AFRICA’s growing middle class has expensive tastes, with research by Bain & Company suggesting that luxury goods sales will increase 11% this year — demonstrating the continent’s potential for upmarket goods.
The nascent middle class aside, recent mineral discoveries have swayed the continent’s fortunes. They have given rise to a band of superwealthy individuals with expensive tastes in countries such as Nigeria, Angola, Ghana, Mozambique and Kenya.
Total luxury goods revenue in Africa is expected to reach €2bn this year from €1.5bn in 2011, according to Paris-based Bain’s worldwide market study.
Other luxury goods groups such as Cartier, Louis Vuitton, Burberry, Gucci, Fendi and Salvatore Ferragamo also have a presence on the continent.
In Lagos’s wealthiest district, Victoria Island, Ermenegildo Zegna opened a store this year on the same strip as luxury car maker Porsche. The Italian luxury fashion house makes made-to-measure suits for Hollywood stars Tom Cruise and Robert De Niro.
Two months earlier, Hugo Boss opened a store in the city.
Bain partner Claudia D’Arpizio, the lead author of the study, says with China’s growth slowing, Africa is poised to have among the fastest-growing economies. "Luxury sales are still very concentrated in SA and Morocco, but brands are starting to expand in new markets like Angola and Nigeria."
Growth in China cooled after a state crackdown on public officials’ spending on luxury and anticorruption campaigns.
Bain’s findings on Africa support a report from London-based Euromonitor, which last month said sub-Saharan Africa was set to become a key battleground for the luxury goods industry.
"Between 2008 and this year, sales of luxury goods grew 35% in current value terms, and are set to increase by a further 33% in the next five years in constant terms," the research firm said.
According to the Euromonitor, sub-Saharan Africa was experiencing the second-fastest global economic growth — behind Asia-Pacific — and is home to five of the 10 fastest-growing economies in the world. These include Nigeria, which was the third-fastest growing market in the world for champagne between 2007 and last year.
Euromonitor luxury goods research head Fflur Roberts said luxury brands and retailers are facing many challenges. "Poverty remains widespread, infrastructure is weak, retail markets are undeveloped and brand awareness is lacking.
"Corruption can also be a problem, as can political instability in some countries ."
The deluge of counterfeit luxury products remained an issue.
Nonetheless, Ms Roberts said more luxury brands were certain to open new outlets in the sub-Saharan Africa region. "Prada, for example, has confirmed plans to open in Angola, which could be a good bet for Nigeria next year. To succeed, brands will need to overcome these challenges through careful research of suppliers, local partners, end consumers and the business environment."
The Wealth-X and UBS World Ultra Wealth Report 2013, released in September, revealed that Africa’s ultra-high net worth population had this year increased by 9.5%, with combined wealth of $350bn — a 7.7% rise from last year.