Nigeria’s population is likely to overtake the United States by 2045, according to the United Nations, and its GDP is likely to surpass US$1.6 trillion by 2030 with a yearly growth rate of 7.1 percent, propelling it into the top 20 for economies by GDP. In a similar time frame, global management consulting firm Accenture in a recent report projects consumer spending to grow to $167 billion by 2020.
Tapping into this market is obviously imperative to gaining market share in sub-Saharan Africa.
Kenya is a favored destination for investment in Africa. It is sub-Saharan Africa’s sixth largest economy and population. And its birthrate remains in the top quartile globally. The International Monetary Foundation (IMF) projects the Kenyan economy to grow 5 percent in both 2014 and 2015, compared to the 4.7 percent in 2013. All this being said, the underlining numbers in Kenya indicate more spending consumers in one of Africa’s biggest food-loving countries.
Accenture projects consumer spending to grow to US$38 billion by 2020. An Africa-focused private equity firm invested in Nairobi Java House, a local Kenyan coffee house and restaurant, back in 2012, signifying a new focus of investment firms. A large expansion by Kentucky Fried Chicken (KFC) only further underlines the opportunity. And Subway will be entering and likely confronting Subzone, a healthy eating alternative in Nairobi that has a similar look and appeal of Subway.
The former “largest economy” in sub-Saharan Africa is still trying to get its growth back on track. The IMF projects the economy to grow 2 percent in 2014, only barely surpassing the 1.9 percent growth in 2013. Weaker economic numbers worry investors and politicians alike. Yet consumer spending remains strong with untapped potential.
Consumer spending, projected at US$315 billion in 2020 by Accenture, will be approximately double that of Nigeria. Skeptics routinely suggest that the food service business is approaching saturation in South Africa. Yet all the numbers indicate growing competition but nowhere near any level where investors cannot snag great returns.
Uganda & Tanzania
Tanzania and Uganda embody the East Africa boom. Underpinned by recent natural resource discoveries, both countries possess fast growing economies. The IMF projects the Tanzanian economy to grow 7 percent in 2014, compared to 6 percent in 2013 while the Ugandan economy grows at 6.25 percent in 2014, compared to 5.75 percent in 2013. As commercialization of these resources take hold and pipeline projects mature, these growth figures may very much be higher in a few years.
If not for the supply chain challenges, many investors think these two countries would rise to the top as investment destinations for the food service industry. Yet a lack of commercial quality inputs ranging from potatoes typically for French fries to meats (i.e., chicken and beef) stymie operators and create deficiencies throughout the value chain. Focused efforts on agriculture from central governments and local investors will continue to improve the industry’s prospects.