On the African continent, demand for mid-to-high-end consumption is growing at a rate of approximately 10% per year. This demand is expected to contribute up to $2.5 trillion to Africa's GDP by 2030.
This trend is reflected in a number of sectors:
● Tourism
● ICT
● Aerospace
● Renewable energy
● Food and beverage
●Textiles and Apparel
● Services
Africa has become a popular destination for attracting investment in mid-to-high-end consumer industries. Many of the continent's urban populations continue to grow and are expected to outpace the global average population growth rate of 20% over the next five years. By 2026, Africa will have nearly one-sixth of the world's population, 45% of which will live in cities. The trend towards urbanization will boost per capita consumption, with cities such as Cape Town, Lagos and Nairobi having per capita consumption rates more than double the national average. This will provide a significant boost to economic activity on the continent, triggering the emergence of substantial markets and more trade opportunities.
On the continent, more than 43% of the population belongs to the middle class or above, and their demand for mid- to high-end consumption is growing at about 10% per year. This demand is expected to contribute up to $2.5 trillion to Africa's GDP by 2030. However, recent developments have raised questions that investors and multinationals are beginning to ponder: is the rapid growth of Africa's consumer markets still worth investing in? Are African consumer markets still as attractive as they were in previous years?
The main mid- to high-end consumer industries involving Africa include tourism, information and communications technology, aerospace, renewable energy, food and beverage, clothing and textiles, and services.
Tourism in Africa is one of the most lucrative industries. With its unique environmental characteristics, rich biodiversity, multiculturalism and consistently good value for money, Africa's tourism industry is expected to continue to thrive. Currently, Africa's tourism industry is growing at the second fastest rate in the world, after the Asia-Pacific region. According to an analysis by the World Tourism Council, the number of people employed in South Africa's tourism industry is significantly higher than in the mining, communications, automotive and chemical manufacturing sectors.
In 2013, only about 13.5% of Africa's population had access to and used the internet, while during the same period, Africa accounted for 15% of the global population. By 2019, only 28.2% of Africa's population will have access to the internet, compared to 82.5% in the European region. In addition, about 83% of digital information services in Africa come from servers controlled by other continents. Parameters such as the number of subscriptions to Internet providers, the total number of servers, the amount of traffic in Internet exchanges or the amount of available bandwidth capacity show that there is a huge scope for growth in the digital space in Africa.
Compared to other regions, Internet penetration in Africa is relatively low. Despite its low contribution to Africa's GDP, the Internet industry is expected to grow at a sustained rate of 6% until 2025. It is generally recognized that the diffusion of Internet technologies in the African region can bring some important advantages. For example, Internet-based telemedicine and distance learning are expected to enhance the quality of life in remote rural areas of Africa.
Looking back to 2006, the entire African region had only 2% of the global telephone penetration rate. However, by 2020, Sub-Saharan Africa will have even fewer landlines than the Manhattan borough of the United States. Currently, Africa is one of the fastest-growing markets for mobile telephony in the world and the second largest in the world, with 8 out of 10 Africans owning a cell phone. In terms of digital technology, the continent's mid-to-high-end consumers are leapfrogging the landline era and moving straight into mobile digital technology.
Africa's space industry is experiencing continued growth in capacity size and investment. According to a 2019 report, Space Africa, an organization, puts the value of the African space industry at approximately $7.34 billion and predicts that it will continue to grow in the coming years.
More and more governments are embarking on the development of new space programs. The Egyptian and Rwandan governments have established and put into operation their own space agencies in the second half of 2019 and the first half of 2020. A number of other countries have publicly announced their space programs and are funding them through federal budget allocations. In total, African governments invested about $490 million in space programs in 2020, compared to $250 million the year before, not including investments in infrastructure development for satellite procurement centers.
However, the New Crown epidemic has had an impact on the space industry, mainly in the form of delays in launch schedules, suspension of the manufacturing process and the filing of bankruptcy by some companies. In Europe, governments have warned that the outbreak could affect the space industry by as much as 1 billion euros due to reduced investment in the private sector. In Africa, the impact has manifested itself in more complex ways. A number of relevant conferences, such as the 16th International Space Operations Conference (SpaceOps), the African Astronomical Society's 2020 Founding Conference (AfAS2020), and the International Academy of Astronautics' (IAA) inaugural Small Satellites Symposium, have also been canceled or postponed.
As Africa's economy grows exponentially, so does its energy consumption, making it a huge challenge to meet the growing demand for energy. How to meet this demand in a rational manner has become one of the core issues that need to be urgently addressed in the African region, and there is a need to explore energy utilization through diversified pathways.
In this regard, Africa can take advantage of its abundant renewable energy resources, such as hydropower, solar energy and wind energy, and ensure that its energy needs are met by combining and matching the development and utilization of these energy sources. Renewable energy has the advantages of being environmentally friendly and relatively low in price, and is undoubtedly the preferred alternative energy source in Africa. In the new year, Africa has shown strong momentum in the solar energy market, with countries such as Egypt, South Africa, Kenya, Namibia and Ghana at the forefront. Even Africa's least developed countries (LDCs), such as Cape Verde, Djibouti, Rwanda and Swaziland, have set aggressive energy targets, and others are moving in that direction. Renewable energy is on the rise across the continent.
Despite the difficulties posed by the new crown epidemic, the basic trend towards sustainable energy development has not changed. According to the International Renewable Energy Agency (IRENA), sub-Saharan Africa is expected to meet about 67% of its energy needs by 2030 if the right policies and regulations are put in place and combined with financial markets. This shows that the prospects for renewable energy development remain strong under the right circumstances.
Since 2010, the food and beverage market size in Africa has grown from $75.63 billion to $142.61 billion in 2019, achieving a compound annual growth rate (CAGR) of 7.30%. However, the food and beverage industry in Africa was somewhat affected during the New Crown epidemic due to home quarantine of workers in the assembly segment due to epidemic prevention and control. Nonetheless, the food and beverage market still realized a growth of USD 143.99 billion in 2020 and is expected to reach USD 277.16 billion by 2030 at a CAGR of 6.80%.
Notably, online retailing of food and beverages in Africa has not been significant enough over the past two decades. However, with the rapid rise of e-commerce, online sales in the food and beverage sector have begun to show strong momentum, making it one of the fastest growing merchandise categories. However, the most critical issue in this regard remains food preservation and transportation. Solving the last-mile transportation problem and realizing same-day sales and same-day arrivals can truly break through the limitations of online sales.
The total value of the global fashion industry is approximately $2.5 trillion, yet the African region's share of the fashion industry is less than 1%. However, Euromonitor says the fashion market in sub-Saharan Africa is worth about $31 billion. Africa's fashion industry has made significant progress in recent years. Many African designers have begun to make their mark on the international stage, frequently appearing in fashion magazines and events, showcasing unique ideas and designs, fully demonstrating the continent's fashion tastes and being welcomed by the global fashion industry.
However, the New Crown Epidemic put a temporary halt to all this. Stores closed, factories shut down, and fashion shows and related events had to be postponed. This has prompted African designers to turn to online sales. Some brands have begun selling online to make up for the loss of sales caused by the closure of offline stores. Previously, African fashion designers relied heavily on physical storefront sales, workshop production and physical presentations to promote their fashion products and earn a reputation. Today, however, there are many challenges to last-mile distribution, which often makes e-commerce in Africa difficult. In addition, the localization of raw material production can take up to a year, which has led to the closure of many processing factories.In June 2020, African designers held an online seminar to discuss survival strategies for diversifying the fashion industry. The African Development Bank has also invested $31 billion to support the local fashion industry and explore the possibilities of e-commerce innovation to help designers navigate through the epidemic and achieve sustainable development in the post-epidemic era.
The service sector is a key part of Africa's economic income and also plays an important role in addressing employment. Between 2009 and 2012, services generated 33% of formal employment in Africa. In some African countries, more than 66 per cent of the workforce is engaged in services. However, while there are many strong engines of growth within the services sector that could boost the industry, these areas still do not receive enough attention, including logistics.
Logistics has huge potential benefits for African agriculture and manufacturing, but it has not yet received sufficient attention within the services sector. African policymakers should aim to provide modernized services that promote strong linkages across economic sectors and inject more dynamism into industrial innovation.
Africa is actively seizing the opportunity of services development. A number of African countries have committed themselves to the development of various types of services and, with some success, have begun to offer a wide range of services across the continent. Examples of successes include banking in Mauritius and Nigeria, air cargo in Ethiopia and South Africa, education services in Uganda and Ghana, telecommunication services in Egypt and port management in Kenya.
Although the value of Africa's services sector reached $271 billion in 2012, it is relatively small globally, with an export share of only 2%. However, this also showed that there was much potential for Africa to be tapped in global trade in services. However, deficiencies in regulation and policymaking have prevented services from realizing their full potential. Africa needed to move from non-tradable traded services to more flexible growth areas. To do so, a comprehensive look at the national, regional and global levels was needed, as well as support for harmonization between human resources and high value-added services. Governments should establish technical training systems and provide subsidized support for higher education to achieve positive intervention effects.
According to the United Nations Conference on Trade and Development in 2015, 50-80% of Africa's GDP is realized by the informal sector. Therefore, measures need to be taken to legitimize these informal productions and increase their productivity. Addressing the above issues also requires the implementation of relatively fair tax systems, the reduction of regulatory burdens and the provision of easy access to finance for micro and small enterprises, among other measures.