When Sammy Mwangi first started selling cocktails at his popular Nairobi bar, customers more accustomed to drinking beer would insist on parcelling out the contents into three separate glasses.
“It was hilarious – people would take away one glass with double vodka, one with double lime and one with ice on the side,” says Mr. Mwangi, who runs Nairobi’s K1 Klub House. “They never used to believe they would get a straight deal so they wanted to see it for themselves – it took us a long time before we could mix it all up and serve it and people would trust a new industry.”
Things have moved on since then. Mr. Mwangi has created a cocktail area, a whisky area and on a typical Tuesday jazz night, during which his customers drink their way through 64 bottles a night, each one topped off with a sparkler and delivered in the style of a Miami night spot.
“We call it west meets Africa – we borrow as much as we can from out there, any good idea that we can catch,” he says of his increasingly well-travelled clientele, who now plump for spirits half the time, compared with the days when they drank beer almost exclusively.
Their rising aspiration is key to the continent’s consumption boom, which is spurring investments in the form of shopping malls and fast-food chains, spa treatments and cars. McKinsey estimates consumer spending on the African continent will grow to $1.4-trillion (U.S.) by 2020, up from $860-million in 2008.
The International Monetary Fund says Africa will soon have seven of the 10 fastest-growing economies in the world, where GDP will grow to $29-trillion by 2050, up from $2-trillion.
Mr. Mwangi’s remarks reflect the fact that Africa’s rising middle class is not just about deeper pockets but also what people chose to do with their money. Corporates keen to coax more from Africa’s bigger-spending consumers are marketing the idea of sophistication to encourage sales in everything from luxury face creams to pricey single malts.
Many companies are learning to take a more discerning market more seriously, advertising products with local models, creating big-ticket lifestyle events and even altering products to suit consumers. Siemens creates fridges that can cope with power cuts and sound speakers that can be turned extra-loud to please its Nigerian audience.
The effort also signals a fundamental shift in the structure of many of the continent’s economies. “The main drivers of growth are no longer exports but actually domestic activity … the emergence of a middle class steadily increasing domestic demand,” Domenico Fanizza, assistant director at the IMF, said of Kenya last month.
The rise in spending fits into a bigger pattern of urbanization amid a rising population set to peak at 2.7 billion in 2050. Urban consumers spend nearly twice as much as rural ones, many of whom take on debt to fund their habits.
“Private consumption in Africa is higher than that in India or Russia,” says James Pennefather, group strategy director at East African Breweries, a subsidiary of the U.K.’s Diageo PLC. “The quality of the top-end hotels, restaurants and bars here in Kenya is now as good as you would find in many more developed countries around the world, the people who frequent them have an increasingly premium mindset, and that for us is the sweet spot,” says Mr. Pennefather, who, partly as a result, has been able to introduce 10 single malts to Kenya in the past year and has seen growth triple in the past six months.
But that does not limit sales hopes to the top end. The tremendous expansion of mobile phones in sub-Saharan Africa – now at 475 million handsets – revealed that those in the informal sector had plenty of ready cash for scratch-card credit.
The official numbers have rarely told the tale. “Economists have had to rip up their numbers for how rich African households are because we know that the numbers were wrong, they were too low,” says Charles Robertson, global chief economist of Russia’s Renaissance Capital and author of The Fastest Billion: The Story Behind Africa’s Economic Revolution.
Many African countries are discovering their economies are far bigger than their limited numbers suggest. For example, Ghana added an extra 60 per cent overnight when it recalculated its gross domestic product in 2010.
The belated recognition of how much money is in the market has led to overenthusiastic misnomers, however. Some surveys define members of Africa’s middle class as anyone spending $2 or more a day. On that definition, the African middle class will reach 1.1 billion in 2060, up from more than 300 million today.
The effusive figures suggest some have been slow to register that a “class” is about more than consumption – someone spending $2 a day is likely to lack the political and social clout associated with all the other resonances of the term “middle class,” which many hope could demand greater accountability and ultimately stability from African governments.
But middle class or not, corporations like growth, which is why they target those $2-a-day spenders – what they delicately title the “emerging middle class,” developing affordable versions of everything from cheap beer to smartphones suited for Africa as the dollars mount up.
“Years back Monday, Tuesday, Wednesday, Thursday was a no-go zone. In the industry there was absolutely nobody going out in those days. Even Friday was still dicey,” says Mr. Mwangi, who recalls that workers: “sweated for that income to go out on a Saturday.”
He adds: “Now you’ve got Tuesday doing better than your weekends – it shows people have that extra cash.”Report Typo/Error