Infographic #2: Consumer & Business Expenditure in Africa
Our second infographic focuses on commerce in Africa and the opportunities that lie therein.
According to Statista, consumer and business expenditure in Africa was $4T in 2015 and is expected to grow to $7T in 2030[1]. The Brookings Institute reported that specifically, consumer expenditure has grown at a compound annual rate of 3.9% since 2010 and reached $1.4T in 2015. This figure is expected to reach $2.1T by 2025, and $2.5T by 2030[2]. By then, the largest markets will include Nigeria, Egypt, and South Africa. There could also be lucrative opportunities in Algeria, Angola, DRC, Ethiopia, Ghana, Kenya, Morocco, Sudan, Tunisia, Tanzania, among others [3].
Africa has 80-90M SMEs[4], which represent 90% of businesses and more than 80% of jobs across the continent[5]. Although cash is king - and the lion share of transactions still happen offline – there is significant opportunity for these trades to be captured online. This will be driven by the deepening of internet penetration and digital financial services on the continent. We note that payments - the bedrock of digital commerce - has seen significant acceleration. According to McKinsey, Africa’s domestic e-payments market is expected to see revenue growth of 20% annually to reach $40B by 2025.
When looking at B2B commerce in Africa, we observe that it is often fragmented, which creates friction along the ecosystem, between manufacturers, wholesalers and retailers. In our view, tech enabled B2B marketplaces offer meaningful solutions to this supply chain problem, and they are gathering steam. For instance, B2B startups on the continent that operate within the FMCG space have raised $415M+[6] in VC financing in 2022, with annualized GMV exceeding $2B. Away from FMCG, there are other industries which could also benefit from B2B marketplaces, and some include industrials, agriculture, healthcare, hardware, enterprise solutions, human resources/outsourcing, etc.
If we moderately assume that 30-40% of consumer and business expenditure by 2030 can be captured digitally, we estimate that commerce GMV could reach $2-3T by then.
CRE’s portfolio company Sabi, a diversified B2B marketplace with embedded fintech tools for merchants, has recorded $1.2B in sales since launch, servicing 200K merchants, and has recently expanded its operations to South Africa.
Sources:
[1] Statista – Consumer and Business spending in Africa. Available at https://www.statista.com/statistics/1082602/consumer-and-business-spending-africa/
[2] The Brookings Institute – Africa’s consumer market potential: Trends, drivers, opportunities and strategies. Available at https://www.brookings.edu/wp-content/uploads/2018/12/africas-consumer-market-potential.pdf
[3] The Brookings Institute – Africa’s consumer market potential: Trends, drivers, opportunities and strategies. Available at https://www.brookings.edu/wp-content/uploads/2018/12/africas-consumer-market-potential.pdf
[4] McKinsey – The future of payments in Africa. Available at https://www.mckinsey.com/industries/financial-services/our-insights/the-future-of-payments-in-africa
[5] African Business - Unlocking SME potential through the power of emerging technology. Available at https://african.business/2022/04/technology-information/unlocking-sme-potential-through-the-power-of-emerging-technology/
[6] Rest of World - Investments flood into Africa’s B2B e-commerce startups. Available athttps://restofworld.org/2022/investments-flood-into-africas-b2b-e-commerce-startups/