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Measuring the African Consumer Market

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Measuring the African Consumer Market

By: Leah Ngari

Estimated reading time: 5 minutes 

Africa’s consumer market is growing. Over the past twenty years, household spending in Sub-Saharan Africa has grown 150% faster than the populationLandry Signé at the Brookings Institution forecasts that total household consumption in Africa will reach $2.1 trillion by 2025 and 2.5 trillion by 2030*. African companies such as Azam and Bidco now include dozens of consumer brands sold across the continent. Large multinationals such as Kraft FoodsJohnson & Johnson, and Volkswagen have ramped up their presence on the continent to meet this growing demand.  

How Big is the African Consumer Class? 

While there seems to be a consensus among private-sector analysts and academic researchers that the African consumer market is growing, it is not always clear how this class is identified and measured. A globally accepted, general definition for the middle class* focuses on average yearly income. For example, the PEW Research Centre defines middle-income households as households that earn two-thirds to twice the national median income. Others categorize households as “middle class” according to total asset ownership or consumption patterns. 

None of these measures can accurately capture the magnitude and spread of Africa’s consumer class. First, data sets regarding income or purchasing patterns are often incomplete or unreliable. Many Africans derive a considerable portion of their income from informal work, which can skew official income statistics. And purchasing patterns mean different things in different places since consumer good prices vary significantly throughout the continent. A person in Lagos, Nigeria, can buy 10 liters of petrol at $4.60, while in Luanda (Angola), the same 10 liters sell for $11.50 – more than double. In eSwatini, 1 GB of Data can cost as much as $21.39, versus as little as $1.97 in Mozambique. These variations mean that consumption levels of specific goods do not necessarily indicate overall purchasing power. 

Second, measuring consumer capacity by looking at income or wealth ignores the fact that household income is often vulnerable to seasonal fluctuations. Many African middle-class members supplement their income with informal side jobs, so their income does not remain steady over time, affecting consumption habits. And for most Africans who still work in agriculture, income is affected by seasonal price fluctuations. As a result, a household’s consumption ability changes throughout the year and between years due to variations in weather patterns and commodity prices. Companies looking to build a long term strategy cannot create an effective African consumer market strategy by looking at income alone. 

Measuring the African Consumer Market

Some data consultancy companies have found ways to include income fluctuations, geographical differences, and consumption patterns when measuring the consumer classIpsos used the AfDB identification of the African middle class as people earning between $2-$20 per day as a starting point. Then, they added several criteria of their own to offset disparities and capture a more stable set of consumers. In their report “African Lions: Who are Africa’s rising middle class?” Ipsos suggests using the following consideration to categorize and individual as a “consumer”: disposable income (not spending more than 75% of income on groceries); productive occupation (that the individual is employed, runs a business, or is in further education); and education 

Other data consultancies have scrapped the income indicator altogether. In its report “Finding the Dynamic African Consumer,” Fraym adapted a method initially designed to classify consumers in India. This technique uses asset ownership data and educational level to identify consumers, with a higher educational level offsetting lower asset ownership and vice versa. Assets include durable assets, such as refrigerators and televisions, and household characteristics, such as piped-in water and agricultural land. 

This classification also allows for better cross-country comparisons without relying on unstable exchange rates or pricing discrepancies. Using its method, Fraym identified 330 million consumers in the region, 219 million in just five countries and 94 million in another fifteen countries. 

Why Consider the Consumer Market at the Continental Level 

Looking at the consumer market on a continental level allows companies to compare between different consumer markets in the region and strategize their growth accordingly. According to Fraym, 95% of the consumer class resides in just 20 out of the 54 countries. For example, Nigeria has about 52 million people in the consumer class, but Togo has fewer than 2 million consumers, presenting a very different market environment for investors and consumer-facing companies. 

These differences also present between cities. Lagos in Nigeria and Johannesburg in South Africa top the count with over 8 million consumers, and Kinshasa in the Democratic Republic of Congo and Luanda in Angola have more than 4 million. Since most African consumers live in cities, companies should focus their market research on cities rather than countries. 

Using Data to Inform Strategy

Companies cannot rely on generalized income levels or spending data to assess the current magnitude or future potential of consumer demand in Africa. Businesses that want to serve Africa’s growing consumer base should use the data on the continental level to identify the cities where they could grow and invest resources to study consumers’ behaviors and characteristics in that city. The lack of readily available, reliable, and comprehensive data sets should not deter companies looking to grow in Africa from making informed strategic decisions based on realistic projections. 

*A note about Covid’s impact and terminology

Most of the projections quoted in this article pre-date the Covid-19 pandemic. Although the specific numerical forecasts need to be adjusted in light of the contraction across the continent, the considerations regarding the best ways to measure consumer demand on the continent remain.

The term “consumer class” and “middle class” are used synonymously.

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Empower Africa Hosts “UAE and Israel Uniting with Africa” Event in Dubai

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Empower Africa Hosts “UAE and Israel Uniting with Africa” Event in Dubai

Tel Aviv, Israel – DECEMBER 15, 2020:

Empower Africa hosted its first event in Dubai last week under the flagship of “UAE and Israel Uniting with Africa” in parallel with the GITEX 2020 Conference. Founder and CEO of Empower Africa Ezi Rapaport, VP of BD and Operations Shai Bernstein, Director of Agriculture Maoz Aviv and others represented Empower Africa at this first ever Empower Africa Event in the UAE. Distinguished guests included Ahmed bin Sulayem, Executive Chairman of the Dubai Multi Commodities Centre (DMCC), the UAE’s leading free trade zone. Over 60 guests from the UAE, Israel, Bahrain, Nigeria, Rwanda, Egypt, the UK, the US, France, and India attended Empower Africa’s evening of dining and networking, and included representatives from the investment, startup and business sectors.

The historic event was made possible by the Abraham Accords Peace Agreement which normalized relations between Israel and the UAE. This year the GITEX Future Stars event included an Israeli delegation. Empower Africa’s Shai Bernstein and Caleb Zipperstein played key roles in assembling the Israeli delegation.

Speaking at the dinner, Empower Africa’s Founder and CEO. Ezi Rapaport shared some thoughts on the symbolism of the event. “The world is becoming more of a global community,” said Rapaport. “We have this pandemic, and people are living a little more isolated, but at the same time we are connecting as a global community and global family.”

Discussing the value that Emirati-Israeli business partnerships could bring Africa, Rapaport described the strong culture of innovation shared by Israel and the UAE. “This is not just an opportunity for us to innovate for each other, with Israel innovating and providing their solutions in the UAE, and the UAE with their innovations looking to provide services to Israel. We can now come together and think about how we can create value together for others.”

Emphasizing the importance of acknowledging African creativity and innovation, Ezi explained that the normalization agreement opened the door not just for two-way partnerships between Israeli and Emirati businesses, but also for multilateral partnerships between Israeli, Emirati, and African companies. Ezi urged Israeli and Emirati business leaders to realize the commercial potential in investing and partnering with African entrepreneurs and businesses.

“It’s not about doing things for Africa,” Ezi concluded. “It’s about doing things with African entrepreneurs and businesses.”

Mr. Ahmed bin Sulayem, Executive Chairman of the Dubai Multi Commodities Centre (DMCC), said, “Empower Africa’s event highlighted the unique opportunity that the UAE and Israel have to create value for the world and specifically with Africa. I enjoyed meeting professionals and business leaders from many countries and diverse sectors all uniting around a core purpose, to create value together, for each other and for the benefit of others. I look forward to working with Empower Africa in driving cooperative initiatives in building trade with the Continent.”

To view the media gallery for this event, please click here.

The Empower Africa Business Network is now open to receive applications, apply today.

About Empower Africa:

Empower Africa is a business with a mission to accelerate empowerment by driving investment, trade and job creation in Africa. The company’s main activities include operating the Empower Africa Business Network, hosting international events and trade missions, and providing strategic consulting and advisory services. The company has recently launched a new customized application to create a global private sector-led ecosystem driving development in Africa.

Media Contact:
info@empowerafrica.com

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UAE & Israel Uniting With Africa

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Driving Business in Africa - UAE & Israel Uniting With Africa

December 09, 2020

Dubai

Empower Africa hosted its first event in Dubai on December 9, 2020 under the flagship of “UAE and Israel Uniting with Africa” in parallel with the GITEX 2020 Conference. Over 60 guests from the UAE, Israel, Bahrain, Nigeria, Rwanda, Egypt, the UK, the US, France, and India attended Empower Africa’s evening of dining and networking, and included representatives from the investment, startup and business sectors.. Learn More

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Cannabis Opportunities in Africa

Cannabis

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Cannabis Opportunities in Africa

By: Shira Petrack

Estimated reading time: 4 minutes 

African farmers have been growing cannabis in Africa for centuries. Nevertheless, consumption of the plant for either medical or recreational purposes is banned almost everywhere on the continent. Recently, however, the growing global demand for medical cannabis has caused several African countries to rethink their cannabis cultivation laws. 

Indeed, as more and more countries worldwide legalize marijuana consumption for medicinal and even recreational purposes, the market for legal cannabis is exploding. The global market for legal cannabis is expected to reach almost $43 billion by 2024. By 2027, the demand for legal cannabis in Europe alone should hit $37 billion, up from $3.5 billion in 2019 – an almost 30% CAGR.

Legal Cannabis Cultivation is Growing in Africa 

In 2017, Lesotho became the first country on the continent to grant an administrative license for the commercial cultivation of marijuana for medical and scientific purposes. Since then, several countries have followed suit, including ZimbabweSouth AfricaMalawieSwatiniZambiaUganda, and RwandaGhana has also authorized cannabis production, but only for varieties with THC (the plant’s psychoactive ingredient) levels of 0.3% or less.

Some of these countries, such as Malawi and Zimbabwe, are major tobacco exporters. Policy makers hope that cannabis can replace tobacco as the country’s top cash crop, given tobacco’s destructive environmental footprint. 

While most countries that allow cultivation also authorize the consumption of cannabis for medical purposesUganda and Rwanda are currently growing the plant strictly for exports. 

In other countries where cannabis production is still illegal, such as Tanzania and Kenya, large amounts of the crop are still grown and exported. The economic incentives to legalize the already existing cannabis trade might mean that these countries’ regulations could also change

What Makes Africa Particularly Suited for Cannabis Cultivation? 

Most of Africa’s climate is favorable to cannabis cultivation. The plant likes warm and sunny weather and does not do so well in the cold. Certain cannabis strains can also thrive in extreme heat. Some growing techniques such as dry farming allow farmers to grow the crop using mostly rainfall with minimal additional watering if the climate conditions are right. Drip irrigation is also a cheap and efficient way to water cannabis crops in Africa. 

The cannabis plant grows in stages. First come the initial germination and seedling. Then, the plant enters the vegetative phase and produces most of its leaves and branches. After several weeks, the plant can enter the flowering stage. If the plant is a male plant, it will grow pollen sacks. If it is a female plant, it will produce flowers (“buds”) that can be smoked or processed into tinctures and oils. 

The plant switches from the vegetative phase when the days begin to shorten and the nights last at least 12 hours. Even though cannabis needs 12 hours of darkness to bloom, prolonged and continuous sunlight (up to 12 hours) will produce the best flowers. Thus, most of Africa is optimal for cannabis production since almost the entire continent lies within 35 degrees of the Equator, where the days never get too short. 

While many areas of the United States are suitable for outdoor cannabis cultivation, most of Europe lies north of the 40th parallel and so does not receive enough sunlight during the winter. The plant cannot flower in the European summer either, since the long summer days keep the plant in the vegetative phase. Of course, European growers could grow their crops indoors using artificial lights, but this requires a tremendous amount of electricity, which is costly both in terms of money and environmental toll. 

Global Potential of Africa’s Cannabis Market 

Africa, with its favorable climate conditions and proximity to Europe, seems well placed to cater to the growing European market for medical cannabis. The continent’s warm weather, rich soil, and abundant sunshine can help it compete against established cannabis powerhouses. Unlike Canada or the Netherlends, where the cold climate requires cannabis to be grown in resource intensive greenhouses, cannabis in Africa can be cultivated outdoors in open fields. Indeed, several American and Canadian companies have already set up or expressed interest in setting up farms and processing plants on the continent, despite the flourishing cannabis cultivation industry in their home countries. 

Setting Up a Cannabis Operation in Africa 

There are a lot of factors to consider before setting up a cannabis operation in Africa. First and foremost, you need to decide on the country. Some countries have legalized medical cannabis cultivation but not processing. Others authorize processing but have already granted long-term exclusive licenses to major companies. Your target market will also affect your choice since different countries have different export agreements with off-continent partners. 

Once you’ve decided what country you want to work in, getting the legal license can pose a new set of complications. And after you receive your license, you will need to build your operation, hire the right people, and set up your local supply chain. 

That’s where we come in. Empower Africa’s Agriculture Solutions and Consulting Services combine the world’s top agronomy experts, industry-leading technology, and tailor-made business-oriented solutions. We can walk you through the process to help you build the most efficient and profitable version of your African cannabis operation.

Contact us, and let’s grow your business.

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Invest in African Agriculture

Sierra Leone fields

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Invest in African Agriculture

By: Shira Petrack

Untapped business opportunities abound in Africa’s agriculture sector. Beyond the profits, however, investing in African agriculture offers the rare chance to catalyze growth in a sector that employs more than half of all working people in Sub-Saharan Africa and to move the continent towards food sovereignty. 

Today, despite the considerable human labor working on some of the most extensive tracts of arable land left in the world, agriculture accounts for only around 15% of SSA’s GDP. What is more troubling is that continent is still not growing enough food to feed its population. 

Most Food on the Continent is Imported – and It’s Still not Enough

Instead of attaining food sovereignty through the farmers’ agricultural efforts, Africa imports most of its food. The continent’s already sizable food import bill increases year after year and is expected to more than triple from $35 billion in 2017 to $110 billion by 2025

The low agricultural yields are largely due to the lack of investment into basic efficiency raising measures such as irrigation systems, mechanization, and adequate storage facilities. Up to 70% of farmers cultivate parcels of less than two hectares manually using hoes. 

Even with the imports, there is still not enough affordable food for everyone. Around 1 in 5 people on the continent are classified as severely food insecure, and over half the population is moderately food insecure. Thirty-three percent of children under the age of five are considered stunted

These statistics translate to over 224 million people on the continent who live in households where at least one person during the year has reduced the quantity of the food, skipped meals, gone hungry, or gone a whole day without eating because of a lack of money or other resources. At least 610 million people live in households where at least one person was forced at times during the year to eat low-quality diets or reduce the quantity of food they would normally eat because of a lack of money or other resources. And Africa is the only region in the world where the number of stunted children has risen in the past twenty years.

Building a Strong Agricultural Sector – What Will it Take?

Affluent countries, multinational organizations, and international foundations have been sending commodities and other types of international assistance to Africa for decades. Unfortunately, food aid is too low and too sporadic to bring real food security to the continent. 

Instead, sustainable food sovereignty on the continent will most likely come through the private sector. Companies and individuals who want to make a difference need to realize that investing in agriculture in Africa is not just a moral imperative – it is also a savvy business decision. In the short run, investments in irrigation, mechanization, storage facilities, and modern inputs will allow farmers on the continent to grow enough food for them and their communities. In the long term, these same farmers will be able to produce and store surpluses and sell them throughout the continent and internationally. The world’s population is increasing at a dizzying pace, and with the right investments, Africa can become its breadbasket.  

By putting their “skin in the game,” international investors and agribusinesses will be more motivated to continue investing in African agriculture year after year. And since Africa has such large tracts of underutilized arable land, investors will be able to reap significant rewards by giving local farmers the means to obtain the most from their fields. 

In the past decade, private equity investments into agriculture have risen globally, with most investments going to Africa. But a much larger investment is still needed. According to a study by McKinsey & Company, Sub-Saharan Africa requires an investment of $8 billion for improved storage and $65 billion for irrigation to achieve its agricultural potential. In terms of inputs, farmers across the region need eight times more fertilizer and six times more quality seeds to reap the most from their soil.

How to Start Investing in African Agriculture 

If you are an agribusiness executive or investor reading these lines, you might realize the opportunity – but you don’t know where to start. When it comes to Africa, it is much harder to use the web to obtain even basic market data, and many seasoned businessmen lack the connections necessary to find the right local partners. Even after such partners are identified, conducting due diligence can be nearly impossible. 

That’s where we come in. Whether you are an international investor looking for the right local partner, an agribusiness executive considering expanding into or across Africa, or a local farmer wishing to increase your yields, we can help. Empower Africa’s Agriculture Solutions and Consulting Services combine the world’s top agronomy experts, industry-leading technology, and tailor-made business-oriented solutions to help you build the most efficient and profitable version of your African agriculture business. 

Contact us, and let’s grow your business.

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Second Driving Business in Africa Virtual Networking Event

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Second Driving Business in Africa Virtual Networking Experience

December 02, 2020

Online Event

On December 2nd, 2020 we hosted the Second Driving Business in Africa Virtual Networking Experience. We are happy to report that 126 individuals from 23 countries participated. Our attendees ranged from government officials to seasoned entrepreneurs who represent 14 diverse industries. For your convenience, below are the recordings from the event.