Improving Corruption Levels in Africa Boosting Long-Term Consumer Market Prospects

Sub-Saharan Africa is home to some of the world’s most corrupt economies: while Botswana is the highest ranked at 30th in the Corruption Perceptions Index 2013 out of 177 economies, many others such as Kenya rank over 100.  While some such as Nigeria are experiencing declines in their corruption levels, many others are improving: Rwanda for example rose from 103rd in 2008 out of 180 countries to 49th in 2013. Because corruption levels are strongly linked to economic stability, foreign direct investment inflows and government spending in areas such as education, this is contributing to a significant increase in average per capita consumer expenditure in markets where corruption is improving. This will boost long term prospects for consumer goods companies.

Corruption Perceptions Index Rankings in Selected Sub-Saharan African Economies: 2008/2013

Source: Euromonitor International from Transparency International

Note: 2008 rankings are out of 180 countries, 2013 out of 177 countries.

The Link Between Corruption and Consumer Expenditure in Sub-Saharan Africa

  • In Sub-Saharan Africa as a whole, consumer expenditure as a percentage of total GDP has actually declined, from 66.1% in 2009 to 58.7% in 2013. Yet many economies where corruption is improving are seeing their per capita consumer expenditure rise, creating opportunities for consumer goods companies;
  • Rwanda saw its Corruption Perceptions Index ranking improve rapidly from 2008 to 2013, from 103rd in 2008 out of 180 countries to 49th in 2013. The stability this has brought to its economy has resulted in healthy real GDP growth of 5.0% in 2013, and this in turn has created a boost to prosperity among the population, resulting in a total rise in average per capita total consumer expenditure of 26.3% in real terms from 2008-2013, albeit to a still modest US$528 in 2013;
  • Likewise Ethiopia bettered its Corruption Perceptions Index ranking from 126th to 111th from 2008-2013, and also witnessed a significant total increase of 32.3% in real terms in its average per capita total consumer expenditure in the same period. In Botswana, the highest ranking country in Sub-Saharan Africa in the Corruption Perceptions Index 2013 at 30th; up from 36th in 2008; real total growth in total per capita consumer expenditure rose by 25.0% in the same period;
  • In the short to mid-term the trend represents solid opportunities for consumer goods companies operating in the basic consumer goods sphere, such as foodstuffs, soft drinks and basic beauty and personal care goods. In the very long term however, if these economies can maintain control of corruption to ensure economic growth, there is significant potential for growth in bigger ticket items such as white goods and electronics in these markets.