Retail market outlook in Nigeria

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Nigeria has some of the biggest opportunities for the retail sector in Africa. However lingering concerns over select risk factors, including tariffs imposed on the industry, may affect investment in the near to medium term.

Currently, more than 80m of Nigeria’s 170m citizens live in or close to urban areas, a figure that is set to rise in coming years as the economy moves away from its traditional rural base. This shift to the cities, and the rise of a broader middle class, represents a vast pool of customers for retailers.

According to a report released in July by research firm McKinsey Global Institute, Nigeria’s consumption could rise to $1.4trn a year by 2030, from its present level of $388bn a year, an average annual increase of 8%.

This rise in consumption will be driven by higher income levels, with the report forecasting 35m households to be earning more than $7500 a year by 2030, greatly expanding the middle-income bracket. This increased affluence is expected to result in 7.1% annual growth in sales of food and non-food consumer goods. The rise of non-food goods such as personal care products will record an even sharper rate of growth, with sales rising by 10.6% a year through to 2030, compared to 6.8% for food.

First-mover advantage

Another report prepared by international management consultancy A T Kearney earlier this year tipped Nigeria, along with Gabon, as offering the best retail investment opportunities in Africa. Kearney’s African Retail Development Index ranked Nigeria second overall for retail potential, saying it had rapidly evolving retail dynamics and demographics, with many other global retailers planning to set up shop.

“There is no time to spare entering these markets before these first movers gain an advantage as they establish their brands early and secure loyal customer bases,” said the report.

The opportunities in Africa more broadly have prompted multinational brands such as Walmart and Carrefour to expand their presence on the continent in recent years. Walmart acquired a 51% stake in South African wholesaler Massmart in 2011, which operates two stores in Nigeria under the Game brand.

Last year, French retail giant Carrefour partnered with the French distributor CFAO, which specialises in African sales and distribution, and plans to open stores in eight countries across the continent by 2015, including in Nigeria.

Challenges to growth

Concerns over domestic security could be an issue for local and foreign retail investors in the short to medium term, especially in the north of the country where interest has stalled due to militant activity. Continued unrest may also slow larger retailers moving into smaller cities, in particular those in or close to potential areas of instability.

Nigeria faces other challenges endemic to most emerging markets on the continent. Expansion in Africa can be slowed by a lack of infrastructure and difficulties in securing property, said Massmart’s CEO, Grant Pattison. Those hurdles, as well as problems with corruption, an unreliable legal system and currency stability in some countries have to be assessed when planning stores, he said, quoted by Bloomberg last year.

Another factor which may impact retailers in Nigeria is related to the fees charged on bank deposits of more than $15,000, a move by the state to promote a cashless economy and also rein in money-laundering. With many customers of retail chains spending less than $5 per transaction – purchases that tend to be made in cash – retailers have a high cash turnover that incurs bank fees. While some chains such as supermarket group Shoprite have seen electronic sales rise steadily, with the retailer reporting debit card purchases representing about 32% of total sales, cash remains king for the time being, though at a cost due to mandated fees.

While supporting the cashless economy programme, Haresh Keswani, managing director of the Artee Group – which operates a number of retail brands in Nigeria – says there are still hurdles to be overcome.

“As the retail sector develops, cashless transactions will grow. Cashless is a great idea, however the Central Bank of Nigeria must restrict cash transactions and create incentives for cashless payments,” Keswani told OBG.

Changing shopping patterns

As in most African markets, at present around 70% of all retail sales are conducted at small shops or informal outlets, however this will likely shift increasingly in favour of larger retailers in the years to come. McKinsey estimates the rate of sales expansion by modern format stores at 28% a year, a rate of growth that will gain pace as urbanisation increases.

Nigeria had attracted more than N205.4bn ($1.26bn) worth of investments into the retail sector in 2012 and 2013, the minister of industry, trade and investment, Olusegun Aganga, said at the end of last year. This is a reflection of growing demand for formal shopping options, with further floor space due to come on-line by the end of 2014, both in the form of stand-alone outlets and shopping malls.

This article is re-published with permission from Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia and Latin America.

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How to Get Your Business Funded

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Banking & Finance

Contrary to popular belief, business plans do not generate business financing. True, there are many kinds of financing options that require a business plan, but nobody invests in a business plan. Investors need a business plan as a document that communicates ideas and information, but they invest in a company, in a product, and in people.

Small business financing myths:

  • Venture capital is a growing opportunity for funding businesses. Actually, venture capital financing is very rare. I’ll explain more later, but assume that only a very few high-growth plans with high-power management teams are venture opportunities.
  • Bank loans are the most likely option for funding a new business. Actually, banks don’t finance business start-ups. I’ll have more on that later, too. Banks aren’t supposed to invest depositors’ money in new businesses.
  • Business plans sell investors. Actually, they don’t—a well-written and convincing business plan (and pitch) can sell investors on your business idea, but you’re also going to have convince those investors that you are worth investing in. When it comes to investment, it’s as much about whether you’re the right person to run your business as it is about the viability of your business idea.

I’m not saying you shouldn’t have a business plan. You should. Your business plan is an essential piece of the funding puzzle, explaining exactly how much money you need, and where it’s going to go, and how long it will take you to earn it back. Everyone you talk to is going to expect to see your business plan.

But, depending on what kind of business you have and what your market opportunitiesare, you should tailor your funding search and your approach. Don’t waste your time looking for the wrong kind of financing.

Where to look for money

The process of looking for money must match the needs of the company. Where you look for money, and how you look for money, depends on your company and the kind of money you need. There is an enormous difference, for example, between a high-growth Internet-related company looking for second-round venture funding and a local retail store looking to finance a second location. In the following sections of this article, I’ll talk more specifically about the types of investment and lending available.

Venture capital

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Gambia Women Farmers Urged to Maintain Lead Role in Agriculture

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Women farmers in rural Gambia have again been urged by the national women mobiliser of the ruling Alliance for Patriotic Reorientation and Construction (APRC) to take a lead role in the country’s food security drive and support the ‘Vision 2016 food self-sufficiency agenda’ of President Jammeh and his government.

The call was reiterated by Isatou Jiffanga Jarju, who, accompanied by a high-powered delegation has begun an eight-day nationwide tour meant to reinforce President Jammeh’s food security call and to engage women farmers to ensure their successful participation in this anti-hunger drive.

The initiative, which was sold out to Gambians during the 2014 presidential tour, seeks to stop the country’s decades-long dependency on imported food, with a first priority on rice.

President Jammeh, it would be recalled, first made the pronouncement in his 2013 ‘Dialogue with the people tour’ and used the initiative as his agenda for the 2014 tour.

Speaking at a meeting in Kerewan, the administrative town of the North Bank Region (NBR), Women Mobiliser Jarju expressed hope that the V-2016 targets will be met, but hastened to enjoin women to take the lead in its implementation.

“Since 1994, the Gambian leader has been calling on Gambians to consume what is grown locally, but many people did not understand at that time. Many of the skeptics who thought that President Jammeh’s targets will not be attained are now convinced that if people go back to the land, the country can feed itself. What we have never thought of since 1994 is what we are about to see in The Gambia’s development,” she told the women. Mobiliser Jarju also challenged the party women mobilisers at all levels to always be the first to respond to President Jammeh’s calls, urging them to engage their colleagues at the grassroots so that they can effectively participate in the food security drive.

“President Jammeh has sympathy for Gambian women and now it is our turn to reciprocate that gesture by working with him to achieve the Vision 2016. Let us work to be food independent,” she challenged.

She called on the women folk to continue being proactive in whatever they are doing, saying they have earned the respect and admiration of the head of state.

The deputy national women mobiliser, Fatou Njie-Fofana, said the country is blessed with arable lands that can be cultivated to feed the entire population. She pledged women’s total support to all endeavours of the head of state, noting that they are ready to actualise the Vision 2016 initiative. “Let us all work with Isatou and accomplish President Jammeh’s vision. Let us change our attitudes, the president trusts us and we should also do our part to make sure his targets are attained,” she said.

The president of the West Coast Region chapter of the National Women Federation, Aja Binta Sabally and Ida Faye of Sabach Sanjal, both agreed that President Jammeh has done his part in terms of providing farming equipment, seeds and fertilizer to Gambians, arguing that it is now the turn of the citizens to do their part.

Njambeh Njie and Isatou Jallow, Lower Baddibou women councilor and mobiliser respectively, both commended the national women mobiliser for the visit, saying it will offer women the opportunity to dialogue among themselves. They pledged that women of Lower Baddibou and the entire North Bank Region will always support the president in the successful attainment of his vision 2016 target.

They however appealed to the mobiliser to ensure that any project that comes for women is handled and implemented by women themselves. “For far too long, projects will come in the name of women and they will be implemented by men and this made us to benefit very little,” they said.

© (Source)

Africa News

S.Africa ranked 13th most attractive FDI destination

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Green Energy

South Africa has climbed two spots to become the 13th most attractive Foreign Direct investment (FDI) destination.

This is according to global A.T. Kearney’s 2014 Foreign Direct Investment Confidence Index.

According to the index, South Africa, which was ranked at number 15 in 2013, closed two major deals with international companies BP and Google, signalling a positive FDI trend for the country.

British oil major BP, for instance, announced a 550 million US dollar investment over five years while global search engine Google made its first renewable energy deal with South Africa’s Northern Cape Province for 12 million US dollars.

The South African government stated that they are humbled by the ranking as it shows that the country’s strategic partnership with foreign investors is gaining momentum. Continue reading

Africa EABDC News

Opportunities that Africa Presents – A discussion

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How can business tap into the opportunities that Africa presents, while also maximising its contribution to long-term economic growth and broad-based socio-economic impact?

  1. What do you see as the main business opportunities in Sub-Saharan Africa?
  2. Sub-Saharan Africa faces a number of socio-economic challenges – what is the role of business in tackling these?
  3. What role can others – in government, society, academia and business networks – play to maximise the contribution of business?

Can we hear your opinion on this.

© Africa Hub (Source)


Empowering Smallholder Farmers Through Business Solutions

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Small Holders Farmers

Most smallholder farmers do not grow enough food to last the year. Once their food runs out, many farm families experience what is referred to as a “hunger season” – typically a six-month period of time of meal skipping and meal substitution. This plays a major role in child deaths: one in 10 children die before their first birthday.

At One Acre Fund, we have developed a business model that helps over 180,000 smallholder farmers in East Africa end their hunger seasons. This model systematically addresses the major barriers that smallholder farmers face.

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Africa News

World Bank to support Kenya in 5-year plan

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Diariétou Gaye

The World Bank has endorsed a five-year strategy to help Kenya achieve its national development blue-print.

A loan facility of 348 billion Kenyan shillings has been approved.

The development strategy is set to aid Kenya flourish in its efforts to boost economic growth sustainably, create more jobs for the youth, improve infrastructure, and devolution in order to fight poverty and manage social diversity.

“While Kenya has grown on average at 4.6 per cent annually over the last decade, poverty and inequality have fallen less dramatically which has prevented many Kenyans from sharing in the benefits of the country’s strong economic performance,” the World Bank said in a statement. Continue reading


Bitcoin for the poor

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Cash transfers in Africa

THE affluent Midrand area of Johannesburg is about to make history. By the end of June a local company, ZABitcoinATM, hopes to install Africa’s first Bitcoin ATM. The machine will allow clients to insert local cash and change it into the crypto-currency minted on the internet, to be used at nearby businesses which have joined the scheme.

Up to 80% of African adults have no bank account, but at least 16% use mobile-money platforms. The continent annually receives $50 billion in remittances, which are subject to fees of up to 12% charged by wiring services like Western Union. If one could improve internet access and provide immediate conversion into local currencies, entrepreneurs speculate that Bitcoin might be able to undercut remittance services. Zach Harvey, the chief executive of Lamassu, the ATM’s manufacturer, could train his sights on companies like Western Union. Continue reading

Africa News

The amazing spirit amongst Africa’s tech entrepreneurs

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Jason Njoku

You think you have seen them all until you see more of them. Solutions that you thought had been long employed. Innovations that you thought had long been exploited. The DEMO Africa Innovation Tour across the continent was an eye opener. Last week we were in Ghana. Be sure to apply before coming Sunday, June 15th.

The startups came in numbers and ready to impress the judging panel, which comprised decision makers from top companies in Ghana and other global players including Google. From Citizen Eye, a social enterprise that aims at tracking oil money with an aim to empower citizens to hold the government accountable, to Kitiwa a startup bringing Bitcoin to Africa. Continue reading