The African Market: Scope & Challenges
Seven out of ten fastest growing economies in the world are from the African continent. African markets like Ghana and Rwanda have outpaced the growth rate of the Asian “tigers” in five of the past seven years. In 2014, the African economy was sized at approximately $1.85 trillion, with a population that is forecast to be 1.2 billion by 2017. Looking out further, Africa is expected to account for over 40% of the world’s population by 2030, of which 60% will be aged under 25 years. This implies that Africa will have a relatively young population and hence there will be a greater demand for beauty and personal care products.
The middle class population (major clientele for cosmetics in Africa) of Sub-Saharan Africa is 300 million strong, comprising of 34% of its total population.
The number is estimated to reach 1 billion by 2060. The value of the total African beauty and cosmetics market is estimated to be around $8.2 billion in 2014 and is expected to grow at an annual rate of 8%-10%. Comparatively, the global beauty industry growth rate is around 4%. The Sub-Saharan beauty market size is expected to reach $11.3 billion in 2017. As shown in the chart below, the market share of cosmetic markets is growing rapidly at constant rate of approximately 10% per annum in Africa.
Africa’s initiatives towards loosening trade restrictions and creating trade blocs resulted in 16 to 17 Sub-Saharan African countries, being featured on the list of 50 countries with biggest improvements, in World Bank’s Ease of Doing Business report. Hence, doing business in Africa is becoming easier for multinational companies. There is great potential for growth in countries within our study area as cosmetics consumption is still 10 to 20 times lower than the developed countries. With such growth perspectives, it is easy to understand why Africa is under the spotlights of all major beauty and personal care players.