On the world economic map, Africa was once a forgotten place of modern trade. Although Lucy, the common grandmother of humanity, emerged from the Great Rift Valley in East Africa, and although she was later replaced, her birthplace is still the African continent, which is recognized by the academic community as the "cradle of human birth".
Today, Africa has become the last "blue ocean market" of the global economy, a region with diverse consumption levels. The land area is 30.2 million square kilometers, with 54 countries and a population of approximately 1.452 billion, second only to Asia, and a huge market consumption potential.
At present, the global market is constrained by a special period of economic downturn and difficult recovery, and the African market has become the fastest growing economy in the world, standing alone, with a strong momentum and astonishing growth rate. Blue ocean markets and demographic dividends have become hot search keywords in the African market this year.
The top ten countries with the highest global fertility rates are currently in Africa. The proportion of young people here is as high as 70%, and it has jumped to become the region with the youngest population in the world. The demographic dividend has continuously improved the market structure in Africa, and the urbanization process has also led to the continuous optimization of the business environment. The 3G network has basic coverage, while the 4G network has already covered the core area, and 90% of the products are made in China.
At the high-end seminar on deep economic and trade cooperation between China and Africa last year, the Institute of International Trade and Economic Cooperation of the Ministry of Commerce released the "Report on China Africa Economic and Trade Relations 2023", which showed that China has maintained its position as the largest trading partner in Africa for 14 consecutive years.
Some overlooked markets often contain huge treasures, and the next blue ocean for Chinese companies may be in Africa.
01. Why is it the African market?
The African market needs Chinese goods, and Chinese goods also need the African market.
Africa is located near the equator. The ultraviolet ray is far stronger than other places. The skin is easy to get sunburnt. The special geographical environment has created special market demand. In the African market, cosmetics such as sunscreen, moisturizer, eye shadow and lipstick are very popular.
2023 marks the tenth anniversary of the the Belt and Road Initiative.
What does ten years mean?
Is it the transformation of global industrial chains, supply chains, and value chains? Or the interconnection of China Laos Railway, Ya'an Wanzhou High speed Railway and China Europe Regular Trains? Or is it the continuous "going out" of Chinese manufacturing and the continuous "introduction" of high-tech?
The story of ten years is grand and specific. Xiaguang News Agency has seen that more and more Chinese enterprises, under the initiative of the "the Belt and Road", have broken the restrictions of time and space, crossed space and time, and made historic changes in the economic structure of China and emerging markets.
Taking the African market as an example, the bilateral import and export volume of goods between China and African countries (regions) in 2023 was 8.3631 million US dollars, an increase of 4.6 million US dollars compared to the same period in 2022, a year-on-year increase of 166.5%.
The African market has long been on the edge of developed markets, creating a vacuum in the global market, characterized by outdated infrastructure, lack of investment, and imperfect industrial chains. In this sense, the "the Belt and Road Initiative" just focuses on developing countries, which can fill the above shortcomings.
Chinese cosmetics companies discovered the enormous potential of the African market as early as 2018.
Shanghai Jiahua is one of the earliest Chinese companies to notice the blue ocean market of African cosmetics. Its multiple whitening products have a very high penetration rate in the South African market, and some places have even become supermarkets for Chinese cosmetics.
Six years ago, in response to the national "the Belt and Road" initiative, Shanghai Jiahua sold Liushen toilet water to Mauritius, Zambia and other countries, and even made Liushen toilet water a "hard currency" in the African market.
According to international beauty agencies, the annual growth rate of cosmetics demand in the African market is currently 30%, and the South African market can even reach as high as 65%. After 2023, the "the Belt and Road" will attract more Chinese cosmetics enterprises to emerging markets and realize the global layout of Chinese cosmetics.
Xiaguang News Agency observed that, with the help of finance, logistics, warehousing and other aspects, Chinese enterprises and countries jointly building the "the Belt and Road" are forming closer and closer positive interactions, and new export growth points and time windows for emerging markets are rapidly forming.
In the African market, in addition to Chinese cosmetics companies and well-known Transsion smartphones (Xiaguang Society will have an explanatory article on Transsion's latest layout next, please follow this account), there is also a successful enterprise case of Sida Era. This is a company born in Qinhuangdao, China, and is also the fastest growing and most influential Chinese digital television operator in the African market. As early as ten years ago, it turned its attention to the resource rich African market.
African consumers have a strong desire to improve the spiritual and cultural life of their citizens. In 2007, Sida Times held intentional negotiations with senior officials in Rwanda, stating that it would empower the Rwandan television industry through digital television, and thus obtained the first overseas digital television operation license.
One year later, the era of Sida began to land in Rwanda. The initial installation fee is $200, the installation and debugging fee is $50, and the monthly viewing fee for more than ten programs is $47, which is only one-fifth of the price of other operators. Sida Era quickly became a digital TV operator for local users through its large-scale low-cost strategy.
Not only that, Sida Era also has a complete after-sales service system, bringing the mature after-sales service model of China's home appliance industry to Africa. It not only provides free on-site service, but also lifetime warranty maintenance. In addition, Sida Era introduced Chinese TV dramas to Africa and translated them into local languages. Today, Sun Wukong and Zhen Huan have become well-known characters in Africa.
At present, Sida Times has established companies and carried out digital television operations in more than 30 countries in Africa, with 20 million users, and has become a highly influential digital television operator in Africa.
Guo Ziqi, Vice President of Sida Times, said, "The most important reason why Sida Times has been able to enter Africa and establish a foothold is the purpose of our African business, to enable every African family to afford, watch, and enjoy digital television, and share the beauty of digital television."
In the sub Saharan region with a population of nearly 1 billion, watching TV is indeed a necessity. In the era of Sida, the expensive price of digital television has been popularized, and a complete after-sales service system has been developed. It has moved the mature after-sales service model of China's home appliance industry to Africa, providing not only free on-site service, but also lifelong warranty maintenance.
A topic worth thinking about is that the concept advocated by the "the Belt and Road" is becoming a new direction for Chinese enterprises to grow internally and explore externally. Not only are there large-scale projects such as large-scale infrastructure and industrial chains here, but there are also many "small yet beautiful" projects, such as small and medium-sized enterprises with relatively weak financial strength, which are also looking for suitable emerging markets to explore overseas.
Xiaguang Society has seen that the global economy is intertwined in various games between people, countries, developed markets, and emerging markets, and actively or passively linked with enterprises. Chinese enterprises, as producers, are also participants in global trade.
Behind this business phenomenon is the trend of Chinese companies going abroad and embracing emerging markets that they are familiar with or unfamiliar with.
In this wave of going global, some companies have succeeded, while others may have failed overseas due to strategic mistakes. The key to the problem lies in what kind of markets (developed/developing/emerging/undeveloped) enterprises use to globalize their layout.
02. The number of middle classes in Africa is 360 million, with a GDP growth rate of 5.8%
The African Development Bank predicts that the average growth rate of the African market will remain stable at 4.1% from 2023 to 2024, and the relatively affluent South African region's GDP growth rate will increase to around 5.8% in 2024; According to data from the United Nations Commission on Population and Development, the current number of middle classes in Africa is 360 million. It is expected that by 2060, the African middle class will grow to 1.1 billion, accounting for approximately 42%.
Unlike the population structure of European, American, and Asian markets, the population of the African market is in a period of rapid growth. The population of sub Saharan Africa grows at a rate of 2.7% annually, which is more than twice the growth rate of South Asia (1.2%) and Latin America (0.9%). This means that Africa is increasing the population of France (or Thailand) every two years.
Ten years ago, China put forward the "the Belt and Road" initiative, which should be viewed against the background of historic and significant changes in the economic structure of China and the world. We have adjusted the open pattern dominated by Western markets over the past 30 years and opened up new market growth points outside of developed markets.
According to the Shanghai Securities News, from January to July last year, Chinese enterprises went to sea to highlight the import and export data of countries jointly building the "the Belt and Road", becoming a new growth point of foreign trade and export. Data shows that the total import and export value of foreign trade in the three provinces and one city of the Yangtze River Delta is about 8.6 trillion yuan, accounting for 36.54% of the total import and export value of the country.
To become an international brand, Chinese enterprises need to have an international strategic vision. Looking at the world, the African market will be the last "blue ocean market" with a population of over 1.4 billion in the next decade. The land area here is 30.2 million square kilometers, with a population of approximately 1.452 billion, second only to Asia, and has enormous market potential.
Xiaguang Society believes that the distant physical distance and unfamiliar cultural environment can no longer prevent Chinese cosmetics companies and domestic brands from turning their attention to the incremental market in Africa.
The demographic dividend has continuously improved the market structure in Africa, and the urbanization process has also led to the continuous optimization of the business environment. The proportion of young people in Africa is as high as 70%, making it the youngest region in the world. Urbanization construction has enabled basic coverage of 3G networks, 4G networks have already covered core areas, and 90% of products are made in China.
Thanks to the large young consumer group in the African market, the African beauty industry has always maintained a good growth momentum. Euromonitor International predicts that among 54 African countries, the beauty and personal care market in Africa will reach $8.2 billion in 2023, and by 2025, the size of the African beauty market will exceed $10 billion.
Under multiple factors such as rapid economic growth and explosive population dividends, the African market has become the fastest-growing consumer market in the world. As the younger generation of consumers in the African market continues to grow, local culture and aesthetic awareness are awakening, and the African cosmetics industry needs to face both skincare and beauty market demands simultaneously.
Technology knows no borders, digital knows no borders, and trade knows no borders. The essence of business is to shape and change people's lifestyles, and Chinese companies are using business to change the way young people in Africa live.
Chinese domestic supply chains respond quickly in various aspects such as design, research and development, production, transportation, and distribution. After more than a decade of development, domestic brands have performed well in product quality, technological research and development, and design creativity, which are comparable to international brands.
A large African market with a population of over 1.4 billion, with economic growth, the rise of the middle class, and steady urbanization, will form a huge consumer market in the future. It is currently in the early stage of market development and is very friendly to Chinese goods, which has created an excellent window for Chinese enterprises to go abroad and open up the African market.
03. Observation by Xiaguang Think Tank
From the perspective of industry observation, the investment scale in the African market is not large, and the effect is relatively fast, making it easy for local people to benefit. Perhaps it can become a reference sample for Chinese enterprises to "go global". Based on various factors, including market research, user needs, cultural differences, brand image, cooperation methods, and legal regulations, Xiaguang Society and Xiaguang Think Tank have summarized the following suggestions:
Market thorough research: Before entering the African market, Chinese companies need to conduct thorough market research to understand local market demand, consumer preferences, competitive situation, and other information. This helps companies develop more precise marketing strategies and product plans.
User demand matching: The African market has diversity and complexity, and there may be significant differences in market demand and consumer preferences among different regions and countries. Therefore, enterprises need to provide products and services that meet the local market demand and consumer preferences.
Brand image building: In the African market, brand image is crucial for the success of Chinese enterprises. Enterprises need to establish a good brand image and reputation through high-quality products and services, and win the trust and recognition of local consumers.
Multicultural adaptation: Africa is a multicultural continent, with different regions and countries having different cultural customs and values. Therefore, enterprises need to respect local cultural customs, avoid conflicts with local culture, and better integrate into the local market.
Local Cooperation Alliance: Establishing cooperation and alliance relationships with local enterprises in the African market can better enter the local market, while also leveraging the resources and experience of local enterprises to better carry out business.
Compliance with laws and regulations: In the African market, enterprises need to comply with local laws, regulations, and business practices to ensure the legality and standardization of their business. At the same time, it is also necessary to pay attention to changes in local policies and regulations, and adjust the business strategy of the enterprise in a timely manner.
Leveraging the African market with a population of 400 million requires Chinese companies to have comprehensive market insights and strategic planning capabilities, as well as to focus on product and service quality, in order to establish a good brand image and reputation. By localizing and cooperating with local African enterprises, it can also help Chinese enterprises better integrate into the African market, thereby achieving scaled growth in performance and long-term development of the enterprise.
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