Speaking at a roundtable discussion ahead of the fifth yearly Brazil, Russia, India, China and South Africa (Brics) Summit, to be held in Durban at the end of March, Andrew asserted that an emerging continental middle class was driving intensified interest in core consumer market investment.
“To give a sense of scale, about a year ago, we were receiving between two and three enquiries a week around investment strategies into Africa, which has now grown to between 15 and 18 enquiries a week. It’s really ramped up,” added KPMG global Africa COO Anthony Thunstrom.
Increasing investor interest had been recorded from both multinational organisations investigating entry points into the continent, as well as regional players looking to opportunities closer to home.
KPMG observed that, as demographic trends evolved, the continent had presented an emerging middle class with a rising income level and an appetite for upmarket Western-branded goods as a show of wealth.
Andrew noted, however, that this emerging consumer base remained quite polarised. While many upwardly-mobile Africans increasingly demanded high-end consumer goods, a large proportion of those adopted a highly austere approach to spending and saving.
“A large majority of emerging consumers come from poor families and do not have social security systems to fall back on, and are conservative around spending. However, they believe that the purchase of certain brands demonstrate their success. As a result, this is a very difficult market to understand,” he commented.
He noted that, in addition to consumer markets, good prospects in the telecommunications, resources, infrastructure and supply chain logistics sectors were emerging and were consistently being investigated by big business.
Thunstrom added that the emerging middle class also created demand for financial services, such as a formal banking infrastructure and insurance services.
“While there is a population of over a billion in Africa, the vast majority have never had access to branch banking, for example, which simply doesn’t exist in rural Africa, and this has resulted in the rise of the mobile money transfer system,” he said, adding that “massive” investment interest had been shown in this sector.
Moreover, most companies that had indicated an interest in Africa had very little experience, knowledge and management ability in an emerging market and were very cautious, requiring advice around market entry risks and strategies.
This interest appeared to be driven by portfolio investors moving out of cash markets and into other asset classes, following the realisation that maximum growth would be best realised through new products, services and markets.
Andrew added that, in selecting emerging markets, investors were increasingly looking to countries with a record of introducing significant economic reform, a high level of transparency and corporate governance, high levels of accountability, and a low level of corruption.
“It is the countries that are instituting these reforms that are attracting the money,” he commented.