Top 5 food markets in sub-Saharan Africa

By Kurt Davis

The food sector is the focus of investors who are seeking to capture the opportunity of a rising middle class in Africa. 

They were lost in Luanda, Angola's bustling capital, until they found the McDonalds. Being American in a familiar place in a foreign country is home until you see the price for the burger meal: $14. 

This being Africa means there must be a local twist, says the American tourist John, and sometimes the twist is the price.

Investing in the sub-Saharan African market is the right move at the right time. Call it the “last frontier” or the “last big opportunity.” Either way, the numbers speak to great prospects.

The International Monetary Fund’s (IMF) latest Regional Economic Outlook for sub-Saharan Africa projects GDP growth to reach 5.5% in 2014 from around 5% in 2013. The accelerating growth is expected to be buoyed by large investments in infrastructure and mining, maturing investments in transport and telecommunications, and a rebound in agricultural output.

The sustained boom creates more consumers. Global management consulting firm Mckinsey & Company projects that more than half of African households will have discretionary income by 2020, rising to 130 million households from 85 million today. Restaurants want a piece of the pie.

Kentucky Fried Chicken (KFC) and McDonalds are the big first movers. Other American brands, including Burger King and Pizza Hut, are salivating at the growing opportunity. But franchises are not the only players as local brands, including South Africa's Debonairs Pizza and Nando’s, continue to expand across the region.

Here are the top 5 countries for restaurant expansion in sub-Saharan Africa:

Nigeria

It has a Johnny Rockets! But the entrance of lesser known brands Johnny Rockets and Dominos underline two big things about Nigeria: (1) its approximate 170 million-plus population (biggest in sub-Saharan Africa) and (2) its GDP, which stands north of US$520-billion - the largest in sub-Saharan Africa.

Nigeria’s population is likely to overtake the United States by 2045, according to the United Nations, and its GDP is likely to surpass US$1.6-trillion by 2030 with a yearly growth rate of 7.1%, propelling it into the top 20 for economies by GDP. In a similar time frame, global management consulting firm Accenture in a recent report projects consumer spending to grow to $167-billion by 2020.

Tapping into this market is obviously imperative to gaining market share in sub-Saharan Africa. But creativity is necessary – for example, throw in jollof rice or seafood okra to excite the local palate. Nigerian tastes span local delights to British adoptions and American transformations.

Kenya

Kenya is a favored destination for investment in Africa. It is sub-Saharan Africa’s sixth largest economy and population. And its birthrate remains in the top quartile globally. The IMF projects the Kenyan economy to grow 5% in both 2014 and 2015, compared to 4.7% in 2013. All this being said, the underlining numbers in Kenya indicate more spending consumers in one of Africa’s biggest food-loving countries.

Accenture projects consumer spending to grow to US$38-billion by 2020. back in 2012, an Africa-focused private equity firm invested in Nairobi Java House, a local Kenyan coffee house and restaurant, signifying a new focus of investment firms. A large expansion by Kentucky Fried Chicken (KFC) only further underlines the opportunity. And Subway has entered and likely confronting Subzone, a healthy eating alternative in Nairobi that has a similar look and appeal of Subway.

The Kenyan palate, to a distance observer, initially seems fulfilled by the simple presence of meat – ideally chicken. But locals will suggest that you have only tapped the surface if you leave with that belief. Asian influence, British and American influence (from Kenyans studying abroad), and a well-travelled middle class undoubtedly implies greater diversification.

South Africa

The former “largest economy” in sub-Saharan Africa is still trying to get its growth back on track. The IMF projects the economy to grow 2% in 2014, only barely surpassing the 1.9% growth in 2013. Weaker economic numbers worry investors and politicians alike. Yet consumer spending remains strong with untapped potential.

Consumer spending, projected at US$315-billion in 2020 by Accenture, will be approximately double that of Nigeria. The South African palate is nuanced accompanied by larger pockets. Local brands, including Spur and Ocean Basket, compete strongly against Western brands inside (and outside) South Africa. It is also easy to find a McDonalds and a KFC in country.

Skeptics routinely suggest that the food service business is approaching saturation in South Africa. Yet all the numbers indicate growing competition, but nowhere near any level where investors cannot snag great returns.

Uganda and Tanzania

This grouping will not excite Tanzanians and Ugandans – the countries are definitely different in many ways. But they do have a lot in common too. As the 5th and 7th most populated countries in sub-Saharan Africa, Tanzania and Uganda already possess large consumer bases. This base will only expand with birthrates in the top 20 globally – Uganda at the 3rd highest and Tanzania is the 18th highest.

Tanzania and Uganda embody the East Africa boom. Underpinned by recent natural resource discoveries, both countries possess fast-growing economies. The IMF projects the Tanzanian economy to grow 7% in 2014, compared to 6% in 2013 while the Ugandan economy grows at 6.25% in 2014, compared to 5.75% in 2013. As commercialisation of these resources take hold and pipeline projects mature, these growth figures may very much be higher in a few years.

If not for the supply chain challenges, many investors think these two countries would rise to the top as investment destinations for the food service industry. Yet a lack of commercial quality inputs, ranging from potatoes typically for French fries to meats (i.e. chicken and beef) stymie operators and create deficiencies throughout the value chain. Focused efforts on agriculture from central governments and local investors will continue to improve the industry’s prospects.

Honorable mention: Angola and Ethiopia

This article is re-published with permission from Frontier's content partner, Ventures Africa.

Ventures Africa chronicles business and investment news, and the success stories of African entrepreneurs and business leaders.

Top 10 African cities of the future

By 2040, Africa will experience faster economic growth than any other region and is expected to have the biggest labour force in the world, according to PwC’s latest Global Economy Watch, which puts the spotlight on the largest cities in sub-Saharan Africa.

As companies around the world look to exploit the widely reported untapped potential on the continent, the question now is, where can one focus if they want to expand their activities in sub-Saharan Africa (SSA)?

Most major corporations are already active in at least one of the four largest cities in SSA – Lagos, Kinshasa, Nairobi and Johannesburg. But, according to PwC economists, it is the ‘Next 10’ biggest cities in the region that should be exciting foreign investors. The population of these cities is projected to almost double by 2030, growing by around 32 million people.

Next 10 biggest cities

1. Dar es Salaam (Tanzania)
2. Luanda (Angola)
3. Khartoum (Sudan)
4. Abidjan (Cote d'Ivoire)
5. Nairobi (Kenya)
6. Kano (Nigeria)
7. Dakar (Senegal)
8. Ouagadougou (Burkina Faso)
9. Addis Ababa (Ethiopia)
10. Ibadan (Nigeria)

Top 3 cities

1. Lagos (Nigeria)
2. Kinshasa (DRC)
3. Johannesburg (South Africa)

The latest UN projections show that by 2030 two of the ‘Next 10’ – Dar es Salaam and Luanda – could have bigger populations than London has now.

Cities are the typical entry points for businesses trying to expand into new overseas markets, because they enable closer interaction with customers in a relatively small geographic space, which in turn helps contain distribution costs.

One of the key factors that drive economic growth is the number of people of working age. PwC expects a bigger and younger urban population to be associated with strong GDP growth. The firm’s analysis shows that economic activity in the ‘Next 10’ cities could grow to about $140-billion by 2030. “This is roughly equivalent to the current annual output of Hungary,’ says Stanley Subramoney, Strategy leader of PwC’s South Market Region

This is a comparatively conservative estimate by PwC that assumes no real exchange rate appreciation despite relatively strong projected growth in these SSA economies.

More people, bigger business opportunities

One of the key factors that drive economic growth is the number of people of working age. PwC expects a bigger and younger urban population to be associated with strong GDP growth. Several trends are responsible for the increasing appeal of the region to international investors. These include high GDP growth rates, rapid urbanisation and the “demographic edge”. Other economic factors are the big new discoveries of natural reasons, substantial investment in infrastructure, sustained growth in per capital incomes and the growing ability of countries to raise project financing on international capital markets.

The three big hurdles 

There are however three problems that could slow the pace at which the ‘Next 10’ biggest cities in sub-Saharan Africa grow, says the report. These are issues that African countries have been trying to tackle for many decades with limited success:

Low quality of 'hard' infrastructure like highways, airports and trains, which increases the cost of doing business, eats away at business profits and discourages investment.

Inadequate 'soft' infrastructure like schools and universities, which could lead to a persistent skills gap that hampers long-term business growth.

Growing pains stemming from the inability of regulators and policymakers to manage effectively a larger and more complex economic system as growth proceeds. These problems could, for example, lead to credit or property bubbles as a result of rapid economic growth, or a failure to tackle issues relating to corruption and excessive bureaucracy that deter international investment.

Looking ahead

The challenges that policy makers face is to convert Africa’s demographic dividend into economic reality by overcoming these hurdles. “History suggests this will not be a quick or easy process. Investors should form their own plans to mitigate these problems by supporting infrastructure skills and development programmes,” says Stanley.

Source: APO

Top 5 infrastructure investment opportunities in Africa

By Kurt Davis

The 'Top 5 public private partnership opportunities in Africa' highlighted the best countries for PPPs in Africa. This article examines the best countries for infrastructure investment, if we assume all things to be equal in each country’s PPP system. 

Only one country - Nigeria - makes both top 5 lists, largely because it's government has made great strides in recent years to match its enthusiasm to develop infrastructure with the demand for infrastructure investment in the country. Over time, all political indicators point to a greater PPP environment in the other four countries on this list, and greater growth in PPPs across the continent. Still, in the short term, private investors should not be deterred by the challenges in the PPP markets, as officials in these countries have indicated that they are keen to bolster the PPP market, especially from a legal perspective, and participate with investors.

Angola

More than ten years after a 27-year civil war that left nearly 1.5 million people dead, Angola is taking off like no other country. Situated on the western cost of southern Africa, the country is home to a wealth of natural resources, most notably oil (making Angola the second largest oil producer in sub-Saharan Africa). A boom in real estate construction (including hotels) and financial services unsurprisingly accompanies the oil boom, making Luanda unrecognisable from 10 years ago.

On the surface, it is a perfect turnaround. But, as it goes in any other country, every boom has its challenges. The all-encompassing challenge in Angola’s growth story is infrastructure. New buildings, more people, and a deficit in power sums it up, says a major Lusophone private investor. Hydropower is an obvious solution and the government is making great strides in restoring its capabilities. Still the hydropower facilities and greater distribution systems for power remain a shell of themselves after their decimation in the civil war.

Fundo Soberano de Angola, the US$5-billion sovereign wealth fund for Angola, is targeting infrastructure investments across the country. Yet, despite the government’s pledge to transfer annual surpluses from the oil reserves account (with annual receipts as high as US$3.5-billion), greater investment will be required from foreign investors. The quality of the transport network, including airports and ports, is sub-par to support the country’s growth. Private investors will find an interested government partner and a lucrative return in connecting the resource-rich Democratic Republic of Congo with the Atlantic Ocean and partners in the transport-capable country of Namibia.

Mozambique

As the other big Lusophone country in southern Africa, Mozambique shares a similar story of civil war and decimation. Booming with gas reserves and the accompanying real estate sector, the country is in great need of a transport upgrade. Recent estimates by professional services firm, PwC, values transport projects in the pipeline at US$17-billion, including increased rail links to the ports and expanding port capacities. Yet, by all accounts and estimates, more money will be required to ensure that major ports, including Nacala, Beira and Macuse, reach full potential. Equally, transport networks from those ports to neighboring Zimbabwe, Malawi and Zambia require financing currently not available in the market.

A recent announcement by the Minister of Public Works Cadmiel Muthemba indicates an openness on the government’s side to erect more toll roads. The country currently has only one toll road - the N4 toll road connecting Maputo to South Africa - which is operated by South Africa’s Trans Africa Concessions (TRAC). Private operators see enormous return potential in several routes, including highways between Manica and Tete, between Nampula and the port of Nacala, and between Marracuene and Inhambane.

Speaking at the ‘Africa Rising’ conference back in May, hosted by the International Monetary Fund (IMF) in Mozambique, the Minister of Planning and Development Aiuba Cuereneia stated the country’s notable gains in paved roads and the projects in the pipelines. Equally, during Q&A, he conceded that more financing was required, specifically from foreign investors, to match the plans envisioned by the government.

A power deficit is also quite noticeable in the country. A changing environment for public private partnerships should breathe life into this sector in the near term.

Cote D’Ivoire

Talk of a country booming under the public radar. Cote d’Ivoire has made amazing strides since the assumption of power by President Alassane Ouattara in 2011. The economy expanded 9.8% in 2012 and 8.7%  in 2013, with an estimated 8.0% predicted in 2014, according to the IMF. Yet it remains a fragile state, especially with elections around the corner in 2015.

The country is the largest producer of cocoa as well a global player in the palm oil and cashew nuts markets. Cargill, Cadbury and Hershey’s among many others call the country an agriculture hub - yet the country is nowhere near its potential. Infrastructural upgrades in the transport sector, specifically ports and road infrastructure, will greatly boost the country’s capacity for moving agricultural products and growing its position as a food basket and trading partner to neighboring Sierra Leone, Liberia, and Ghana.

The arrival of energy companies, following the discovery of oil reserves, will help fill government coffers for spending on infrastructure. But the boost in cash, particularly in the short term, is not sufficient to jump the infrastructural hurdle left by years of civil war. The power necessary to buoy the energy, agriculture (including agri-processing) and manufacturing sectors going forward is simply not there, creating big opportunities for investors. But it cannot be ignored that Cote d’Ivoire did not make our list for public partnerships in sub-Saharan Africa, as the government will have to do more to appease investor concerns and mediate risk. More details around regulation should appear after next year’s election.

Nigeria

As mentioned before, Nigeria is the only country to appear on both the top five list for public private partnerships and top five list for greatest infrastructural opportunity. Nigeria has one of the greatest infrastructural needs on the continent, particularly due to its size and population, and its politicians recognize this grave infrastructural challenge, consequently enacting laws to promote public private partnerships across the country.

The estimated cost of infrastructure investment required over next 10 years hovers between $8-billion and $10-billion. The newly-established sovereign wealth fund for the country cannot pay the bill for everything. Thus private investors will have a wealth of opportunities to keep picking from in the near future, especially in Nigeria’s power and accompanying transport sectors. Recent laws and change in government approach has numerous private operators waiting at the gates to make a deal. Some parties do complain that the due diligence process is absurdly arduous but this should gradually change over time.

Ethiopia

Ethiopia has the highest spending on infrastructure as a percentage of GDP in Africa. The government is dedicated to delivering high quality infrastructure to the country as the impetus for investment in the country’s other business sectors, particularly manufacturing/industrial and agriculture. For a country with 90 million people and relatively un-urbanized compared to its peers, improved transport - specifically roads and rails - is critical to moving goods to disperse populations.

The country’s leadership currently envisions an energy surplus following the completion of its latest dam project. But this should not lead investors to think the investment opportunities are limited for the power sector. Power purchased at the borders with Djibouti and Somalia can go north of US$0.75 per kWh depending on the time of the year. Thus, Ethiopia's vast land mass - ripe with energy opportunities from geothermal to gas to wind - offers boundless potential for growth.

Power generation could solely justify Ethiopia’s ranking in the top five. But, it would be a failure to ignore the demand for increased investment in power distribution. Any opening to foreign investment in the telecommunication sector will offer investors access to a country desperate for improved telecom infrastructure. Creative operators are already considering opportunities in water and sewage treatment which will become a graver concern to the country’s population as it approaches and surpasses 100 million persons.

It is not about the potential return with Ethiopia, in the eyes of those investors currently looking at the country, but rather all about timing (as to when a sector is more liberalized or the project gets approved). Whether today or in a year, the country will remain very attractive for infrastructure investment.

This article is re-published with permission from Frontier's content partner, Ventures Africa.

10 things to consider when planning your marketing strategy for Africa

By Tielman Nieuwoudt

When supply chain management in Africa is the topic of discussion, frequently used words include inefficiency, bottlenecks, bureaucracy, corruption, poor infrastructure and the occasional “chaos”. It is easy to fall into the trap of grouping all African countries into the same categories. The growth on the continent has sparked renewed interest in overcoming retail supply chain challenges. 

Below are 10 issues impacting retail supply chains in Africa:

Lead times - Importing products in Africa remains challenging and lead times could be anything from four to six months. The African continent has the most landlocked countries, further increasing lead times.

Outlet base - The numerous traditional trade outlets (e.g. spaza, dukas or souks) remain the biggest segment of the market and modern trade is still in the very early stages of development.

Fluid outlet base - The outlet base is fluid with new shops opening and closing. Seasonality also plays a part as some shops might stop selling ice cream and cold  beverages during the rainy season.  In addition, not all shops or selling points are permanent structures and some are roving hawkers.

Alternative channels - Beyond the traditional outlets, companies also need to understand alternative channels. For example, in Nigeria, “Table Tops” and the “Go-Slow” channels are important channels.  “Table Tops” are tables, set-up as temporary sales points to sell a limited number of stock keeping units (e.g. mobile phone carts). The “Go-Slow” channel or hawking channel, sells various types of merchandise that is normally easy to carry or transport (e.g. biscuits).

Markets -  Markets in Africa plays an important role. In some cases products flow from agents, who sell product directly to wholesalers based in  markets. For example in Lagos (e.g. Idumuta) and Addis Ababa (e.g. Mercato), markets remain a primary purchase channel for a number of product categories.

Moving away from trading - As African markets become more attractive, companies are moving away from trading (e.g. export agent and wholesale) and adopting a more organised Route-to-Market system, employing distributors to directly service the outlet base.

Route-to-Market considerations - Moving goods to a large fragmented outlet base is difficult and costly. Small groceries often have limited cash flow and  space to stock products. Finding the right model can take time and patience. Outlets are often  situated in high density and congested areas and companies are increasing looking at alternative distribution means, including micro distribution to reach these hard to reach areas.

Poor execution and stock out - What happens in the last 10 meters of retail supply chains is really important. In African markets, customers often experience stock outs because of poor planning and in-store execution. As small groceries have limited space and cash flow, they often require more frequent deliveries, in some cases daily.

Intermediaries - As small groceries have limited cash flow and space, they often require an intermediary, such as wholesaler, to break bulk. The wholesaler is often in close proximity to these outlets and provide a basket of goods, and in some cases credit.

Consumer satisfaction is availability - Retailers that sell undifferentiated products compete on the basis of product availability. Having the right product in the right place, at the right time (and frequency), with the right brand, at the right price, may be what really drives customer satisfaction.

Prospects for cement companies in Africa

Free download report: Outlook for the cement industry in Africa

Cement companies are expanding their footprints and investing in more capacity to meet the rising demand for cement in Africa.

In East Africa, old and new players are jostling for a share of the booming market, with Kenya and Tanzania attracting the most interest from investors.

In Southern Africa, cement companies are expanding to take capture growth opportunities in the region's massive pipeline of infrastructure and housing projects.

In West Africa, companies in Nigeria are taking advantage of government incentives to increase cement production.

Imara Securities looked at the sector recently and compiled the cement outlook report that we are now sharing with you.

Download the report  to get comprehensive information on:

• Regional consumption and production trends
• Drivers of consumption
• Opportunities for investment
• Risks for investors
• Top industry players and other Pan African companies to watch

To access this report you must be a Frontier member. Click on this link to sign up and get immediate access.

Visit www.frontiermarketnetwork.com to read some country-specific articles on cement production.

Seven things to consider when exporting products to Ethiopia

With a population of over 90m and a fast-growing economy, Ethiopia is a ripe market for distributors.

By Tielman Nieuwoudt, Principal at The Supply Chain Lab

Ethiopia is the second most populous country in Africa (after Nigeria) and one of the fastest growing economies, with an average GDP growth rate of 10% (IMF) over the last eight years.

When entering Ethiopia, there are a number of issues to consider when designing your Route-to-Market: 

Infrastructure and territories

Ethiopia has made great progress in infrastructure development with the country spending US$-1.3-billion or 10% of its GDP annually on infrastructure development, according to the South African Institute of International Affairs. However, as impressive as these numbers are, distributing products in upcountry areas remains a challenging undertaking.

Port

Ethiopia lost its port in 1992, when Eritrea became independent. They now rely on the port of Djibouti where costs are high. It costs more to transport a container from Djibouti to Addis Ababa than China to Djibouti (The Economist). The Lamu Port-South Sudan-Ethiopia Transport Corridor (Lapsset) holds future potential.

Territories

In comparison to other African countries, Ethiopia has a low urbanisation rate (11% vs. 30%). Addis Ababa, the capital city, contributes the bulk of the volume in Ethiopia. Ethiopia’s second city, Dire Dawa, has a population of 274,000 (ESA) compared to Addis Ababa’s estimated three million. It is estimated that 38% of the population still resides five hours or more away from a city with a population of 50,000 (IFPR).

Trade channels

Modern trade is in the very early stages of development and there are currently no international supermarkets operating in Ethiopia. In a very fragmented trade market, souks/kiosks remains the largest trade channel in Ethiopia.

Market

The Mercato market in Addis Ababa is one of the largest markets in Africa and the largest in Ethiopia. The market is dominated by wholesalers. Some companies generate more than 70% of their sales from Mercato. Wholesalers make low margins (2-5%) and most tend to be passive, waiting for customers to collect. While the role of Mercato wholesalers cannot be overlooked, they are not always a good option for building relationship with retailers and building brands. Most MNCs (Multinational companies) we talked to highlighted the importance of direct distribution, as it remains difficult to build a brand through a wholesale system.

Route-to-Market Models

MNCs are entering Ethiopia though distributors as they lack the required knowledge, scale and product portfolio to build their own distribution. However, beverage companies with local bottling operations also make use of direct distribution (key accounts) and micro distribution (such as the Coca-Cola Micro distribution system). It is important to note that foreign companies cannot distribute imported finished products, whether sourced directly or from local importers.

Organisation

Most MNCs are still operating out of their Nairobi offices. However, companies are increasingly opening new offices in Addis Ababa. Ethiopia is significantly different from the other East African markets and care should be taken to understand the culture aspects. Including when displaying role models for advertising purposes.  Foreign investors are increasingly recognising the consumer goods potential in the country, as recent acquisitions from Diageo, Heineken and Tiger brands have demonstrated.

7 business trends to watch in Ethiopia

Trend #1: Investment in infrastructure 

Ethiopia’s economy grew significantly in the past decade, driven mainly by major activity in the infrastructure and construction sectors. Annual per capita growth could increase by 3.8% if the country can get its infrastructure up to the quality of facilities found in Mauritius or South Africa. The Ethiopian government has an ambitious infrastructure development plan that will see to the delivery of adequate power, road, air, rail and telecommunications facilities. The plan will quintuple power generation capacity (to 10,000 MW) by 2015, according to the Growth and Transformation Plan; triple the capacity of the road network to 136,000 km, build new 2,000 kms of railway and facilitate mobile phone operators’ quest to increase the number of subscribers. Additionally, the national carrier, Ethiopian Airlines, plans to expand facilities to become the largest airline in Africa. These programs and others such as the ones that were designed to enable the country fulfil the Millennium Development Goals (MDGs) present huge opportunities for private companies. The key to identifying the opportunities lies in understanding the inputs the government requires to implement various development projects.

Trend #2: An agricultural revolution

Agriculture accounts for 40% of Ethiopia’s GDP and 60% of exports. Despite the lingering perception of the country as famine-struck, there is immense unexploited agricultural potential. The varied agro-climatic and altitude differences allow farming of a wide variety of crops including coffee, tea, oilseeds, pulses, cereals, which are the traditional crops grown, and newer crops such as fruits, vegetables, sugarcane, and palm. Ethiopia is a big exporter of floricultural products, fourth largest sesame exporter in the world, and top ten in the production of oilseeds like linseed and a wide variety of pulses. The livestock sector has the largest base resources in Africa but is grossly unexploited. The high value horticulture sector is likely to overtake floriculture in the coming years as an export earner. Future growth in the agribusiness sector will be driven by improved production by small-scale farmers and further foreign investment in commercial farming and agriprocessing. Some foreign companies are already invested in agri-procesing, for example, beverage production. It is likely that the sector will attract more investment especially in agriprocessing.

Trend #3: Growing market for consumer products

Ethiopia’s population of 93.8m, a rapidly expanding economy (% figures), high urbanisation rates and a young population – 73% of population is under 30 years of age – supports the case for investing in the Fast Moving Consumer Products (FMCG) sector. Foreign investors have recognised this potential, with Diageo buying a minority stake in state-owned brewery, Meta Abo, in 2011 for $225m, while Heineken bought two smaller breweries for $85m and $78m respectively. Diageo is looking to complete the acquisition soon, as it seeks to increase its market share. UK company, Duet Group followed the beer giants in Ethiopia by acquiring a 41% stake in Dashen Brewery for $90 million. Interest in the beer industry has continued with greenfield investment projects such as Raya Brewery and Habesha Brewery taking off. The beer market is expected to grow more than 10% each year to 2015 amid the country’s rising economic growth, which is expected to reach 8% by 2015, according to the IMF.

South Africa’s Tiger Brands acquired majority stake in East African Holdings’ FMCG operations, which is the largest manufacturer of household goods in the country. With industrial parks under construction and government-focus on the development of the light manufacturing sector, the sector is set to take off.

There will be interesting opportunities for smaller companies who aim to supply products and services to big investors. In the barley-malt-beer value chain, for instance, one can see opportunities, from contract farming, distribution and marketing, to advisory services, packaging, and input supplies. In the broader FMCG industry, interesting opportunities exist for expansion of market outlets such as supermarkets, distributions systems, and wholesale/retail operations. The next drive in the growth of FMCG sector may see expansion into regional markets of Somalia and South Sudan.

Trend #4: Unparalleled regional trade expansion

Ethiopia’s trade with neighbouring countries is likely to present a major business and economic opportunity in the near future. This will be made possible by bilateral and multilateral trade agreements under the auspices of COMESA and IGAD. However, a more important factor are the planned transport corridors in the region. There are established road linkages with Ethiopia Djibouti, Sudan, Kenya and to parts of Somalia. New projects are on the way to link the country to the emerging market of South Sudan, which operators in Ethiopia can also reach via river transport on the Baro. Perhaps the most interesting project is the Nairobi-Addis Ababa highway. When complete, it will represent one of the largest business opportunities in Africa, linking Ethiopia’s over 90m population with 130m consumers in the East African Community. There are talks of building a rail transport network, which will link with West Africa, perhaps from Senegal to Djibouti.

Trade figures are growing despite the current inadequate infrastructure - in 2010, Somalia and Sudan were Ethiopia’s fourth and seventh largest export markets, registering more than $200m in value. Imports from the Sudan and Somalia have also reached significant values at 4.5% and 6.6% of total Ethiopian imports respectively. Ethiopia has started supplying power to Djibouti and the Sudan and with additional multi-million dollar agreements to supply Kenya and South Sudan. Kenya in the meantime is developing the port of Lamu, with the aim of supplying South Sudan and Ethiopia. This region is likely to benefit further from a planned railway project connecting Ethiopia and Kenya along with South Sudan.

People are moving freely between Kenya and Ethiopia, while trade between Djibouti, Sudan and Ethiopia is tariff free. Any FMCG business with a good foothold in Ethiopia is thus also in a good position to supply these countries. The emerging interconnection of the East African and Horn of Africa trading blocks will represent some of the best opportunities for investment and value addition.

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