Africa Competes With Asia as Next Market for Luxury Goods

SAN DIEGO (TheStreet) -- A native Nigerian, Chris Folayan travels back to the country of his birth four to five time every year.

During recent visits, he's been increasingly surprised by the vivid and multiplying examples of luxury consumption.

"I saw one Rolls-Royce Phantom at the airport, and two more on my drive from the airport. Those are cars you don't generally see very much anywhere. To see three in one day ... it's just not very common," says Folayan, who has lived in the United States for about 15 years.

It's just one example of the rapidly growing market for luxury goods among Africans.

A sizable and ever expanding number of Africans can now afford luxury goods due largely to increasing disposable income and wealth generated from Africa's enormous natural resources, including oil, gas and precious minerals, say regional analysts and business owners engaging in more and more trade on the continent.

Disposable income, coupled with infrastructure that's rapidly improving and decreasing trade barriers, has by many accounts helped make Africa the next great market for luxury products.

Some analysts say U.S. luxury manufacturers would be foolish to ignore the emerging opportunities on the continent.

"When you talk about luxury goods and the African consumer, you're talking about a huge opportunity. It would be very disadvantageous for American businessmen and women to overlook that opportunity," says Ken Johnson of Devconia, a New York-based international business development management firm specializing in enhancing international trade, particularly in sub-Saharan Africa.

"Companies from China, India, Brazil are all there en masse. It's high time U.S. businesses take a closer look at Africa and take advantage of the opportunity," says Johnson, who was born in Sierra Leone and visits Africa at least once a year.

Africa is one of the fastest-growth regions in the world, poised to surpass Asia in terms of economic growth, by many accounts.

In particular, the economies of South Africa, Nigeria, Angola, Ghana and Ethiopia are growing at a brisk pace, says a report from T. Rowe PriceFive Countries to Watch.

South Africa is the leading economy on the continent, while countries such as Ghana have one of the fastest-growing economies in the world, according to the report.

What's more, the International Monetary Fund's World Economic Outlook released in October says 11 of the world's 20 fastest-growing economies are in Africa.

All of which has translated into a very visible consumption of luxury products.

"Desire for luxury goods is dramatically increasing, " Johnson says. "It varies country by country, but it's trending in areas of huge natural deposits and natural resources ... Nigeria, Ghana, with its gold."

Billy Bauer has also witnessed Africa's vast potential first-hand.

As marketing director for Royce Leather's luxury products, Bauer visits the continent each year and has no doubt Africa has seen its fortunes improve recently.

For the past 15 years or more Royce has been distributing products in African countries including Ghana, Kenya, Nigeria and South Africa. During the past three years the company has seen a dramatic spike in business, Bauer says.

"I'm getting orders more regularly from distributors in Nigeria and stores in South Africa. We've always had a presence there, but it's now more noticeable and permanent," says Bauer, whose luxury briefcases and luggage sell for between $200 and $500.

Bauer points to oil and gas discoveries as being among the primary drivers of economic growth. The result, he says, is a growing class of wealthy individuals who are conspicuous consumers of luxury products.

"It's not just luxury handbags or shoes. We're talking watches, alcohol and cars. Every time I go back, there seems to be more," Bauer says.

Advances in technology have also helped drive the demand for luxury goods in Africa.

Folayan's new business is just one example of that.

A software developer, Folayan has tapped into the purchasing power of Nigeria's rapidly growing upper and middle classes by developing a unique, proprietary shopping platform called MallforAfrica.

"There is a significant population in Nigeria, and many other African countries that can afford and wants to purchase Western luxury products," Folayan says. "We've seen a huge amount of people asking for Louis Vuitton, Armani, Coach, Burberry. We've seen those spike significantly over the course of the last year."

For many years, security issues plaguing Africa and distribution logistics made such purchases difficult or even impossible, Folayan says. But with technology such as the Internet and innovative business people, businesses are increasingly able to offer Africa the access it has wanted while guaranteeing retailers that transactions will be secure and delivered safely.

MallforAfrica, started about two years ago, does just that. It's a website that allows consumers to buy items from such stores as Macy's and Best Buy using a MallforAfrica Web card they've preloaded with funds at a local Nigerian bank.

"We're allowing Africans to do something they've never done," Folayan says. "The global economy has been opened up to Africa. If I were to shut down my software today, nobody in Africa can buy anything from Macy's, T.J. Maxx or Best Buy."

Folayan's site averages 25,000 transactions a month. Currently only delivering to Nigeria, MallforAfrica will begin offering distribution in Ghana sometime over the next two months, Folayan says.

Based on successes such as these, Folayan, Bauer and Johnson maintain that the future market for luxury items in Africa will only continue to expand.

"If you look continent by continent," Bauer says, "so many other places are already saturated with luxury goods -- South America, Asia, the Middle East. Africa is the next logical place to go. And there is so much potential, particularly when looking at sheer population size, even a small increase in purchasing power translates into a lot of potential."

A report by Accenture titled The Dynamic African Consumer says sub-Saharan Africa alone will have more than 1.3 billion consumers by 2030. And while the global economy is predicted to grow by 2% to 3% between now and 2020, sub-Saharan Africa's economy will grow by 5% to 6%.

"The rest of the world is used to watching programs asking people to donate money to Africa, with images of a black child with flies on his lips, and a big belly. People think, 'Wow, what a poor continent.' But we're not," says Folayan. "The continent has the fastest-growing economies in the world right now. Those pictures are not the correct representation."

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