Milk chilling with biogas: How green TVET skills are improving lives

By Clive Mutame Siachiyako

Milk production is a key resource for smallholder farmers in farming areas of Zambia. However, milk spoils quickly in warm condition. Since the cold chain for milk is not reaching remote dairy farmers, it results in limited supply of high-quality milk to dairy processors from a large portion of smallholders farmers in the country.

Stakeholders are stepping in to avert such problems and impart skills that enable farmers store their milk longer without getting spoiled. A Dutch NGO, SNV working with SimGas, Mueller and BoP Innovation Centre are training and supporting the development and market introduction of the first biogas-powered milk chiller for smallholder dairy farmers in Zambia, Tanzania and Kenya. The training and supported target the farming groups that face limited access to market since most of the farmers live too far from the milk collection centres and are off the national power supply grids.

When delivering milk for the previous evening the following morning, farmers face the risk of milk rejection due to spoilage, which negatively impacts their income. SNV and its partners have thus designed a milk chilling system that uses biogas energy through absorption cooling, supporting farmers to make their milk production more sustainable, and to increase their sales. The biogas-powered milk chiller provides a solution to this problem by cooling 10 litres of milk from 35°C to 4°C within 3.5 hours. The cooling level is within the standard milk cooling standard. The milk chiller capacity is tailored to the availability of surplus evening milk at smallholder dairy farms with 2-10 cows. A 10 litre capacity chiller is sufficient to serve more than 80% of the target group. The milk chiller runs on biogas, produced from any type of domestic biogas system.

In Zambia, SNV has since trained 42 masons (men and women) in bio-digester construction, maintenance and marketing. In addition, 8 bio-digesters have been constructed in Copperbelt, Lusaka, Western, Central and Southern provinces for demonstration. These achievements have laid the groundwork for SNV to commence developing a market for biogas in the country and to mark this decision. The NGO held field day at Lusunga farm in Chilanga district to demonstrate the possibilities of bio-digesters and biogas to government officials, cooperating partners, representatives from financial institutions and farmers in the area.

Bio-digester plants convert animal manure into combustible methane gas known as biogas. SNV is a leader in Biogas programming and has installed over 500,000 digesters across the world – primarily in Africa and Asia. Since January 2013, SNV Zambia has been working as part of a multi-country, public-private partnership to further the use of Biogas for Milk Chilling together with world leaders in the development of chillers. Prototype milk chillers developed by the NGO and its partners (SimGas and Mueller BV) has been since launched in Zambia. The technology supports off-grid, smallholder dairy farmers who need to chill their milk overnight before delivering to the milk collection centres, and provides additional benefits in bio-slurry – an organic fertilizer that improves crop and fodder production, and also energy for lighting and cooking on-farm.

SNV has also i) started working with financial institutions to support the possibility of developing financial products that can support farmers to procure bio-digesters and, ultimately, milk chillers; ii) partnered with the Dairy Association of Zambia and other players in the industry to promote the technology and ensure it is of the highest standards; iii) called upon cooperating partners to consider supporting the development of the biogas sector which will provide poor rural farmers with much needed energy that will enhance their productivity levels.

The possibilities of biogas are endless. Biogas cannot only provide energy for milk chilling, but for piglet warming, production of heat for improved rearing of chicks, energy for hot water to improve milk collection and safety by sterilising milk collection and storing equipment, as well as the bio slurry that enhances agricultural production without further damaging and degrading the environment. About 40 dairy farmers are expected to sign contracts with masons to construct digesters and more are expected to visit the demo sites to witness the technology in action. The foundation for the biogas market has been set and can only grow with a dedicated and supportive multi-actor approach.

How will it improve the livelihoods of small-scale farmers by reducing food waste and spoilage?

This is the question many can put forward. Drivers of open innovation platforms that encourage solving community challenges for social good contend that there abundant ideas to the question. One of the responses resulted into designing of the Biogas-Powered Milk Chiller designed being used in Zambia, Kenya and Tanzania. The Biogas Milk Chiller provides off-grid biogas-powered milk cooling on-farm, allowing smallholder dairy farmers without access to electricity to store and sell the highest possible quality of raw milk and increase their income. This bottom-up approach is new to the dairy industry; instead of focusing on processors who are on the top of the cold chain, the biogas-milk-chiller approach focuses on filling the gap at the bottom (on dairy farms) where the problem originates.

Biogas plants (biodigesters) convert animal manure, human excrement and other organic materials into combustible methane gas, known as biogas. A household family with just three heads of cattle or seven pigs can generate sufficient gas to meet their basic domestic and/or productive energy needs. This is clean cooking, powering and/or basic lighting energy that is resonate with green economy values.

In addition, the residue of the process (bio-slurry) can be used as a potent organic fertilizer to enhance agricultural productivity and sustain soil fertility. The market potential for household digesters fed by animal manure is estimated at 155 million. Bio-digesters can also be used by institutions, businesses and communities. Niche markets for medium-scale digesters are emerging in middle-income countries, also addressing environmental pollution.

Today one of the most important goals is to transform existing economies to green economies that seek the achievement of sustainable development goals (SDGs). A green economy refers to an economy that result in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In its simplest expression, a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive. Another important feature of green economy is the emphasis on the “regeneration-of individuals, communities and ecosystems”. Green economy embraces green design, green buildings, materials and construction products, waste management, waste-to-energy are part of almost any sector directly or indirectly including woodworking and furniture industry.

It is evident that the green economy can only be achieved in a society where education and innovation are accepted as the “prime movers of sustainable growth in green economies, where innovation, green skills and the capacity to cope with change will be significant drivers of each economic sector”. Transition to green economies then requires re-configuration/re-structuring the formal and non-formal education in which not only themes related with sustainability but also critical thinking should be taught.

In this context well-trained professionals who can cope with this paradigmatic change in the economy and society will be the backbones in this transformation. Technical and vocational education and training (TVET) should also be revised not only to provide skills needed for an occupation to be green: green skills but also skills necessary to adapt professionals to changes and new technologies in order to sustain themselves. Greening TVET is described as “prepares learners for fields of work and business such as construction, waste management and agriculture, many of which consume enormous amounts of energy, raw materials and water. Green TVET helps develop skilled workers who have knowledge of (and commitment to) sustainable development, as well as the requisite technical knowledge. Greening TVET is crucial for making a transition from energy and emissions-intensive economies to cleaner and greener production and service patterns”.

TVET goes beyond promoting skills development for employability. It empowers young people and adults to develop skills for work and life. Green TVET therefore means more than developing technical skills for green employment (such as eco-tourism, renewable energy and recycling). It also means developing ‘soft’ green skills such as enhancing problem-solving skills in everyday situations (life skills education), education for sustainable consumption and lifestyles, and entrepreneurial learning. Green TVET ensures that all workers are able to play appropriate roles, both in the workplace and the broader community, by contributing to environmental, economic and social sustainability. The roadmap for greening TVET necessitates the inclusion of subjects related with sustainability and thus revision of the existing curricula promoting the use of cleaner energies, waste management, green technologies, developing skills to cope with new technologies, promoting entrepreneurship and innovative way of thinking, matching theory and practice through work based learning/apprenticeship, emphasizing the needs of the sector.

References

Albert, E. M. (1968). Value systems. New York: Crowell Collier and Macmillan.

Australian Chamber of Commerce and Industry and Business Council of Australia (2002). Employability skills for the future. Canberra: Department of Education, Science and Training.

Australian Industry Group and Deloitte. (2009). National CEO survey – Skilling businesses in tough times. Sydney: Australian Industry Group.

Bauman, Z. (1995). Life in fragments: Essays in postmodern morality. Oxford: Blackwell.

Campbell, W. J., McMeniman, M. M., & Baikaloff, N. (1992). Visions of a desirable future Australian society. New Horizons in Education, 87, 17–39.

Feather, N. T. (1975). Values in education and society. New York/London: Free Press/Collier Macmillan.

Gatto, J. T. (1991). Dumbing us down: The hidden curriculum of compulsory education. Gabriola Island: New Society Publishers.

http://www.snv.org/country/zambia

The double challenge: environment problems and job creation. How Harrison Musonda is meeting both challenges

By Clive Mutame Siachiyako

The story of Harrison Musonda is a relative rags-to-riches story with a difference: it is the rags and other household waste that are now bringing Musonda prosperity, and helping the community at the same time. Musonda earns a living by selling litter and recyclable waste as part of the highly successful Manja Pamodzi project, a community-based initiative that has seen parts of Lusaka where the project has been launched cleared of refuse, and recycled material for cash.

Dealing in other people’s household waste has always earned the 30-year-old Musonda enough to survive, but since becoming an aggregator for the Zambian Breweries-supported Manja Pamodzi initiative, he has enjoyed a noticeable improvement in his standard of living. His role involves buying litter in bulk from collectors so that he can then process the discarded material into bundles to be sold on to Manja Pamodzi. Thereafter; companies specialising in processing of recyclable materials buy the solid waste and turn into useable material such as tissues and egg trays. It is difficult to believe that Musonda at one time had to survive on picking waste from the dump site; now these days are long gone.

“Before engaging with the Manja Pamodzi project, I met up with some business people who would buy plastic litter in bulk. They would give us K50 a time. Later, I realised that there is value in this waste-picking business. I started selling a kilo for 30 ngwee. I would make between K300 and K500 weekly and I started saving,” he says. As fate may have it, in March 2014 he met with some consultants who were conducting feasibility studies on recyclable material. This was a turning point in his life as it meant he could finally move on from his Chunga dumping ground litter-picking business. In 2015, the team came back for the Manja Pamodzi project with Zambian Breweries. That was the moment when it dawned on him that becoming an aggregator was a way out of the poverty trap which he was in danger of falling into. “I realised that I could engage others and now have about 60 collectors that pick recyclable litter in Chawama, Ngombe and other places in Lusaka.”

Manja Pamodzi initiative is supported by Zambian Breweries with the aim of the environmental clean-up and recycling project is to minimise litter that can block drainage system and give rise to disease such as cholera and typhoid, especially during the rainy season. The project is generating enterprise development opportunities and thus alleviating poverty. It is also giving chance to community members to create their own businesses.

The collectors are identified through environmental education campaigns with the emphasis on recycling. The collectors gather polyethylene terephthalate (PET) bottles, cardboard and other recyclable materials from target areas in their communities. “I have grown up in a hard situation. I was a bin scavenger. I was getting food to survive by God’s Grace. Then I started visiting the Chunga dumping site, but I was also determined to work hard and make it in life. When I look at litter, I see business: I see money. I started with I was familiar with…garbage.” Musonda hopes he can inspire schoolchildren to keep their environment clean and provide leadership in creating green jobs.

Why green jobs?

Green jobs hold the promise that humankind will be able to respond effectively and fairly to the following two defining challenges of the 21st century. First is averting dangerous and potentially unmanageable climate change and protecting the natural environment which supports life on earth. Environmental degradation, including the pollution of water, land and air, the irreversible loss of biodiversity, the deterioration and exhaustion of natural resources such as water, fertile agricultural land, and fish, is one of the most serious threats facing economic and broader sustainable development. The environmental and health costs already often outweigh the gains from the economic activity causing the damage. Such degradation will be exacerbated by the impacts of climate change, which are already felt globally.

In the medium- to long-term, projected climate change will lead to the serious disruption of economic and social activity in many sectors worldwide. Scientific scenarios for avoiding dangerous and possibly unmanageable climate change require global emissions of greenhouse gases to peak over the next 10-15 years and then to decline by half until the middle of the century. Stabilising the climate will require a rapid shift to a low carbon world economy.

The second challenge is providing decent work and thus the prospect of wellbeing and dignity for all. Decent work is defined as opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity. Decent work sums up the aspirations of people in their working lives: opportunity and income; rights, voice and recognition; family stability and personal development; for fairness and gender equality. Ultimately these various dimensions of decent work underpin peace in communities and society. Decent work is central to efforts to reduce poverty, and is a means for achieving equitable, inclusive and sustainable development.

The social challenge of the working poor largely looms, with an estimated 1.3 billion people [over 40 % of the global workforce, and their dependants] live in poverty and insecurity because their earnings are too low and they are relegated to the informal economy. There are 190 million unemployed and tens of millions of young job-seekers cannot find a place in society. The above challenges are closely linked and need to be addressed together. Green jobs are crucial to meeting both simultaneously. Making economic growth and development compatible with stabilising the climate and with a sustainable environmental footprint will require a drastic shift towards clean development and green, low-carbon economies worldwide.

The green jobs and the decent work agendas are mutually supportive and include several interdependent elements, such as rights at work, more and better jobs for women and men, social protection measures, labour protection – in terms of occupational safety and health, migration, laws on wages and working time – and social dialogue, including freedom of association and collective bargaining.

What kind of jobs are green jobs?

Green jobs reduce the environmental impact of enterprises and economic sectors, ultimately to sustainable levels. Green jobs are found in many sectors of the economy from energy supply to recycling [e.g. the case of Musonda above] and from agriculture and construction to transportation. They help to cut energy, raw materials and water consumption through high-efficiency strategies, to decarbonise the economy and reduce greenhouse-gas emissions, to minimise or avoid altogether all forms of waste and pollution, to protect and restore ecosystems and biodiversity.

How good are they?

Green jobs do not automatically constitute decent work. Many current recycling jobs, for instance, recover raw material and thus help to alleviate pressure on natural resources, but apply a process which is often dirty, dangerous and difficult, causing significant damage to the environment and to human health. Employment in this industry in developing countries tends to be precarious and incomes are low. If green jobs are to be a bridge to a truly sustainable future, then they also must be decent jobs. Decent, green jobs effectively link Sustainable Development Goals that focus on poverty reduction, protecting the environment, and make them mutually supportive rather than conflicting.

Who takes green jobs?

Skills shortages have emerged as a constraint on the greening of economies in industrial and developing countries alike. This is why developing the right skills to ease just transitions is a crucial element in the process. In response to the urgency for greener economies, young persons and workers with the right skills and the ability to learn new ones will be prepared to shift out of declining and into emerging industries.

Technical and vocational education and training (TVET) should also be revised not only to provide skills needed for an occupation to be green: green skills but also skills necessary to adapt professionals to changes and new technologies in order to sustain themselves. Greening TVET is described as “prepares learners for fields of work and business such as construction, waste management and agriculture, many of which consume enormous amounts of energy, raw materials and water. Green TVET helps develop skilled workers who have knowledge of (and commitment to) sustainable development, as well as the requisite technical knowledge. Greening TVET is crucial for making a transition from energy and emissions-intensive economies to cleaner and greener production and service patterns”.

TVET goes beyond promoting skills development for employability. It empowers young people and adults to develop skills for work and life. Green TVET therefore means more than developing technical skills for green employment (such as eco-tourism, renewable energy and recycling). It also means developing ‘soft’ green skills such as enhancing problem-solving skills in everyday situations (life skills education), education for sustainable consumption and lifestyles, and entrepreneurial learning. Green TVET ensures that all workers are able to play appropriate roles, both in the workplace and the broader community, by contributing to environmental, economic and social sustainability.

The roadmap for greening TVET necessitates the inclusion of subjects related with sustainability and thus revision of the existing curricula promoting the use of cleaner energies, waste management, green technologies, developing skills to cope with new technologies, promoting entrepreneurship and innovative way of thinking, matching theory and practice through work based learning/apprenticeship, emphasizing the needs of the sector.

Just transition to green jobs

Available studies of labour-market dynamics both for sectors and entire economies, suggest that there will be more jobs in green economies. Not everybody will gain from such a change, however. The typically positive job balance from greening an economy is the result of major shifts often within sectors. While some groups and regions are gaining significantly, others incur substantial losses. Therefore, just transitions are needed both for those affected by the transformation to a green economy and also for those having to adapt to climate change.

The industries hardest hit by climate change and those most in need of adaptation are those in developing countries that have historically contributed least to the emissions causing global warming.

The overall balance of available jobs will depend on those created and lost in the sector concerned, such as energy, transport or buildings. Government assistance to both workers and enterprises, including social protection and active labour-market policies, will be a necessary complement in many cases. Meaningful social dialogue will be essential to ease tensions and to arrive at effective cost-sharing and resource allocation.

Vicious to virtuous circle

Inadequate skills development can be the cause of a vicious downward circle of low skills, low productivity and low income. If quality education and training is unavailable, the working poor will remain trapped in low-skilled, low-productive and, as a result, low-wage jobs. Many of these jobs can be found in informal economies in developing countries. In developed economies, disadvantaged groups such as migrant workers, people with disabilities or older workers can suffer similar constraints. Lacking access to skills development excludes workers from participating in economic growth and social development.

However, more and better skills can turn this vicious circle into a virtuous circle, leading to better and more productive jobs. Improved and more widely available skills enable individuals, enterprises and society to innovate, adopt new technologies, and diversify the economy. Skills to develop, adopt, implement or adapt new technologies, such as improved home insulation or decentralised renewable energy supply systems, are essential to address the opportunities and challenges of low-carbon economies. Skills fuel technological change, investment, diversification of the economy and contribute to the competitiveness of enterprises and industries. Skills development, therefore, is a leverage to boost job quantity in growing sectors and job quality through more productive and sustainable enterprises and through improved working conditions and worker employability.

Towards more and better green jobs

Low-carbon economies require skills development policies addressing all three objectives. Yet, the third objective is particularly relevant for economies striving to prepare for the future by reducing their ecological footprint. The responsible reaction to climate change is to shift to low-carbon, less resource and energy-intensive, and more sustainable, ways of production and consumption.

First, effective response strategies by enterprises to update skills and to link them to longer-term business strategies help prepare businesses to take advantage of upcoming opportunities, for instance through improved recycling, which mitigates greenhouse gas emission and reduces resource scarcity.

Second, forward-looking national development policies and strategies can include the greening of jobs and economies. Sustaining a dynamic development process implies anticipating where economies will be competitive and developing the skills needed to encourage new investments and adoption of new green technologies. The key to curbing skills shortages is a forward-looking approach, having a vision of the opportunities and challenges ahead and anticipating the skills needs of the economy to reap potential benefits (in terms of quality jobs and environmental sustainability) and address the challenges (of increased international competition or climate change) wisely.

Implications for greening economies

The first objective is to meet new skill needs as part of mitigation and adaptation efforts. New skill needs will arise due to policy changes or due to environmental changes themselves, as well as to policy responses to ease adjustment to them. The current skills sets available in labour markets might no longer match demand regarding pollution control or emission trading. Upskilling of workers, opportunities for lifelong learning, and updated education and training need to be provided. The greening of current occupations is expected largely to outnumber the need for new occupations. Core skills portable from one work place to another become increasingly important when economies are in transition. While much of the attention focuses on technology, experience demonstrates that the weakest link in the production chain will determine the performance that can be attained. Without qualified entrepreneurs and skilled workers, the available technology and resources for investments cannot be used or cannot deliver the expected environmental benefits and economic returns.

Next it is important to support a fair transition to more sustainable production. Shifting economies towards greener ways of production entails that jobs in declining sectors, such as coalmining, are lost. Supporting a fair transition of displaced workers to more sustainable production requires retraining and effective employment services. Active labour-market policies can help bridge the employment gap and aid transition from one job to another. It is also necessary to create dynamic and sustainable development. New technologies and production processes for low-carbon production, reduced pollution and improved energy and resource efficiency require anticipation of skills needs. Therefore, governments need instruments to forecast skills needs. Also they need institutions and feedback mechanisms to ensure that the information is translated into training systems, so that training offers can be adjusted accordingly.

References

Abramovitz, J.J. et al. (2002). Adapting to climate change: natural resource management and vulnerability reduction. Gland: IUCN – World Conservation Union.

Bird, A. (2006). Together: making national skills strategies that work – for all: with lessons from Australia, Singapore, Malaysia and South Africa. Bangkok: ILO Asian Regional Office (unpublished).

BMU (2007). Federal Ministry for the environment, nature conservation and nuclear safety. GreenTech made in Germany: innovation atlas. Roland Berger Strategy Consultants study. Munich: Franz Vahlen.

BVET (2007). –Board of vocational education and training. Skills for sustainability. Sydney: New South Wales Department for education and training

Huq, S. et al. (2007) Reducing risks to cities from climate change; an environmental or a development agenda? Environment and Urbanization, Vol. 19, No 1, p. 3-15.

ILO (2008a). Conclusions on skills for improved productivity, employment growth and development. International Labour Conference 2008. Geneva: ILO.

ILO (2008b). Skills for improved productivity, employment growth and development. Report for the International Labour Conference Geneva: ILO (report 97V).

London Energy Partnership (2007). Skills for a low carbon London: summary report and recommendations on the skills gaps in the energy efficiency and renewable energy sector in London. London: Greater London Authority.

UNEP et al. (2008). Green jobs: towards decent work in a sustainable, low-carbon world.

Nairobi: UNEP – United Nations Environment Programme.

http://eepurl.com/cuQM5P

Africa’s consumer sector projected growth: how can countries position themselves for the growth?

Clive Mutame Siachiyako

Just a few years ago, consumer spending in Africa passed the US$1tn mark. The continent’s impressive growth trajectory at that time – in particular, the robust growth in Africa’s 30-largest economies – caught the attention of consumer businesses worldwide. Indeed, the consumer-facing sector has been pivotal in Africa’s growth story, accounting for almost half of the continent’s GDP growth between 2010 and 2014. From the Zambian perspective, local consumer patterns has attracted many shopping malls with assorted products that were initially sourced from abroad. The construction sector has also seen preferences for modern touch to buildings be it houses or office spaces. 

But because of the recent slowdown (e.g. Zambian economy dropped from 6.3% GDP growth  to 3.2% - Lusaka Times 2017) some executives have begun to question whether Africa’s once-roaring economy and burgeoning consumer sector still hold promise. Is Africa truly worth investing in? Can multinational companies succeed in the region? Is the African consumer opportunity still as attractive as it once seemed? Our unequivocal answer is yes – but companies will need to adopt increasingly sophisticated approaches to compete effectively. In this article, latest perspectives on Africa’s outlook to 2025 and what it will take for consumer-goods companies to thrive in the region are shared.

A temporary slowdown

Consumer spending across the continent amounted to $1.4tn in 2015, with three countries – South Africa, Nigeria, and Egypt – contributing more than half of that total. Food and beverages still constitute the largest consumption category, accounting for as much as one third of Africa’s household spending in 2015 (and close to 40% of household spending in lower-income countries such as Ghana, Kenya, and Nigeria), but discretionary categories already make up a substantial share of consumption. Spending on nonfood consumer goods – including clothing, motor vehicles, and household goods – accounts for a further 15% of consumption.

 

However, due in part to currency devaluations (e.g. Zambian currency was devalued by knocking off three digits in 2015) and a sharp downturn in oil-exporting economies, spending growth has slowed. Out of the 15-largest consumption markets in Africa, which constitute 90% of the continent’s total consumption, 12 experienced a slowdown in consumption growth between 2014 and 2015 – the exceptions being Ethiopia, the Democratic Republic of Congo, and Tanzania. Clearly, the African consumer is under financial pressure. In a 2016 McKinsey survey of consumers in six African countries, two thirds of respondents said they were worried about their finances and more than half said they’ve reduced their spending (Exhibit 1 opposite).

The outlook to 2025

Consumer spending in Africa is projected to reach $2.1tn by 2025. The following strong structural fundamentals are in place to drive the consumer opportunity:

A young and growing population: The continent’s population is projected to grow by 20% over the next eight years, with Africa’s youth making up 40% of the total. In Zambia, 9.8m of the total population of 14m are young people. It is estimated that by 2025, almost one fifth of the world’s people will be living in Africa. This population growth is accompanied by falling dependency ratios and an expanding workforce: The size of Africa’s working-age population is expected to surpass both India’s and China’s by 2034. 

Rapid urbanization: By 2025, an additional 190 million people in Africa are expected to be living in urban areas, which mean that about 45% of the population will be urbanised by then. City dwellers are voracious consumers: per capita consumption spending in large cities in Africa is on average 79% higher at the city level than at the national level. Cities in Kenya and Nigeria, for instance, have per capita consumption rates that are more than double the country rates. The top three cities in Ghana and Angola will account for more than 65% of national consumption spending in each of these countries.

Rising incomes: Since 2005, increases in spending per household have been responsible for about 40% of consumption growth in Africa. By 2025, 65% of African households will be in the “discretionary spending” income bracket (earning more than $5,000). Consequently, the profile of goods and services that Africans purchase will shift, from basic necessities toward more discretionary products.

Widespread technology adoption: Technology is opening many new doors for consumers. Mobile money, for instance, is growing five times faster in Africa than in any other region. By 2020, half of Africans – up from 18% in 2015 – are expected to own a smartphone, which they can use to buy and sell products and services, pay bills, and make remittances. A study in Kenya found that families with M-Pesa mobile money were able to withstand financial shocks (such as illness) without reducing their consumption, because they could borrow money electronically from friends and family. The success of e-commerce company Jumia – colloquially referred to as “the African Amazon.com” – is partly due to the fact that it accepts mobile payments, allowing even Africans who don’t have bank accounts to make purchases. E-commerce and m-commerce offerings are partially leapfrogging formal retail, and McKinsey analysis suggests that e-commerce could account for 10% of retail sales in Africa’s largest economies by 2025.

These factors bode well for the continued growth of Africa’s consumer sector. However, growth will be uneven across countries and income classes, and the geographic spread of consumption will change. Our colleagues at the McKinsey Global Institute have identified four groups of consumers that will drive much of Africa’s consumption growth between now and 2025: those earning more than $50,000 a year in North Africa and South Africa, Nigerian consumers, middle-income consumers in East Africa, and middle-income consumers in Central and West Africa (Exhibit 2 on the left).

East Africa’s share of consumption is projected to rise from 12% in 2005 to 15% in 2025; Francophone Africa’s from 9% to 11%. Meanwhile, South Africa’s share is projected to decline from 15% to 12% over the same period, and Nigeria’s from 26% to 22%. But given that Nigeria will still account for more than a fifth of African consumption, consumer companies can’t afford to ignore that market, even amid challenges in the business environment.

Serving the African consumer

In previous articles, we’ve discussed some of the imperatives for consumer companies to succeed in Africa. These imperatives – such as taking a city-based view of growth, getting credit for value, tailoring the offer to the local market, and creating bespoke route-to-market models – are as relevant as ever. But the changing consumer and retail landscape has highlighted the importance of several other focus areas: making smart use of advanced analytics across the value chain, adopting sophisticated pricing and assortment strategies, and being selective about distributor relationships.

Understand customers through advanced analytics

Formal retail in Africa is expected to grow by about 5% each year over the next few years, bolstered by the aggressive expansion of international retailers such as apparel players Cotton On, H&M, and Zara. However, informal retail channels are likely to continue to dominate the market in sub-Saharan Africa for the foreseeable future.

Because of the highly fragmented nature of informal retail in much of Africa, many consumer-goods companies rely on a passive wholesale model and lack a direct relationship with the retailer, limiting their visibility into retail-outlet performance. But leading companies are now exploiting big data and advanced analytics to take their understanding of their customers to a new level. A consumer-packaged-goods (CPG) manufacturer, to serve hundreds of thousands of small outlets in Africa, equips its sales reps with handheld devices that they use for collecting detailed information about, for instance, an outlet’s product range, pricing, in-store execution, and storage space. This information, combined with internal data (such as SKU-level sales and profitability) and external data (such as weather forecasts), helps the company make outlet-specific decisions about which products should be in the assortment, how much stock the outlet should have, what types of promotions will be most effective, and so on. Sales reps then receive specific recommendations based on the analytics. Early results suggest that using advanced analytics in this way can drive a 10 to 15% sales improvement within months.

Adopt a more sophisticated approach to pricing and assortment

In the past, companies could offer just a small range of products with a basic pricing structure, all targeting the “average” African consumer. Today, in light of rising income disparities across the continent, the most successful CPG companies are using tiered-pricing strategies to capture price premiums from high-income consumers or special consumption occasions (for example, meals at restaurants or bars) while continuing to provide affordable price points for lower-income consumers or value-oriented occasions (such as family meals at home).

Beer companies have long had tiered brand offerings in Africa. Heineken’s brand portfolio in Nigeria, for example, includes Goldberg, a value brand; Star, a mainstream brand; and Heineken, a premium brand. Soft-drinks players take a slightly different tack: they vary their products’ pack formats and sizes. The Coca-Cola Company sells soft drinks in low-cost returnable glass bottles, nonreturnable polyethylene terephthalate (PET) bottles at slightly higher price points, and, at even higher price points, sleek cans or sleeved PET bottles. It sells each of these formats in a variety of pack sizes tailored to specific occasions; it also adjusts pack sizes from time to time to ensure that they remain affordable to the target consumer segments while still being profitable for the company.

Still other companies differentiate their pricing and assortment by region. One CPG manufacturer studies competitor dynamics, cost-to-serve economics, and consumer incomes within micro-geographies so that it can develop region-specific product portfolios and highly localised discounting tactics.

Choose, segment, and manage distributors strategically

Many CPG companies’ distributor networks in Africa are the result of long-standing and often unexamined relationships. It’s therefore not uncommon for CPG manufacturers to find themselves making big investments (for example, through discounts and other kinds of trade spending) in distributors with poor outlet coverage, shoddy execution, or suboptimal capabilities.

Companies should instead be deliberate about designing their distribution network. They should select distribution partners who can help them achieve strategic objectives such as maximising outlet coverage or optimising cost to serve. They should then segment distributors based on criteria such as size and quality of relationship, and then differentiate their treatment of each segment – deploying levers such as trade terms, account planning, capability building, and territory allocation in line with segment needs or challenges. Finally, CPG companies should closely track distributor performance on clearly defined metrics (such as volume, outlet coverage, SKU coverage, and price compliance), establish pay-for-performance parameters, and conduct regular performance dialogues with distributors. A handful of large manufacturers, including Diageo and Unilever, excel at these practices. Other companies would do well to follow their lead.

Africa’s economic lions may not be roaring as loudly as they were a decade ago, but they are still undoubtedly on the move. Consumer companies seeking long-term growth would be unwise to ignore the region’s potential. Investment agencies should equally strategically position their countries to attract the relevant investment to the population needs. Investments should be also made in ensuring the youthful population is skilled to make each country preferred for investment considering the amount and quality of skilled persons to drive returns on investment injected into African economies and in different individual countries. 

Reference

Hattingh, D. 2017. Lions (still) on the move: Growth in Africa’s consumer sector. https://www.howwemadeitinafrica.com/lions-still-move-growth-africas-consumer-sector/59889/[Accessed: 09/10/2017]

Lusaka Times, 2017. Zambia’s 2017 GDP projection revised higher from 3.2% to 4.0 %-Ministry of Finance. https://www.lusakatimes.com/2017/06/21/zambias-2017-gdp-projection-revised-higher-3-2-4-0-mutati/[Accessed: 09/10/2017]

Damian Hattingh is a partner in McKinsey’s Johannesburg office, where Acha Leke is a senior partner. Bill Russo is a senior partner in the Nairobi office. The authors wish to thank Sidhika Ramlakan for her contributions to this article. This article was originally published by McKinsey & Company.