Johannesburg, 16 Sept. 2015 – Global measurement company Nielsen has released its pioneering African Prospects Indicator (APi), which for the first time, provides existing and potential investors in Africa with comprehensive insights across an extensive range of indicators, culminating in an unambiguous ranking of Sub-Saharan African countries.
The APi is the result of 18 months of intensive collection and analysis of detailed macro-economic, business, retail and consumer information sets. These have been combined and weighted into a consistent single source, trended and comparative set of metrics to understand not only a country’s relative potential but also the source of that potential.
Speaking at the global launch of the report, Nielsen Africa Managing Director Allen Burch said: “Africa is a vast and complex continent. With 48 individual sub-Saharan Africa landscapes and distinct consumer and retail characteristics differentiating each country; the need for common measurement information to assess relative market potential has never been greater.
“The launch of the APi, means we’re now able to provide consolidated country views based on multiple performance indicators that will allow investors to assess the critical metrics to understand where and how to optimise investment to achieve sustainable growth.”
The launch of the report takes place against the backdrop of a rapidly changing global investment environment that has seen a shift in economic opportunity from the developed to the developing world, with six out of the 10 fastest-growing economies in the world now located in Africa.
Many African countries also have the largest ranked populations and population growth markets in the world. In addition, the estimated 350-million middle class consumers on the sub-continent, and the resultant increasing scope and consumer spending potential, places Africa firmly in the spotlight as a highly conducive environment for the growth of global, regional and local companies.
In terms of the macro-economic context provided by the APi, the 26 countries measured in the study represent 93% of sub-Saharan Africa’s economy and 85% of the population. Fifteen of these countries show GDP growth ahead of the sub-Saharan African average of 4.5%.
Topping the APi’s Economic Growth Ranking with double digit growth are South Sudan (13.1%), Ethiopia (10.4%) and the Democratic Republic of Congo (9.5%). While Nigeria commands sub-Saharan Africa’s largest economy, valued at US$568-billion, and has frequently appeared on the fastest-growing list, the outlook for growth is now viewed as more moderate and is currently placed at the lower end of the scale at 4%. Further progress is also challenged by steep depreciation of the country’s currency (the Naira), rising inflation and lower oil prices all of which challenge further progress.
South Africa’s outlook also remains lacklustre, as the economy shows little signs of recovery from its current low growth rate at the 1% mark. Creeping interest rates, short-lived fuel price relief and increasing utility prices place an ever-increasing burden on growth, in addition to the country’s electricity constraints.
While the outlook for Angola, Ghana and Zambia has deteriorated, on a more positive note, improving growth expectations are forecast for Cote d’Ivoire, Ethiopia and Kenya.
Another key macro-economic metric included in the APi is inflation, which is viewed as one of the more realistic indicators of the actual conditions facing consumers and directly affects their ability to save, spend and invest. It also often has an inverse correlation to economic growth and future sentiment.
Countries that rank positively (i.e., display lower levels of inflation on this indicator) include: Ivory Coast, Burkina Faso, Senegal and Zimbabwe, highlighting their ability to provide greater price stability and more favourable environments for consumer spending, as well as growth ahead of the sub-Saharan African average. Consumers who face the highest inflation levels include Ghanaians, Nigerians and Angolans, all of whom live in countries with economic growth behind the sub-Saharan African average.
Ugandans have experienced consecutive quarters of declining inflation of more than 5 percentage points versus quarter 1 2014 and deflation of 3% in food prices in quarter 1, 2015. The affordability of a common wallet of essential items in Uganda is also the lowest of all the countries measured, at US$11.84, nearly one-third of the price of the equivalent basked of essentials in Ghana or Angola.
A further data set incorporated in the APi was sourced from company surveys during the first quarter of 2015, when business executives from across Africa with single and multi-country responsibility ranked the same 26 sub-Saharan Africa markets based on their view of growth opportunities.
The markets topping the list in terms of overall economic growth expectations – that were accorded a measurement out of 10 - are Ethiopia at 7.1, the Ivory Coast (6.5) Mozambique (6.4) and Kenya (6.3). Angola ranks fifth at 6.3. However, companies do not recognise their own growth potential as highly for Angola and Ethiopia as they struggle to overcome various operational challenges within these markets.
In addition, sentiment on growth outlook for “their country” and “their business” is less favourable versus a year ago in: Nigeria (5.3), South Africa (4.3), Tanzania (5.5) and Zambia (5.9). It’s important to note, however, that while South Africa ranks on the lower level of the list, businesses still view their opportunities to grow within this country ahead of overall country expectations.
For macro-economic potential and business sentiment to translate into actual growth; companies need to balance their outlook with consumer and retail realities. Confidence in personal finances and spending intentions provide favourable opportunities to accelerate growth and introduce new products. A key dataset included in the APi report therefore relates to the percentage of retailers that feel that consumer spend in their stores is increasing. Topping the list is Zambia at 44%; Nigeria at 43% and Uganda at 32%. South Africa is 27% and at the lower end of the scale Ghana at 12%.
Perhaps the most critical component of an integrated view of prospects in Africa is not only having the right product in the right climate, at the right time but also in the right place. In the expansive traditional trade environments characteristic of African retailing, retailers are not only valuable brand recommenders but are often closest to consumers’ day-to-day lives, and therefore have respected knowledge of shoppers.
In this regard, actual retail sales to consumers is the ultimate outcome of performance. In South Africa, annualised quarter 1 sales across more than 150 consumer goods categories have risen by 3.7%, with pack unit growth of 3.1%. As consumers struggle with rising overall household expenses they have traded down to smaller packs and reduced shopping frequency. They are also more inclined to shop around for more competitive prices and promotions. Kenya’s retail sales declined in quarter 1, 2015, as the outlook for prospects has deteriorated with consumers preferring to hold on to their cash rather than spend it. Higher Nigerian food inflation has also dampened positive consumer views.
In light of the above variables, the real strength of the APi is the depth of data utilised and then weighted to determine a single, easy to comprehend overall ranking that highlights the relative and overall potential growth with insights into which dimensions to focus on to achieve success.
Looking at the first ever overall ranking resulting from the outlined key metrics, Nigeria tops the APi ranking. It has, however, slipped in terms of the business and retail prospects rankings. Burch comments that, “Sustained success in Nigeria is therefore about efficiently navigating the complex routes to market pinpointing optimal outlets to generate the greatest return and working with these retailers to build and activate demand, not a quick and simple task.”
An unexpected second is Cote d’Ivoire which ranks highly on most dimensions, however, with this country the principal prospects for realising growth will be to concentrate on consumer related elements like: need identification and fulfilment, brand and product awareness, trust and recommendation.
In third place is Kenya which ranks strongest in terms of business sentiment. While South Africa ranks in ninth place it cannot be overlooked. Its economy accounts for the largest base of consumer spend in sub-Saharan Africa, it is home to more than 50 million people with various coping strategies for overcoming tough times.
Looking ahead Nielsen Content and Marketing Director Ailsa Wingfield says; “Success in Africa depends on many factors including agility and localisation of strategy. Realising opportunities will also take time as companies navigate complex environments and develop extended operational parameters.
“Within this context the strength of our new APi is its unique ability to integrate business, consumer and retail prospects together with more speculative and commonly used macro-economic factors. This brings companies closer to consumer market realities, which means investment can be more optimally directed to achieve maximum impact.”
The APi will be released on a quarterly basis with the next report to be published in November 2015.
The Africa Prospects Indicator report comprises information from proprietary Nielsen data and non-proprietary sources on a quarterly basis. Multiple datasets are collected across the Macro Economic, Business, Consumer and Retail dimensions. Comparable, country level datasets are analysed and factored, first within each dimension and then equally combined to obtain an overall country rank. A total of 9 datasets, across nine countries and 12 weighting factors are used to determine the individual and overall country rankings
Nielsen N.V. (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers Watch and Buy. Nielsen’s Watch segment provides media and advertising clients with Total Audience measurement services across all devices where content—video, audio and text—is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry’s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen provides its clients with both world-class measurement as well as analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries that cover more than 90% of the world’s population. For more information, visit www.nielsen.com.