Winning in Africa might not be as intimidating as you think

When you learned to read a map as a child, you were most likely looking at a distorted image of Africa. Most world maps compress Africa in order to project a three dimensional world on two-dimensional paper. In reality, Africa is so large it can fit the United States, China, India and most of Europe within its borders, with room to spare!

This is an incredible emerging market with billions of dollars in potential consumer spending to capture. However, the sheer size of Africa can be intimidating for a consumer products or retail company looking to enter the market. Luckily, there is another way to think about how to go to market in Africa: Cities.

Urban concentration of income

Africa’s GDP is concentrated in its cities, with the top 50 cities in Africa estimated to account for as much as 60% of the purchasing power on the continent. Johannesburg in South Africa is Africa’s millionaire city, with over 20,000 millionaires and $70 billion in consumer spending. Similarly in Egypt, capital Cairo alone has added over $4 billion worth of food and beverage consumption in the past decade. And the Nigerian capital Lagos would by itself rank as the fifth largest economy among the 54 African nations.

This urban concentration of wealth is only going to increase with time. Between 2010 and 2030, Sub-Saharan Africa’s urban population is expected to double and by 2050, most of Africa will live in cities.

Breaking into and winning in the African market is not only about focusing on these mega-cities: mid-tier cities in Africa are expanding rapidly and now represent the new frontier of market growth and competition on the continent.

Capturing the market by focusing on the top 100-200 cities seems much less intimidating, but how exactly should one go about it? I believe there are three ways to capitalize on unique African consumer and retail trends:

Locally convenient

Busy and stressed city-dwelling consumers in Africa welcome anything that makes life convenient for them. They love it when their favorite local products and recipes, which are traditionally effort-intensive, are made easily available to them. The economics are favorable: African governments prioritize local sourcing to boost their economies, and supplier costs are still low. So companies that can think of ways to make locally appealing products conveniently available are likely to be winners in urban Africa.

Formalize the informal

The African retail market is characterized by approximately 90% of informal transactions, creating a viable gap for formal retail to step in. E-commerce innovators like Kaymu Village are creating marketplace models to help connect small local businesses with consumers who cannot complete e-payments to make purchases, and are also willing to provide support, resources and marketing to sellers. 

Going mobile

Africa has leapfrogged the world by becoming a mobile-first and almost a mobile-only continent. While only 63% of Africans have access to piped water, a staggering 93% have a mobile phone. The explosion of mobile phone networks has allowed Africans to skip landlines and desktops and jump straight to mobiles and tablets. Thus, mobile commerce and mobile payments are not just an add-on, but a critical element in the omni-channel strategy for success in Africa.

Looks of a winner

Can foreign players win in Africa? What do winning players look like? Here's an example: Indonesian-brand Indomie landed in Nigeria in 1996 and by 2013, it built a previously non-existent instant noodle category into a $600 million business. Today, the brand accounts for approximately 74% market share in Nigeria, with an estimated annual growth of 40%! Fundamental to its success has been the sheer convenience of a meal that can be cooked in less than three minutes, while being quite economical as well.

Additionally, Indomie kept their brand fresh by regular new flavor introductions and made it locally relevant by bringing flavors to match local palates, like joloff and pepper chicken in Nigeria and Nyama Choma in Kenya. This is a great example of the locally convenient trend.

Succeeding in Africa is about winning its cities. Foreign consumer products or retail companies should enter Africa by targeting consumers in key cities and then build on this momentum to continue their expansion in this exciting emerging market. Don’t think of Africa as a continent. Think of it as a collection of cities rich with potential and ripe with consumers.