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Africa a Mecca for multinationals

         Date: 2012-07-06

           Tag: Africa, Africa multinationals

Summary: That ubiquitous McKinsey & Company report from two years ago which said Africa's consumer spending would reach $1,4tn in 2020, spurred not only a wave of Afro-optimism, it announced to the world…

That ubiquitous McKinsey & Company report from two years ago which said Africa’s consumer spending would reach $1,4tn in 2020, spurred not only a wave of Afro-optimism, it announced to the world that Africa was open for business.

The continent, long shrouded in scepticism and instability has become a modern day mecca for consumer-facing multinationals in search of higher yield.

“Africa’s emerging middle class and favourable demographic structure is expected to result in a major increase saving and investment rates, trigger a spike in disposable income and create a new and vibrant consumer class, all of which will provide ample opportunities for corporates to engage in business activities on the continent,” Ronak Gopaldas, sovereign analyst at RMB says.

Bruce Layzell, General Manager New African Markets at Yum, the owners of brands including KFC, Taco Bell and Pizza Hut, says Africa is giving people the ability to get in on the ground floor of its development.

“Things are just starting to boom, so if you go now you’re going to enjoy massive upside and if you wait much longer its going to be very crowded and much more difficult to get in there,” he says.

Yum, which is considered the world’s largest fast-food restaurant company, hopes to open 130 KFC stores in Africa this year, Keith Warren, MD, KFC Africa says.

Local player Famous Brands, whose portfolio includes Steers, Wimpy and Debonairs Pizza already operates in 15 African countries.

CEO Kevin Hedderwick says the group’s strategy with regards to Africa, is to “think deeper rather than go wider.”

“We want to focus on markets where we currently have representation. We’ll probably end the [financial] year adding about 45 new restaurants in Africa,” Mr Hedderwick says.

In Africa, drinks giant Diageo has seen annual sales rise 15% over the last five years.

And the London-listed maker of Johnnie Walker whisky expects growth in its biggest emerging market region to accelerate beyond this figure.

One of the main driving forces behind Africa’s growth spurt is the increasing pace of urbanisation and consumerisation.

Research from the Economist Intelligence Unit predicts that by 2050, 63% of Africa’s population will be urban.

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