1. Investment Opportunities for Growth in Africa: Food,
Pharmaceuticals, Home and Personal Care Industries
By Frost & Sullivan’s Chemicals Materials and Food (CMF) Research Analysts, Dr Richard
Orendo Smith and Linda Ganyeka
Africa is a continent of 54 countries; including the addition of the newly formed South
Sudan in 2011. In 2010, the urban population was estimated at 413 million inhabitants,
or 40% of the total African population; making Africa more urbanised than India yet less
so than China. Analysts predict that by 2030, more Africans will be residing in urban
areas for the first time in the continent’s history. However, by 2050, this number is
projected to approximate 1.2 billion; representing almost 60% of the total population.
Currently, the continent has 52 cities with more than one million inhabitants. This
number is expected to grow to 75 cities in the future, writes CMF Research Analyst
Richard Orendo Smith at Frost & Sullivan, global growth consulting firm.
Many financial institutions, such as The African Development Bank (AfDB), Goldman
Sachs, IMF, World Bank believe that Africa is the place to invest; and rightly so,
because of the significant opportunities it presents. Africa is the fastest growing region
after Asia, with better return on investments compared to most developed countries in
Europe or the US. According to a recent World Bank report, Sub Saharan Africa’s
(SSA’s) annual GDP growth is projected at 5.8% (excluding South Africa). However,
most of the growth recorded, emanates from mining and oil and gas. Overall, there are
very few manufacturing activities that are currently taking place in Africa. Other
countries with an emerging manufacturing sector, however, include Egypt, Algeria and
Morocco; South Africa; Nigeria, Ghana and Kenya. Consequently, foreign investors are
attracted to infrastructure development projects, mining, oil and gas exploration and
production, banking and agriculture. The rising consumer market also offers opportunity
for investment, mainly driven by rising economic growth across Africa (Figure 1) and
subsequently an increased middle-income class population. According to The African
Development Bank (AfDB), Africa’s middle-income class had grown to 313 million
people in 2010, or 34% of the continent’s population, compared to 151 million in 1990.

2. Note: Chart reflects 2015 GDP growth figures at constant prices and GDP figures at current prices
Figure 1 Projected figures and growth rates in Africa (2015)
Source: IMF, World Economic Outlook Database (April 2012), Frost and Sullivan
Looking at the consumer market, SSA offers many opportunities to companies, either
manufacturing and/or supplying consumer good products, such as food,
pharmaceuticals and home and personal care, notes Frost and Sullivan. The recent
expansion of South African retail food stores, such as Shoprite, Spar and Pick ´ Pay,
into SADC and West African countries (including Ghana and Nigeria) are proof of
potential for growth in these markets due to the demand for higher quality food and
cosmetics products by the growing middle income class. South African retail store,
Massmart Holding Ltd, was recently acquired by the American giant retail store, Wal-
Mart, as a point of entry for its strategic expansion into the rapidly growing African
consumer market. With their rapidly developing food processing industries, countries
such as Morocco, Algeria, Egypt and South Africa, are likely to attract interests from
manufacturers or suppliers of ingredients used in fruit juices, confectionaries, dairy
products and processed meat products. For example, the food industry in Morocco and
Algeria is quite sophisticated and accounts for 17% and 8% of the GDP respectively.
The market value for ingredients was estimated at US$105 and US$200 million for
Morocco and Algeria; respectively, with dairy products, meat processing,

3. confectionaries and fruit juices being the predominant money-spinning sectors (Figure
2).
1,200
1040
1,000 Algeria ($ million) Morroco ($ million)
800
632
600
400
187 215
200 131
49 60 81
0
Dairy products Fruit Juices Confectionaries Meat processing
Figure 2 Estimated markets for finished food processed products for Algeria and
Morocco (in US$), 2011
The size of the pharmaceutical market in Africa is estimated at more than US$10.00
billion. Egypt, South Africa and Algeria are currently the biggest markets, both in terms
of revenues as well as volume of products consumed. All three countries generate
market revenues of more than US$2 billion each, followed by Nigeria, Morocco and
Tunisia respectively (Figure 3). A number of multinational pharmaceutical companies,
such as Sanofi-Aventis, GlaxoSmithKline, Pfizer and Hikma pharmaceuticals, have
manufacturing facilities in Africa, with an equally significant number of emerging local
producers. The Sub Saharan African pharmaceutical market is driven by the high
incidence of diseases such as those of HIV/AIDS, TB and malaria while in North Africa
the prevalence of lifestyle diseases such as cardio-vascular diseases, cancer and
diabetes dominate.

4. Egypt
$2.48 billion South Africa
$2.43 billion
Nigeria
$0.74 billion
Algeria
$2.32 billion
Morocco
$0.71 billion
Tunisia
$0.68 billion
Figure 3 Estimated markets for finished pharmaceutical products per country
and revenues (in US$), 2011
The African home and personal care market (which includes cosmetics) is characteristic
of a growing market, and was estimated to be about US$12.90 billion, in 2011. The
market is catered for by both imports from other continents as well as locally produced
products. Local production is characteristic of high volume, low value products, which
represent about 50% of the volume of the total market. Local production is estimated to
represent 37% of the overall value of the total African Home and personal care market.
This is due to the fact that the vast majority of the African population make use of
multipurpose soap bars across all home and personal care applications, like skin care,
hair care, dish care and toilet care. Local producers often use basic chemicals or raw
materials, over specialty chemical raw materials used on other continents, writes Frost
and Sullivan’s Chemicals Materials and Food Research Analyst Linda Ganyeka.
The market is dominated by multinationals, which import more sophisticated home and
personal care products. Multinationals usually have small manufacturing or repackaging
plants in Africa and cater for the market through their global manufacturing hotspots.
The biggest multinational players on the continent are Unilever, Procter & Gamble,
Colgate, Palmolive and L’Oreal. These multinationals are responsible for the bulk of
finished goods that enter the African market and often bring in low volume, high value
finished goods compared to goods produced locally. Multinationals drive their products
to the market through intense advertising. Multinational companies are, therefore, the
biggest challenge that local market participants face, as well as counterfeits from other

5. regions like Europe and Asia. Cheaper products with multiple functions are also a threat
to the local producers’ market share.
The African market is expected to grow, driven mainly by the expanding African
population, increased urbanisation and a rising middle class on the continent with more
sophisticated needs. South African and Nigerian home and personal care markets are
valued at about US$2.1 billion and US$1.2 billion respectively. South Africa has the
biggest home and personal care market in terms of local manufacturing, because most
multinationals use South Africa as a gateway to the rest of the continent. In addition,
most multinational companies with significant home and personal care manufacturing
on the continent are based in South Africa and Egypt.
The main source of supply of ingredients for home and personal care to the African
continent is through distributors. This is mainly due to the structure of the market and
the quantities of raw materials in demand. In most African countries, local raw materials
manufacturing is limited and more than 90% of the ingredients required are, imported.
The biggest chemical raw materials demanded on the continent are of a basic nature,
which include mainly solvents and surfactants, among other raw materials. The
regulatory environment for chemical raw materials in the African market differs vastly in
comparison to that of other continents. The manufacturing sector in Africa is challenged
mainly by lack of poor infrastructure, which has resulted in slow growth of the African
home and personal care sector.
Many global ingredients manufacturers and suppliers develop distribution networks,
through partnering with local distributors, in order to get their products into the African
market. An in-depth understanding of overall African market dynamics, however, may
prove to be critical in order to gain significant market share going forward, concludes
Frost and Sullivan.
Contact:
Samantha James
Corporate Communications Africa
P: +27 21 680 3574
F: +27 21 680 3296
E: samantha.james@frost.com
http://www.frost.com