For African businesses to grow, China, with its booming middle class, is definitely the next frontier. But, does Africa hold attraction for Chinese consumers?
Chinese consumers are single-handedly making or breaking economies and businesses around the world. Indeed, when Apple recently declared a quarterly dip in sales for the first time in more than a decade, it was because Chinese consumers appear to have moved on from its flagship iPhone, with China taking a lion’s share of the sales dip at 26%.
Of course, Apple was quick to blame the dip in sales on a ‘general economic softness’ in the Asian economic giant. So, is the recent slowdown in the Chinese economy likely to dampen its long term growth prospects? Not really. Sample this:
“14 cities from China will appear on the list of the world’s top 25 cities in terms of absolute GDP growth for the next decade. By 2020, the GDP of some clusters of cities will be similar to that of some developed markets currently.”
All in all, China’s cities are bursting at the seams with a rising middle class that is set to substantially alter the consumption behaviour of the Chinese consumer, moving it from savings mode to consumption fever. The concerns related to retirement and health spending that have traditionally pushed the Chinese consumer to save are now being addressed by the Government through new plans aimed at increasing retirement pension coverage and allowing more consumption spends.
Supplement this with an expanding services sector that is set to create more jobs and higher incomes, and you have a Molotov cocktail of private spending waiting to explode.
For watchers of the African continent, the question now begs itself: Is a rising Africa likely to find itself warming up in the glow of the dragon’s favour? Or, is the Dark Continent going to find itself left out in the cold?
Traditionally, Africa and China have enjoyed good relations at a political level, as China has turned increasingly to the resource-rich continent to fulfil its need for minerals to process electronic goods. But resource-based relationships were both draining for the continent as also unsustainable from a business continuity perspective.
However, with the government relations being supplemented by healthier private sector exchanges, it looks like the relationship between Africa and China may be deepening to a sustainable level.
Take studies from the Sino Africa Centre of Excellence (SACE) Foundation, which is an organisation seeking to improve China-Africa relations. SACE studies show that, going beyond minerals, African countries currently provide most value to the Chinese market in terms of agricultural produce.
Why agricultural produce, you ask? Well, China is fast transforming into an upper-middle income nation with a rise in what is termed the “mainstream” consumer i.e. relatively wealthy households with annual disposable incomes of between $16,000 and $34,000. These wealthy consumers are not concerned about spending thousands and thousands of dollars on health and wellness –the health and wellness that they equate with the natural agricultural produce that African nations can provide. Thus, for African business, there is an opportunity in all things organic, natural and healthy.
Fortunately, Africa does not have to struggle on the marketing front. To a typical Chinese consumer, SACE studies show that ‘Made in Africa’ connotes products that are “wild, natural and culturally exotic”.
Then, for agri-processing businesses in Africa that specialise in home-grown foods and brews such as exotic coffee blends or garden teas for instance, there is big money to be made in reaching out to the Chinese masses. And yes, these wealthy consumers are more than willing to pay a premium for products perceived to be superior, unique and exclusive.
African products that position themselves along these healthy lines will appeal to consumers. But naturally!
For those African businesses that are daunted by the distance barriers, there are plenty of opportunities thrown open by technology. E-commerce platforms such as Alibaba.com and JD.com have a huge following in China and can be easily tapped by a boutique firm sitting in far-out Africa to reach out to a vast market that is looking for the next health product.
Indigenous products by small African businesses that are championing their culture and heritage can then be key to conquering a market that can make or break the future of the continent.
Do you have a small business with an indigenous offering that you believe could be your ticket to enter the dragon? Read the next blog in this series to find out how, with the right combination of finance and support from specialist SME financiers on the continent such as GroFin, your business just might get the shot in the arm it needs to bridge the distance between Africa and China.
- This article was originally published by Nishika Bajaj on LinkedIn Pulse