These African cities will see the fastest growth in consumer spending

even though South African cities are some of the region’s most developed consumer markets, future growth potential will increase elsewhere,” Euromonitor International.

Recently, Euromonitor published a report titled: “Doing Business beyond South Africa: growth and opportunity in sub-Saharan cities.” The report analyses the fastest-growing cities for consumer spending in Africa. According to the report, while South Africa’s Johannesburg and Pretoria remain leaders in consumer expenditure, they are becoming increasingly saturated, and growth is shifting to cities in other African countries.

The report also reveals that as of 2015, sub-Saharan Africa was the least urbanised region in the world, with only 38 percent of the total population living in cities. Therefore, this region lags behind others such as Asia and Latin America, and is projected to see its urban population surge by 74 percent between 2015 and 2030, the most of any developing region globally.

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In absolute terms, the number of city dwellers in sub-Saharan Africa is expected to increase by 268 million and the urban population will constitute 45 percent of the total by 2030.

In Cameroon, Kenya, Nigeria and South Africa, the four sub-Saharan African countries researched by Euromonitor International at the city-level, there were 24 cities with a population ranging from 0.6 to 10 million in 2015, together comprising 59 million people, or nearly a fifth of the market population. In terms of consumer expenditure, the share carries an even bigger weight, constituting almost a third (US$197 billion) of the market total in 2015.

As of 2015, the top five sub-Saharan African cities with the biggest market sizes in terms of consumer spending are Lagos in Nigeria (US$37.5 billion), Johannesburg (US$31.2 billion), Pretoria (US$20.4 billion), Cape Town (US$19.7 billion) and Durban (US$14.3 billion). Underpinned by a large population base and a relatively high level of affluence, these urban areas are home to some of the most sophisticated consumer markets in the region. Out of the twenty-four cities in sub-Saharan Africa, only three cities, Abuja (Nigeria), Pretoria and Johannesburg, recorded more than half of all households in the over US$10,000 income bracket as of 2015, often considered the international benchmark for middle-class households in emerging regions. 

Below are the Top 10 sub-Saharan Cities for Consumer Spending Growth by 2030:

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South Africa’s cities, Johannesburg and Pretoria, will remain the region’s leaders in consumer expenditure in 2030. South Africa has been a long-term favourite entry point into the region for many multinational companies, and so the country’s flagship cities have over time developed consumer markets of a relatively extensive depth and breadth. However, the market saturation of Johannesburg and Pretoria is evident and greatly contrasts with the dynamism of Nairobi, Abuja, Yaoundé and Douala.

In Kenya’s leading cities of Nairobi and Mombasa, the purchasing power of households is forecasted to be a major factor behind soaring consumer spending in them. The country’s sizeable consumer market potential cannot be ignored. For example, in consumer foodservice, average spending per capita on fast food annually in Kenya was estimated at just under US$4.77 in 2015. This per capita average is well behind countries such as the United States where a person spends US$ 709.6 in fast food restaurants as of 2015.

According to a comment by Iryna Sychyk, city analyst at Euromonitor, Lagos, the Nigerian economic hub will remain the largest consumer market in 2030 among 24 sub-Saharan African cities, with more than 500,000 inhabitants that Euromonitor researches. This largely reflects Lagos’ substantial population, which is due to reach 16 million by 2030.

However, the growth in consumer spending in Lagos in the period between 2015-2030 will be not as impressive, leaving the city out of the top 10 list. As is common for emerging mega cities, Lagos faces challenges that hold back the city’s consumer spending growth potential. Two intertwined issues in mind are overpopulation and a lack of adequate infrastructure.

She further stated that overcrowding creates a strain on infrastructure, which limits economic growth, while poorly developed facilities cannot fully accommodate potential increases in population. Lagos’ population expansion will be slower than Kenya, Cameroon and some other Nigerian cities by 2030. Additionally, Lagos’ real Gross Domestic Product (GDP) growth, while still at a solid 4.1 percent average annual rate in 2015-2030, will trail that of many sub-Saharan first and second-tier cities.

Source: http://venturesafrica.com