Consumer Spending Growth: Sub-Saharan Africa Setting the Pace

I don’t know about you but it gives me a sense of hope to know that Kenya, amidst all the politically motivated opinions of the slow economic growth, is expected to be among the fastest growing cities in Sub-Saharan Africa based on consumer spending. To compliment that, household income is also expected to improve in Kenyan cities like Nairobi and Mombasa which are set to be the only cities in Sub-Saharan Africa that will have faster growth in household income compared to population growth.

According to an article from the Euromonitor, consumer growth is shifting from mature consumer markets such as South Africa to urban markets in other Sub-Saharan countries like Kenya. Kenyan cities – Kisumu, Nairobi and Mombasa – are the top 3 Sub –Saharan cities expected to realize the fastest growth in consumption spending. Consumer market potential will be boosted by population growth and improving purchasing power.

fastest growing SSA cities in consumer spending

Sub-Saharan Africa is expected to realize a 74% population growth between the year 2015 and the year 2030 which, on average, is the highest growth in urban population in developing countries globally.

SSA cities population growth and income

With the exception of South African cities like Jo’Burg and Pretoria, consumer spending is expected to be channeled to basic necessities such as food and non-alcoholic beverages. Nairobi, for example, is expected to have a third of consumption expenditure going to food. With the expected faster growth in household income than population growth in Kenyan cities such as Nairobi and Mombasa, the proportion of food expenditure will decline leaving room for more spending in discretionary items.

The Kenyan Case

Kenya has been experiencing a strong growth in shopping malls which has improved Kenya’s prospects as a strong retail hub in Sub-Saharan Africa. Over the last 5 years consumer spending, on average, has improved by over 67% (Oxford Business Group Research). Consumer spending growth has also been promoted by better product offering and diversification in the Kenya retail space.

An increase in shopping malls and gated communities is an indicator of urbanization. Previously, shopping malls and gated communities were once concentrated in areas within Nairobi but this has changed following devolution. Devolution has improved the incomes in Counties and also improved investor willingness to develop retail centers and cosmopolitan housing developments. Mixed use developments such as Thika Greens Golf Estate in Muranga County, Two Rivers Malls in Kiambu County and Greenwood City in Meru County are clear indicators that devolution has and will continue to benefit Kenya as they contribute to urbanization in their respected Counties.

Gated Communities along Thika Road and Kiambu Road

gated communities KE

Source: MML