Ever since independence in 1960, US petrodollars have flowed into Nigeria as crude oil has been pumped out. Unfortunately, much of that wealth was squandered by corruption and military leaders until, in 1999, the political stability of democracy opened up opportunities in other industries.
The exponential growth of what was a previously untapped market has created a burgeoning middle class and a new circle of affluent individuals. Two such examples are the billionaires Aliko Dangote, who built his empire on commodities including flour, sugar and cement and Mike Adenuga, who runs an oil company and Globacom Ltd., one of Nigeria’s largest mobile phone service providers.
It is not only Nigeria that is witnessing a rise in high net worth individuals. According to the World Wealth Report produced by Merrill Lynch and Capgemini, South Africa has close on fifty thousand US dollar millionaires with a 13.3% year on year increase. Factor into that a recent spate of oil and gas discoveries, for example in Ghana (oil) and in Tanzania (gas) it is fair to say that Africa, with five of the world’s top 12 fastest-growing countries all hailing from the continent, has become a breeding ground for the nouveau riche.
With so much growth and newfound wealth at their disposal, Africans are increasingly looking at ways to enjoy new luxury goods, services and experiences. Previously, this would mean shopping sprees to Dubai, London, New York and Paris but now luxury brands are beginning to make inroads direct to the African wealthy consumer’s doorstep.
In Nairobi’s Garden City, a 32-acre project that is currently under development will produce the largest retail mall in East Africa, state-of-the-art commercial premises, 500 luxury residences and an outdoor events arena for staging live concerts. The developer, Actis, was behind The Palms and Acera, Nigeria and Ghana’s first shopping malls respectively. This modern retail initiative will be key for the accessibility of luxury brands.
Korean manufacturer, Samsung, is doubling its efforts to tap into the African market. They already have assembly plants in six African countries, they sold $2 billion worth of goods on the continent in 2011 and plan to reach $10 billion in sales by 2015. By recognising that less than 8% of all African mobile phone users possess smartphones and by doubling their share of the sub-Saharan smartphone market from 10% to 20% as a result, Samsung is taking steps to ensure their future as the continent’s smartphone of choice.
On Victoria Island, home of Nigeria’s super-affluent, the Italian car manufacturer, Porsche has opened a dealership to supplement their existing showrooms in Angola and Ghana. They initially harbour aspirations of 300 annual sales to compliment the 800 they already sell in South Africa. There are also plans for a Porsche racetrack and club in Lagos where the affluent can socialise and go out on drives together.
Elsewhere in Nigeria, LVMH Moet Hennessy Louis Vuitton SA, the French luxury conglomerate, has doubled its marketing efforts to sell its top-shelf wines and liquors. A smart move when you consider that fine wines/champagne and spirits accounts for almost half of all luxury goods sales in South Africa.
LVMH Moet Hennessy Louis Vuitton SA also released a commemorative Hennessy cognac bottle in honour of Nigeria’s 50th independence last year with their Nigerian marketing manager Tokini Peterside explaining “For Hennessy cognac, Nigeria ranks among the Top 10 consuming countries in the world.”
Africa’s increasing demand for Hugo Boss suits, Prada sunglasses and Louis Vuitton handbags is reminiscent of China and India ten years ago and western luxury brands are spreading like wildfire to meet demand.
Luxury in Africa has come such a long way in such a short space of time that the 2012 International Herald Tribune Luxury Conference held its focus on the potential and growing influence of luxury goods and global brands in Africa as well as addressing how Asian investment was transforming the African landscape.
Although historically Africa has been blighted by corruption and poverty, the new markets opening up there are some of the most lucrative in the world and luxury brands would do well to act fast and position themselves well for the oncoming gold rush.