While the rest of the world is battening down the hatches and waiting for the economic tsunami to pass, Africa’s consumer economy is doing just fine, thank you. Although the severe fall in the demand for oil and other commodities has tarnished what might have been a record growth period for Africa, the continent’s burgeoning middle classes have more than kept the domestic economy afloat. Sarah Rundell reports.

In recent months, Africa’s big brewers have bucked the global economic downturn by posting record sales and growth while their parent companies in established markets have watched sales slump and been forced to close depots and lay off staff. Nigerian Breweries, the West African nation’s biggest beer maker by volume, and Consolidated Breweries, both majority-owned by Heineken; and Guinness Nigeria, part of British drinks company Diageo, are all seeing strong growth. Nigeria sells more Guinness than any other country apart from Britain, and sales jumped 13% in the last financial year, compared to falls of 8% and 7% in Europe and North America respectively. According to Canadean, the drinks research group, Nigeria ranks among the world’s top 10 fastest-growing beer markets, with annual sales volume growth of around 10% between 2002 and 2008. London-listed SABMiller recently made a push into the Nigerian drinks market by buying the small Nigerian brewery Pabod last December.  But it’s not just beer sales that are booming in Africa. Despite the negative impact of the economic crisis on sectors such as mining and manufacturing, several industries are successfully weathering the storm.

Africa’s population is growing faster than any other major region and economic growth over the last decade has fostered a middle class that still has money to spend. “The large consuming middle classes are increasingly affluent, increasingly brand aware and they are now buying through the formal retail network,” says Jonathan Harrison, the London-based global head of research at Nigerian bank UBA.  “The important drivers will remain the same,” summarises Brian Mugabe, managing director at Johannesburg-based Securities Africa. “Telecoms, retail banking, real estate, and construction.” International telecom operators’ current interest in Africa’s mobile phone market is testimony to its strength despite the recession. Not wishing to enter the fray as new operators, many are now seeking alliances with established players. For example, in an attempt to access fast-growing markets in Africa and the Middle East – and in what would be, if successful, the biggest merger and acquisition of the year – India’s largest mobile operator, Bharti Airtel is in talks to buy a stake in South Africa’s MTN. French media conglomerate Vivendi SA had been in talks with Kuwait-based Zain Group to buy its African operations. Zain, whose biggest shareholder is Kuwait’s sovereign wealth fund Kuwait Investment Authority, has spent more than $12bn in Africa since 2005 – including nearly $3bn in Nigeria.



Case Study 1

Integr8 Group

Integr8 Group, South Africa’s largest privately-owned ICT managed-services company, designs, implements and maintains the IT infrastructure and service needs of leading corporations. Clients include travel and tourism company Amadeus, mining company Gold Fields, as well as Volvo and MTN. From an initial investment of $30,000, the company has grown to a turnover in excess of $15m. Despite the recession, the company expects good growth and is sticking by its expansion plans. It expects to benefit from growth in Africa’s telecoms, travel and private health sectors particularly. “We are expanding our services up the continent and have offices in Botswana, Kenya and Nigeria. “In the current climate, we find that companies will keep investing in ICT to keep competitive. In many cases, our clients will cut back on staff numbers and marketing before they cut back on ICT,” says Rob Sussman, co-chief executive of Integr8 IT Group.

The company has done well on the back of South Africa’s infrastructure investment ahead of the 2010 World Cup. That said, Sussman says the company is suffering from a lack of new business in the form of entrepreneurial business start-ups. He also says the government should do more to open up the public sector to private ICT providers. “We want to take our delivery expertise into government departments.”