Johannesburg - Wanted: Investors for young, hot and thirsty
continent. Population to double in 40 years. Poor, but less than it was.
Interested parties must think long term.
Africa's demographic profile could make it a dream for
retailers if spending power continues to rise - or an unfolding disaster for
everyone if the labour market fails to absorb its swelling ranks of young
Top business executives at the Reuters Africa Investment
summit see potential. They expect ever higher numbers of childless young people
to enter the labour market and earn money that they can spend or save.
The latest UN figures project that Africa's population will
double over the next four decades to almost 2 billion. To give just one
example, 46% of Zambians are below 15.
"We are going to benefit from a demographic dividend.
You are going to have this significant increase in consumers," said John
van Wyk, who co-heads the Africa business of private equity firm Actis, which
has $1.5bn under management in Africa.
A 2010 study by the McKinsey Global Institute projected that
the number of African households with discretionary income earning over $5 000
would rise to 128 million by 2020 from 85 million.
Credit Suisse estimates African household wealth grew at 19%
in 2010-2011 - outpaced only by India and Latin America.
Some argue that hype around Africa is overdone and that
concentrating on the big macroeconomic numbers gives a misleading picture on a
continent where most trade remains informal.
"(It) doesn't tell you about the peasants, it doesn't
tell you about the urban slums," author Duncan Clarke told Reuters this
"The idea that because there are expanding consumer
markets or more mobile phones in Africa and more people waltzing around in
Armani suits, that this is somehow going to drive the economies out of poverty,
is pure fatuous nonsense," he said.
But retailers are not discouraged and Actis sees pent-up consumer
desires to be tapped.
"If you look at Nigeria for example, a sophisticated
retail model there is actually non-existent. The bulk of trade still happens in
informal markets," he said. "But as people become more affluent they
That was also the watchword for Mark Bowman, brewer
SABMiller's managing director for Africa.
SABMiller's Africa business, not counting South Africa, is
the group's fastest growing. Underlying volumes in the last three months of
2011 were up 11% on the year before.
"Beer is highly aspirational. As the economies improve
and the legal drinking populations grow, the prospects are very positive for
beer and soft drinks," he said.
SABMiller [JSE:SAB] plans to invest up to $2.5bn in Africa over the
next five years.
The strategy with Africa's income levels and demographics,
he said, was simple: make beer affordable by cutting the price.
"You have this natural increase in wealth, slowly but
surely and inexorably across Africa and what we want to do is go down and meet
it earlier as opposed to waiting for it because beer is just too expensive, on
balance," he said.
"So if you can get beer down to a Latin American-type
earning profile where within 30 minutes of work you have enough money to buy a
beer, from the three to four hours it takes currently, we would significantly
increase the opportunity for our sales."
But the big worry is those who cannot afford to buy any sort
of drink as youth unemployment rises in many parts of the continent, fuelling
resentment against the expanding elites and potential social unrest.
"Youth underemployment and unemployment is a major
source of concern to our government," Zimbabwe's Youth Minister, Saviour
Kasukuwere, told the summit in Johannesburg.
"If you have young people who are restless and they
have nothing to occupy them then the sure way will be the Egyptian kind of
uprising," he said, referring to the uprising that toppled president Hosni
Mubarak last year.
There has been no sign yet of North African-style revolts
spreading south of the Sahara.
And Zimbabwe is a particular case after losing more than a
decade of growth to what detractors say were disastrous economic policies.
But Zimbabwe's demography is not unique to the continent.
According to the World Bank, about 40% of its population is below the age of 15
and estimates of its unemployment rate run as high as 80%.
"In 1900 there were only 110 million people in Africa,
now there are over a billion. In 2050 Africa is going to have 2 billion. So
there will still be huge problems of poverty, of income scarcity, and most
importantly of unemployment," said Clarke.