Rwanda is the top destination for global goods and services suppliers, thanks to its focus on reforming the business climate and seeking to attract foreign investment, a new report shows.
The 2014 African Retail Development Index developed by AT Kearney, a global consultancy, launched yesterday, indicates that although Rwanda is geographically small, it has a highly fragmented and increasingly more attractive market than African countries with larger economies.
Nigeria, Namibia, Tanzania and Gabon are the other nations making the top five places of the inaugural index, which is acclaimed as a useful framework for retailers because it offers them attractive destinations for their business expansion.
“With one of Africa’s fastest growing economies–an annual GDP growth of more than 8 per cent–Rwanda leads the ranking. Although small in land area and just 20 years since the 1994 Genocide against the Tutsi, Rwanda has an efficient government and strong macroeconomic indicators that opportunities for international retailers can offer basic packaged goods,” the report says.
“Specifically, infrastructure reforms have focused on developing an efficient transport and road network and turning Rwanda into a regional logistics hub. With a low income per capita, most consumers base their shopping decisions on price and affordability, and are reluctant to change brands.”
A handful of foreign enterprises operate in Rwanda at the moment, the largest being Kenyan retailer Nakumatt, but the report indicates that global retailers such as Wal-Mart and Carrefour are also eying the country’s market.
The report further earmarks sub-Saharan Africa as “the next big thing” in retail business, with seven countries in the region making the top 10.
It also paints a rosy picture of East Africa, citing its global attractiveness due to rapid population growth, urbanisation and stable economies.
“As retailers tiptoe into Africa, figuring out where to enter and how to begin is a daunting task. While Africa is becoming a serious investment option for retailers, questions on how to succeed there linger. It is with this in mind that AT Kearney embarked on its first African Retail Development Index,” Mirko Warschun, AT Kearney partner and co-author of the report, said.
The report measured 48 countries in the sub-Saharan region and used data of 2012.
More index results
The report shows that formal retail business in malls and shopping centres are still in early stages in most sub-Saharan African countries–with the exception of South Africa–limited to a handful of urban areas.
It also indicates that although the majority of Africa, including Rwanda, Tanzania, Gabon and Ethiopia, have promising markets, their major retail markets remain small and informal.
Botswana, Namibia and South Africa have Africa’s most advanced local and international retail presence, offering a wide range of products that target the middle class population.
The report predicts that by 2020, nearly half of all Africans will be living in cities and their spending on consumer products will grow to almost $1 trillion.