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African consumer prosperity: Big dreams or actual spend?

When it comes to whether Sub-Saharan African consumers are feeling more prosperous and how this influences their propensity to purchase, Nielsen Africa MD Bryan Sun says markets are significantly polarised in terms of feeling ‘better off’. It is therefore imperative to dig deeper to gain a comprehensive understanding of how consumers truly feel about improvements to their lives and the impact this will have on their purchasing behaviour.

Across Sub-Saharan Africa (SSA) there are a considerable number of consumers who feel optimistic about improvements in their quality of life and financial wellbeing, despite their relatively lower levels of income and limited advancements in personal economic and living conditions. Forty-one percent of Nigerians and 38% of Kenyans display a positive outlook based on their quality of life sentiment, while 50% of South Africans base theirs on financial wellbeing (higher than the European average of 37%).

In SSA’s developing markets, what may seem like slight changes can have a deep impact on consumer lifestyles and outlooks, for example, upgrading their feature phone to a smartphone, improvements in connectivity, or the ability to purchase better quality, staple food products. These small advancements can make a big impression on consumers’ quality of life, day-to-day interactions and how they are able to provide for their families and translates into more upbeat perceptions about their wellbeing.

Underlying this more optimistic outlook, an even larger proportion of consumers are feeling upbeat about their immediate financial outlook. Eighty percent in Nigeria, 77% in Ghana, 65% in Kenya and 61% of consumers in South Africa consider their finances to be ‘excellent’ or ‘good’ for the upcoming 12 months.

Counter conditions

As with most things consumer related, the situation is complex given that SSA is highly fragmented when it comes to feelings of prosperity. There are substantial numbers of consumers at the opposite end of the prosperity spectrum within the same countries. In terms of those feeling ‘worse off’, Nigeria and Kenya rank in the bottom 10 global markets, together with Greece, Ukraine, Argentina and Japan.

The effects of this are reflected in the fact that 45% of African and Middle Eastern consumers say they have enough for the basics and 43% say they live comfortably, and only 12% feel that they are able to spend freely.

Reality check

With divergent consumer sentiment, it’s clear that despite some of the highest global levels of GDP growth in many SSA markets, this hasn’t yet translated into broader feelings of prosperity and spending ability. The reasons become more apparent when digging further into some of the macro-economic indicators.

Average per capita GDP in SSA has not kept pace with global gains, growing on average at 2.3% versus the global average of 3.1% (per 25 years). Real wages have also declined in Nigeria, Tanzania and Kenya over a 10-year period.

Positivity is also swayed by consumers’ perceptions of inflation, reflected in the day-to-day price changes of goods they are especially familiar with. The reality is that medium to short term inflation has improved in Kenya, Ghana and Nigeria, but the lingering perception of rising prices remains strong. For example, in Nigeria, despite inflation recovering substantially from a high of 20% in 2016 to currently below 14%, 91% of Nigerians still perceive food prices as increasing and 60% said they buy only essentials and are cutting back on luxuries.

The ‘recency’ phenomenon also has a profound effect on emergent market sentiment, where consumers often live hand to mouth and therefore don’t have a transparent and impartial longer term view of whether their circumstances have improved. For them, every day may be a struggle, so often their point of reference is whether today was better than yesterday or last week. This precludes a viable, longer term assessment of overall improvement in their lives.

While many consumers’ circumstances are improving, it’s not at the rate that macro indicators would suggest. Therefore, even though many are feeling more prosperous, that doesn’t yet mean they have the ability to spend significantly more as the positive effects of this will take time to truly touch their everyday lives.

Progressive spending

Despite polarised prosperity sentiment and slow reaching economic elements, the outlook for consumer spending is positive. More than four in 10 consumers in Nigeria (44%) and Ghana (43%), and over a quarter of consumers in South Africa (30%) and Kenya (27%) consider the present a good time to buy what they need or want. In addition, a quarter (23%) of SSA retailers say this is reflected in increasing in-store spend, and 42% believe it is about the same as five years ago.

Though current economic times are tough in many SSA countries, consumer spending shows an upward trend. In Nigeria, Ghana and Kenya Q4’2018 Consumer Packaged Goods (CPG) volume and value growth is positive and outstripped annual growth levels, pointing to ongoing opportunities.

All realities considered, Africa’s consumers are still seeking new and better products; for example, 66% of SSA consumers are more willing to try new products today, up from 63% five years ago. Even though a massive portion of the continent’s consumers don’t have a huge amount of money, there are plenty of highly aspirational consumers across the income scale that are able to spend in different ways.

Diverse influencing factors

This has created unique sets of Sub-Saharan consumers with a diverse range of influencing factors when it comes to their propensity and ability to purchase. Upper or lower income consumers who feel worse off are looking for value for money products, while those who are feeling more prosperous look for better quality products, and often those associated with premium characteristics.

This makes for a highly challenging environment for manufacturers and retailers trying to develop and sell products that appeal to these disparate mind-sets, within highly fragmented markets. This emphasises the fact that for businesses to realise the range of opportunities that do exist, it will be dependent on bringing the right products and services at the right prices, across the value and premium product innovation spectrum.

The Link between education and income

DCL Blog – The Link between education and income

The relationship between education and income

Education is defined as the act or process of imparting or acquiring general knowledge, developing the powers of reasoning and judgment, and generally of preparing oneself or others intellectually for mature life. In other words, it is the process of achieving knowledge, values, skills, beliefs, and moral habits.

Francis Bacon once said that “knowledge is power”. This is still true since higher education is a fundamental part of personal, national and global development. Not only does it shape independent minds, but it is also important for the continued growth of the economy. There are many reasons to seek higher education – some do it for job security, others do it to advance their knowledge but probably the most common reason is financial ambition. We all want to make a better life and for most this means we need to educate ourselves so we can qualify for positions that earn more.

The link between education and income

Generally, the more educated an individual is, the higher their income potential will be; education is often referred to as an investment in human capital.  

Matriculants in South Africa can expect to earn twice as much as someone with an incomplete high school career. Moreover, a tertiary certificate could result in a 63% increase in income while a bachelor’s degree would see a 330% jump. (BusinessTech, 2019)

To put this into perspective, data from Analytico covering a total sample size of 717,364 individuals in South Africa concluded that matriculants typically earn R4 977 per month, diploma holders earn R13 378 per month and bachelor’s degree holders earn upwards of R21 527 per month.

Why aren’t more people getting educated?

Even though education is considered a basic human right, only 13.8% of South African adults over the age of 20 attended school up until grade 7. Furthermore, 51% of South African youth between the ages of 18 and 24 claim they did not have the financial means to pay for their tuition. 18% of those aged between 18 and 24 who were not attending educational institutions stated that their poor academic performance prevented them from furthering their studies.

The benefits of higher education

A major benefit of furthering your studies is that a tertiary education equips students with the knowledge and skills necessary to deal with a wide range of challenges – both in their personal and professional lives. It broadens the mind and introduces a multitude of topics that the student may not have known about. The critical thinking skills developed through higher education allow one to ask better questions and solve more intricate problems.

Bottom line – tertiary education makes you more employable!

In this demanding and competitive job market, employers are only interested in the most qualified candidates. Also having a qualification gives an employer a benchmark of the level of work they can expect from you. Once qualified, you’ll be able to apply to jobs which specify a required level of tertiary education. Your chosen field of study and your grades can also be a deciding factor in your hiring.

Once you are employed, you are more likely to be considered for promotion into management and even executive levels, especially if you continue furthering your studies. The knowledge and skills you applied throughout your studies will help you to climb the ranks within your industry. These skills will also be applicable should you choose another profession at some point throughout your life.

In conclusion, higher education will benefit you personally and professionally. Not only will it open your mind to bigger and better things, but it will also help you to get ahead in your career. The truth is that in today’s highly competitive job market having a tertiary qualification is no longer an option but a necessity if you want to qualify for anything above the unskilled labour level.