OVER the past few years the African continent has shaken off its image as the place of only pity. Increasingly for many today, it is a place of business opportunity for even the crème de la crème of products – luxury goods.
The new gold rush for the African consumer generally targets the continent’s burgeoning middle class as they begin to embrace more high-end mobile phones, pricy restaurant meals and trips down supermarket aisles with their new disposable incomes. Consultancy firm McKinsey predicts that this consumer spending will reach $1.4 trillion in 2020, from about $860 billion in 2008.
Continent for rich men
Though many African countries are growing from a low base – and income distribution is often very unequal – the number of wealthy, status-conscious people is set to double in the next ten years and the number of Ultra High Net Worth Individuals (UHNWIs) – people with $30m to burn – has ballooned. The size of the HNWI population increased by 3.7% in 2013 to 0.1 million, while wealth witnessed an increase of 7.3% to $1.3 trillion.
This is set to grow, and the number of Africans with $30m in assets will increase by 53% to 2,858 by 2023, far outstripping the average pace of growth across the rest of the world. The number of centa-millionaires is set to rise by 51%, and by 2023 there will be 38 billionaires based on the continent.
As this wealth increases, so too will levels of spending on luxury goods.
South Africa was usually seen as the only entrenched market for luxury goods in sub-Saharan Africa. For example, in luxury cosmetics South Africa was one of the world’s strongest growth markets. Its total premium cosmetics market was valued at around $773 million in 2011. This love of expensive cosmetics was driven by the high number of wealthy individuals – a recent report by the consultancy Bain noted that South Africa has 71,000 dollar millionaires, 60% of the total number in sub-Saharan Africa. That is more than Saudi Arabia or the United Arab Emirates.
But South Africa is not the only African country with very rich people. The rest of the continent is increasingly demonstrating its attractiveness as a high-potential region for luxury goods, with 11% growth and expansion into new markets such as Angola and Nigeria beyond its traditional strongholds of Morocco and South Africa.
These highly wealthy Africans have expensive tastes and a habit of unapologetically flaunting their wealth in ways that would make some Arab Sheikhs look modest. This spending habit was captured by KnightFrank’s Wealth Report which showed that on average, salesmen of luxury items reckon their clients will carry on spending more in 2014, with sentiment most bullish in Africa (46%) and most cautious spending in Europe (30%).
Nigerians pop the bottles
A clear example of this is the Nigeria-Champagne love affair. In 2012 Nigeria spent $59m on the consumption of champagne alone. This places Nigeria as having the world’s second-highest growth in new champagne consumption from 2011-2016, trailing only France. The study showed that there was 849,000 litres in new consumption during that timeframe in Nigeria.
Also in Nigeria the appearance of “Quintessentially” – the luxury lifestyle management and concierge service – on the scene clearly demonstrates the high expectations of the country’s super rich. After all these are people who “who believe that life is too short to waste time on the mundane or second-best”. In this country the upper-middle class, often made rich off oil and gas, are growing and they like to show off.
This spending on luxury goods is sometimes called “investments of passion”, which include purchases of super-cars and collectable art, and the luxury industry is picking up on this.
South African luxury yacht importer, Boating World, is looking to meet the growing demand for multi-million dollar luxury vessels in the expanding African market. This year the company was able to even sell a $2.3m 65 Fairline squadron yacht, the first of its kind to be sold through South Africa into Angola.
But it’s not all about expensive boats, there is a huge demand for expensive cars too. German automaker Porsche already has a dealership in Nigeria, couldn’t keep up with the demand of luxury cars in Luanda, Angola, and is now eyeing up the Kenya market – whose UNHWIs will increase from the current 110 to 191 over 10 years.
In the “top ten forecast growth in wealthy individuals”, five countries were African – between 2013-2023 the number of super-rich people is set to increase in Cote d‘Ivoire by 116%, in Tanzania by 97%, in Ethiopia by 97%, Ghana by 93% and in Nigeria by 92%. In terms of African cities ranked by wealthy individual population growth, Nairobi came in top for Africa with a growth of 78%, followed by Marrakesh with a growth of 60%, then Johannesburg with a growth of 41%.
Going are the days when Africa’s rich shopped abroad for their luxury items, despite making up a tiny percentage of the population, Africa’s super-rich are developing such a pull that brands are now opening doors on the continent.