Assessing Opportunities within the Rising African Middle Class
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Assessing Opportunities Within the Rising Assessing Opportunities Within the Rising African Middle Class African Middle Class Mark Simoncelli Global Director: Growth Implementation Solutions and and Craig Parker Senior Economist: Emerging Markets © 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
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Why you should listen On Demand: - Learn about the key factors in assessing the African middle class - Identify the political and social dynamics that may influence business in the region - Assess the growth opportunities in various countries and key focus areas of future development On Demand: https://www.brighttalk.com/webcast/5562/91115
Transcript of Assessing Opportunities within the Rising African Middle Class
Assessing Opportunities Within the Rising Assessing Opportunities Within the Rising African Middle ClassAfrican Middle Class
Mark Simoncelli
Global Director: Growth Implementation Solutions
andand
Craig Parker
Senior Economist: Emerging Markets
© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
Agenda for Today
• Assessing the African Opportunity
• African Investment Potential
• Identifying Africa’s Growth Potential
• What is the African Middle Class?
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• What is the African Middle Class?
• Opportunity of the African Middle Class
• Future Drivers of the African Middle Class
• Frost & Sullivan’s Geographic Expansion Process
Assessing the African Opportunity
GDP Growth
1990’s 2000’s
2.2% 5.5%
The Economist, 3 Dec 2011
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GDP Growth
FDI Inflows
Civil Wars
1990 2010
1990’s 2000’s
15 5
$66.32bn $342.51bn
Foreign Debt to GDP
1990’s 2000’s
61.8% 37.4%The Economist, 13 May 2000
Average Growth Potential Remains Robust in Sub-Saharan Africa
Average GDP Growth for Most Regions Except Sub-Saharan Africa is Significantly Lower After the Financial Crisis
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FDI Inflow into Africa Is Expected to Double in the Next 7 Years
56.5bn
2013
56.5bn
5
2001
19.1bn
36.8bn
2006
Return on Investment for Inward FDI was Highest in Africa in the Last 5 Years
AfricaAsia4.8%
United States
Return on Investment for FDI, 2012
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A strong infrastructure drive and PPP’s will further raise the ROI for FDI in many African countries
9.3%
8.8%
7.1%
Latin America
Identifying Growth Potential
Nigeria
Ethiopia
DRC
Ghana
Countries with High Growth and Investment Potential in Africa, 2013-2015
Africa to Average 4.8% GDP Growth in
2013
Africa to Average 4.8% GDP Growth in
2013
Gabon
Average Per Capita GDP
(US$)
GDP Per Capita
Growth (%) (2013-2015)
Average GDP Growth
(%)(2013-2015)
FDI Stock (Million
US$)
FDI Stock Growth (%) (5 year average)
Average Export
Growth (%) (2013-2015)
Nigeria 3,067 12.9 7.1 53340.9 85.5 4.7
Ethiopia 1,338 12.8 6.5 3964.2 23.0 13.7
Ghana 3,723 12.8 6.8 7308.1 236.1 16.2
Zambia 1,982 15.3 7.9 9468.4 70.1 14.4
South Africa 12,250 8.6 3.2 115771.9 17.6 4.0
Gabon 18,925 15.5 6.6 1570.4 146.3 1.7
Democratic Republic of the Congo
416 11.6 7.2 3336.6 267.6 14.5
Angola 7,067 12.6 6.8 11460.2 -44.0 4.3
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Zambia
DRC
South Africa
Gabon
Note: Countries based on score determined from
weighted average of per capita GDP and potential
growth, GDP & GDP potential growth, FDI stock and
growth, political stability, export and import growth
potential, and population size and population growth
potential
Angola 7,067 12.6 6.8 11460.2 -44.0 4.3
Average Import
Growth (%) (2013-2015)
Average Pop (2013-2015)
Pop Growth (%) (2013-
2015)
Average GDP 2013-
2015 (Billion
US$)
Political Instability Index
Nigeria 8.2 174.0 5.6 304.87 7.00
Ethiopia 7.9 90.9 4.7 50.14 5.10
Ghana 5.4 26.2 5.2 47.60 5.90
Zambia 11.1 14.6 5.0 25.69 7.80
South Africa 3.0 52.4 2.4 393.12 7.00
Gabon 5.6 1.6 2.9 20.15 5.10
Democratic Republic of the Congo
6.3 79.3 6.1 20.85 8.20
Angola 7.5 21.5 6.1 135.09 7.20
Africa’s Potential Hinges on Infrastructure Development to Open Markets and Trade Routes
Power Interconnection Investment:
Total Intra-trade:
Regional Transport Investment (road, rail):
Power, Transport, and Trade IntegrationAfrica, 2012-2020
$50.00 billion
$216.00 billion
$30.00 billion
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Source: Frost & Sullivan analysis.
`Planned Electricity Interconnections
Inga Interconnection Project
Trilateral Free Trade Agreement (T-FTA)
Road Infrastructure Development
rail):
ICT Infrastructure Development:
Investment in infrastructure raises the potential for trade and improves the access to goods and services
$30.00 billion
$60.00 billion
What is the Size of the Potential Opportunity of the Rising African Middle Class?
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Estimates of the African Middle Class Vary Considerably
African Middle Class by Expenditure Split (As Defined By the ADB), 1980-2010
% o
f A
ll E
xp
en
dit
ure
Gro
up
s
10
% o
f A
ll E
xp
en
dit
ure
Gro
up
s
Source: Africa Development Bank
Leading a Middle Class Lifestyle in Africa is Expensive
0 100 200 300 400 500 600 700
Ghana
Venezuela
Mauritius
Nigeria
China
Ethiopia
Cost of Living and Grocery Index Comparison, Selected Countries, 2013
Mortgage Affordability Comparison, Selected Countries, 2013
Ghana is ranked 1/103 countries as most The cost of
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Note: Mortgage as Percentange of Income is a the ratio of the actual monthly cost of the mortgage to take-home family income. Average monthly salary is used to estimate family income. It assumes 100% mortgage is taken on 20 years for the house(or apt) of 90 square meters which price per square meter is the average of price in city center and outside of city center.
Ethiopia
Kenya
Brazil
Tunisia
India
Turkey
Mortgage as Percentage of Income
Source: Numbeo and Frost & Sullivan
countries as most expensive to pay a
mortgage
The cost of living and
buying groceries is almost equal in Nigeria and
the United Kingdom
We Should Not Confuse Per Capita Consumption Expenditure As Middle Class Growth
NigeriaGhana
Rising per capita incomes translates into greater demand
potential
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2001
2011
Population in MillionGDP Per Capita in US$
South Africa
Kenya
South Africa has high GDP per capita, but the top income decile earns 60% of income and has increased in the past decade
Tertiary Education Levels and ICT Development Are A Strong Indicator of Middle Class Growth and Size
Tertiary sector growth
Infrastructure development
Tertiary Enrolment and Mobile Subscriber Correlation to Spending ($10 to $20 Per Day)
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Source: Africa Development Bank, World Bank and Frost & Sullivan
Infrastructure development
Urbanisation
Geographic Expansion
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Frost & Sullivan’s Strategic Approach to Geographic Expansion
Test expansion options
againstt market information
and internal analysis
Country Selection
Strategic Options
Quick wins
Commercial feasibility
Business Case
Phase 1: Building the Fact Foundation
Phase 1: Building the Fact Foundation
Phase 2: Recommended
Strategic Options
Phase 2: Recommended
Strategic Options
Phase 3: Business Case DevelopmentPhase 3: Business Case Development
Phase 4: Implementation
Phase 4: Implementation
• Develop rollout plan• Design systems and
procedures• Support on the ground roll-out
(structures, asset rollout and staff)
• Establish relationships with
Initiate Operations
• Assess internal strength & capabilities
• Operational review • Growth strategy and goals• Resource Availability• Readiness for change
Internal Analysis
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Country specific analyses will be developed for each key business category:
• Customer Analysis• Competitive Analysis• Market Analysis• Operational Assessment
Market Analysis
assessing the gap between
future and current states to
assist in the development of
market entry options
• Analyse selected countries to on macroeconomic and industry variables
• Perform analysis and identify focus industries/countries
Country SelectionOrganisational
feasibility
Operational feasibility
Financial feasibility
Market Entry
• Establish relationships with key marketing contacts, suppliers, and partners
• Support marketing efforts• Identify, assess and
establish relationships with new clients, partners and government agencies
• Drive and support relationships with key clients
• Support registration with consultants and clients
• Sustain and stabilisebusiness over long-term
Entrench Operations
Next Steps
Develop Your Visionary and Innovative SkillsGrowth Partnership Service Share your growth thought leadership and ideas or
join our GIL Global Community
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Join our GIL Community NewsletterKeep abreast of innovative growth opportunities
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For Additional Information
Mark Simoncelli
Global Director
Growth Implementation Solutions
(+27) 21 680 3260
Craig Parker
Senior Economist
Emerging Markets
(+27) 21 680 3260
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Vassilissa Kozouilina
Sales Director
Africa
(+27) 21 680 3260
Samantha James
Corporate Communications
Africa
(+27) 21 680 3260
