$1 million or more) - around 125,000 individuals*.
* of which approx. 36,500 based in South Africa, 15,000 in Egypt, 9,000 in Nigeria, 8,300 in Kenya and 4,500 in Morocco (top 5) - Dec. 2020
We tend to forget but over the last decade, Africa as a continent has been the 2nd fastest growing region after South East Asia. According to the most recent AfrAsia Bank Africa Wealth Report 2021 (see report attached for download below), the total private wealth held in Africa is expected to rise by 30%, reaching USD 2.6 trillion by 2030
Pre-covid, as explained by the CPP-Luxury blog, "all growth indicators [were] positive : a demographic boom, a rapidly expanding young population, the growth and increased wealth of the middle class, the financial independence of women, urbanization (in 2030, of the 41 mega-cities on the planet, 6 will be African), the development of the HNWIs and accelerated penetration of new technologies and smartphone use."
Most studies identify 5 current key luxury markets in that region, with very different stages & roles within the region (source : CPP-Luxury)
South Africa “The Established” is tipped as the gateway to the continent’s luxury market, largely due to its well-established shopping culture, increased international exposure, significant innovation, relatively stable and transparent pricing and convenience (however showing a negative -25% US$ wealth growth between 2010-2020 - source : New World Wealth 2020)
Kenya “The Steady Grower” is strategically positioned as the ‘gateway to East Africa’ and generally seen as one of sub-Saharan Africa’s most advanced countries.(+40% 10-year growth rate - US$ wealth growth between 2010-2020, source : New World Wealth 2020)
Nigeria “The Burgeoning” is Africa’s biggest economic power. Home to the largest population and GDP in sub-Saharan Africa, its market size is a hugely important factor, making it difficult to ignore the opportunity.
Angola “The Unexploited” has become an increasingly popular investment destination due to its strong economic growth and emerging high-end market.
Ivory Coast “The Underdog” is Africa’s fastest-growing economy as it is now on the path to peace and prosperity with a strong macroeconomic environment and a solid position in international markets.
Opportunities identified in that region in a post-Covid world:
- e-commerce : in a region where physical experience was key until very recently, social distancing and stores closures may accelerate the cultural change like in every other part of the world
- advocacy / storytelling / through digitally-driven campaigns
- brands with purpose / authenticity
- women as a consumer group for luxury brands, especially among the new generations
- a handful of specific markets where growth is expected to be outstanding in the next 10 years : "[we expect] Ethiopia, Mauritius, Rwanda, Kenya and Uganda to be the strongest performing wealth markets in Africa during this period (60%+ growth rates). Solid growth is also forecast in Namibia, Botswana, Mozambique and Zambia (40%+ growth rates)" - source : AfrAsia Bank AFRICA WEALTH REPORT 2021
- secondary, smaller-sized cities where HNWIs have migrated to in times of Covid : "Many HNWIs have chosen to work remotely and live in smaller towns. For instance, many South African HNWIs are now working remotely from affluent small towns such as Hermanus and Franschhoek." - source : AfrAsia Bank AFRICA WEALTH REPORT 2021
Credit : the amazing & successful South African actress, television personality, businesswoman and human rights activist with UNHCR, Nomzamo Mbatha
Sources & Additional reading
Knight Franck Africa report 2018 (download file below)
AfrAsia Bank Africa Wealth Report 2021 (download file below)