The next regional boom may very well be across emerging markets in Africa. Optimism for the region comes less from any one sector success story, and more from looking at demographic shifts. In a report for the McKinsey & Company , Damian Hattingh , Bill Russo , Ade Sun-Basorun , and Arend Van Warmelen (all of the McKinsey Johannesburg office) write that Africa will "account for more than 40 percent of global population growth to 2030." And in a couple of decades, the working age population across the continent will have fewer responsibilities for other family members, according to the report, making them eligible producers and buyers of consumer goods. From the report: Thanks to declining fertility rates, it is the working-age population that will have the highest growth rate. (In fact, by 2040, Africa’s working-age population is forecast to surpass China’s.8 ) As a result, Africa is expected to experience a dramatic decline in its dependency ratio—the number of children and the elderly supported by each worker (Exhibit 1). This development will contribute to continued increases in GDP per capita in the next decades and comes at a time when dependency ratios in virtually every other region of the world are increasing, with negative implications for GDP growth in those areas. Africa also has the world’s youngest population—more than half its inhabitants are under 20 years old, compared with only 28 percent in China. Among the residents we surveyed in urban centers, we found that the 16-to-34 age group already accounts for 53 percent of income. And the consumption habits of youth are quite different from those of their elders; younger people in Africa, for example, are more likely to search for information online (67 percent of 16-to-24- year-olds are online, compared with 32 percent of the 45-and- older group) and to seek products and stores that reflect the “right image.” They are more brand conscious, follow the latest fashion and trends (53 percent versus 33 percent), and say they are typically one of the first people they know to try new things (44 percent versus 28 percent). They are also more educated, with 40 percent having completed high school, compared with only 27 percent of the 45-and-older group. These qualities point to a major change in consumption habits as this cohort ages, its incomes increase, and its behaviors and decision criteria become the societal norm. By 2020, more than half of African households are projected to have discretionary income, rising from 85 million households today to almost 130 million in 2020.9 Africans share the optimism of that economic forecast: 84 percent of those we surveyed said they expect their households to be better off in two years (Exhibit 2). Sub- Saharan Africans are the most optimistic—97 percent of Ghanaians, for example, said they will be much better off in two years. North Africans, on the other hand, are generally less optimistic about the future, with only 10 to 15 percent of respondents saying they will be much better off in two years, which is unsurprising given the uncertainty generated by recent political turmoil in the region. Overall, consumers are increasing spending across most categories. Up to 30 percent of more optimistic consumers in some countries say they are buying more frequently and purchasing new and more expensive products, although inflation may also be a factor in buying behavior. Read the full report here .
Filed under: growth, Africa, emerging economies, Johannesburg, McKinsey & Company, rising african middle class, consumer class, rising consumer class, Damian Hattingh, Ade Sun-Basorun, Arend Van Warmelen, dependency ratio, emerging Africa, Bill Russo