World Retail Voice Blog Post
The emerging urban markets of Sub-Saharan Africa and the Middle East
As Retail Congress Africa returns to Johannesburg for another year next month, Planet Retail’s Chief Economist Boris Planer comments on the emerging urban markets of Sub-Saharan Africa and the Middle East.
“Sub-Saharan Africa and the Middle East are now the fastest growing regions in the world after emerging Asia, which is exactly why the World Retail Congress series is returning to Johannesburg for another year. While admittedly a number of challenges wait for retailers hoping to invest in the markets, this is an especially good time for FMCG and clothing brands to grow business in these regions.
Economically, the Middle East is more advanced than Sub-Sahara, but is widely perceived as politically unstable. The same cannot be said however for the region’s largest consumer markets, Saudi Arabia and UAE, which provide a well-developed infrastructure of shopping centres – something international clothing and luxury brands are starting to leverage. Egypt as another key market is now gradually becoming more stable, too.
At the moment international food retailers and foodservice operators are largely staying out of the Middle East and relying on franchise partners to drive business, however this shouldn’t deter FMCG suppliers, as the region already offers plenty of import opportunities.
Cairo and Tehran are the biggest urban retail markets in the region, and once Tehran ends its political isolation, the city’s extraordinarily high sales densities and fairly modern retail infrastructure have the potential to develop it into a real opportunity.
For retailers, Sub-Saharan Africa still provides multiple challenges. Clothing brands will find a lack of shopping centres outside of South Africa, as the property sector continues to develop from a low base. In the grocery space, the often weak infrastructure and supplier base might allow for small numbers of upmarket outlets but development needs to continue for at least another 15 years before Sub-Sahara is mass-market ready in terms of hypermarkets.
By 2019, Lagos will overtake Johannesburg as Sub-Saharan Africa’s largest urban market. While average incomes in Lagos will continue to be lower than in Johannesburg, the former offers twice the population size and very high sales densities due to the high proportion of people living in densely populated dwellings, making it one of the continent’s most attractive markets for FMCG distribution in the lower income parts of the population. However, the real golden ticket is Luanda, the capital of Angola, whose urban core has highest retail sales per Sq Km in Sub-Sahara.”
Boris Planer will be speaking at Retail Congress Africa on Tuesday 18 November at 10.15 on ‘Regionalisation: Doing business across Africa‘.