Back to the future: Fundamental changes across the consumer sector in Africa (part 1)

By Brendan Grundlingh, Executive, Global Consumer Packaged Goods Sector Coverage, Standard Bank Group

It took 75 years for the telephone to reach 50 million users, 13 years for TV, Netflix 7 years, but Disney+ achieved this in just 5 months with the kids under lockdown. And the HouseParty app just 1 month.

Things are going to change, and to be honest, a lot has already changed. It doesn’t take an epidemiologist to realise that consumerism, as we have known it, may not be the same as an entire demographic cohort has come to expect.

The generation I’m referring to has been tactfully identified by the alphabetical symbol Z and defined as a mobile generation, connected through large social networks. They exhibit behaviour that is in search of uniqueness while striving for autonomy through their self-confident beliefs in their abilities. In plain language, they are a generation that is super comfortable with digital technology, and they don’t rely on their parents as much as previous generations.

Ironically, they are the adaptable leaders of our future. However, it is the unadaptable leaders of our present that are making decisions that will lead to the most significant recession in living history. Economists and talking heads all over the financial world are so busy focusing on the other letters V and W, that I fear they may miss the Z recovery in this recession.

Old leaders out of touch with a young population

Let’s start at the top of the Z

Reading, listening or watching any financial news source right now reminds me of the lyrics to a ZZ Top tune: “I’ve been up, I’ve been down, take my word…” That’s what we are all hearing from all the experts who supposedly went through the ’98 Asia, ’00 Dot-Com, ’01 Sept11 and ’08 financial crises. The letters V, W, and U are continually announced as the pattern for the financial market recovery. The reality for the sub-Saharan African consumer sector is, however, much more complicated.

Urbanisation has been a critical component of growth in sub-Saharan Africa. Reading through literature, there is clearly a consensus that labour productivity gains are central to economic transformation in sub-Saharan Africa, which is where the age of mass consumption has been referenced as the outcome and driver of middle-class growth. The resulting recession that we are now in across the region will likely place tremendous pressure on this dynamic. Without labour growth, the consumer outlook looks far direr than is possibly being discussed.

Unlike developed world Gen Z consumers, the majority of sub-Saharan Africa consumers have not had the same exposure to technology-based work. This is, however, where the opportunities lie. Reading through research by McKinsey on other emerging market Gen Z consumers, it seems that their ability to solve conflicts through dialogue and drive to improve the world may be more useful than their previous generation – who were born into economic prosperity and are more confrontational and less likely to accept diverse points of view.

Advanced changes in logistics and distribution are what have led to some of the growth in the consumer sector within most sub-Saharan African countries. Whether that is associated with new forms of transport through multiple layers of distribution networks, or simply better port access for value chain inputs. As we look forward and try to understand forecasts, the recession will alter demand and supply dynamics. We are already seeing a significant shift in Nigeria, as they push for localised sourcing over imports. Recessions are not often the best time to enforce such principles unless you have enough local supply.

This is the globalisation to localisation debate that we have seen play out over the past two years, and which will likely accelerate in the next coming months. As these consumer-related challenges intensify, could it be that more dynamic people are going to be needed to solve these challenges, and maybe it is the generation that makes decisions and relates to institutions in a highly analytical and pragmatic way that should be given the opportunity to lead?

Global youth population projections

Sub-Saharan Africa faces an unprecedented economic crisis

Standard Bank Group is the largest African bank by assets with a unique footprint across 20 African countries. Headquartered in Johannesburg, South Africa, it is listed on the Johannesburg Stock Exchange, with share code SBK, and the Namibian Stock Exchange, share code SNB.