Emerging markets: why so many Disposable Hygiene products manufacturers are investing heavily in Africa
Dynamic, challenging, demanding: this is Africa!
The region has an average life expectancy of 61.2 years[1], a gross domestic product that is smaller than that of France[2] for a total population of 1.3 billion[3], two thirds of which lack access to electricity[4]. Cumulatively, GDP losses due to the novel coronavirus could exceed $200 billion in 2020–2021, with the additional risk that expansionary fiscal spending might double already high fiscal deficits[5]. To top it off, the COVID-19 outbreak has set off the first recession in the Sub-Saharan region in 25 years, with growth forecast between 2% and 5% in 2020[6]. To put this in perspective, between 28.2 and 49.2 million more Africans could be pushed into extreme poverty[7].
And yet, despite this negative outlook, the scenario is much more complex than it looks: there is not one Africa, but many. As a matter of fact, Africa’s steady 3.4% pre-COVID growth was largely driven by five countries - Algeria, Egypt, Morocco, Nigeria, and South Africa[8].
The distinguishing factor supporting Africa’s positive outlook is its capability to attract capital. The economic expansion of the continent has been recently strengthened by rising investment and net exports, so much so that, as of July 2020, the investment expenditure level (54%) was higher than the consumption one (31%)[9]. This phenomenon has also interested the Baby Diapers market, with global manufacturers flocking to the region.
What’s more, the average disposable income is rising. This trend, combined with a low market penetration for Baby Diapers products and a progressively greater sensitivity on health and hygiene, bodes very well for the industry, which recently introduced the Pant-style product. It is estimated that, once it reaches a purchasing power of $1,000, the consumer’s attitude towards sanitary napkins becomes favourable. With $3,500 per capita, Baby Diapers are taken followed by Wipes at $7,000 and, finally, Adult Inco traditional (open) at $10,000.
However, Africa’s most differentiating trend is population growth. By 2050, two in every five children will be born in the so-called "children's continent". According to the estimates, its urban population will nearly triple, up to 1.34 billion[10].
Ultimately, if we look at the bigger picture, the region represents a golden opportunity. Quoting the World Economic Forum, “Yes, Africa is facing some of the toughest challenges in the world right now. But it is also in Africa that we are seeing some of the most innovative, forward thinking ideas when it comes to tackling the issues.[11] ”
South Africa: a hotspot for Baby Diapers
In the past decade, unemployment has steadily increased[12] and public debt has risen to alarming levels[13]. Nonetheless, it is still Africa's first country by GDP, and it’s considered one of the largest and fastest growing markets of the continent. Despite political instability, policy uncertainty, and underperforming state-owned enterprises, high disposable income constitutes a pull factor for global players looking to broaden their customer base.
Indeed, a deluge of foreign capital has poured into the area. So far, local leaders and global first-time movers have been dominant, while international household names have been securing their foothold in the country.
On the one hand, these players are eyeing South Africa’s Disposable Hygiene market growth, enticed by increasing living standards, improving pay for women, and low per capita use. On the other hand, they want to strengthen their position against regional champions in order to capitalize on future growth. On this line, high-quality SS and SMS fabrics for hygiene products tend to be imported into South Africa, making the area a perfect bet for global Baby Open Diapers manufacturers.
Egypt: a bright future for Disposable Hygiene products
If South Africa ranks 35 in the IMF's list of countries by nominal GDP, Egypt is 40[14]. Yet, the country shows a much more stable situation. Data at hand, Egypt's growth in fiscal year 2018-2019 increased to 5.6%, up from 5.3% the previous year. The expansion was largely driven by a widely successful macroeconomic stabilization program that, among other things, reduced debt-GDP ratio and generated a solid primary budget surplus[15].
On top of this, being Egypt among the five top countries leading Africa’s growth, it is already home to a few established international brands of the Disposable Hygiene market. Furthermore, its outlook is positively influenced by the close relationship with Turkey, which unquestionably represents a lucrative market for a country such as Egypt.
Kenya, Nigeria, Ethiopia: three multifaceted areas for Disposable Hygiene manufacturers
Kenya, Nigeria, and Ethiopia are where the clash within the Disposable Hygiene market between local leaders and foreign brands is more pronounced. The three countries, albeit sharing similar characteristics, vary greatly when it comes to mortality rate, growth potential, and spending power.
Kenya and Ethiopia, both representing East Africa, have a life expectancy of 64 and 67 years respectively. Nigeria, representing West Africa, goes as low as 53 years. In the context of Disposable Hygiene, the greatest market opportunity for these three countries lies in the Baby Diapers market.
In terms of economic development, Ethiopia stands out, showing a 7.5% growth rate, which is even higher than China’s. This is not a fluke: the Ethiopian government has renewed the public infrastructure, modernizing roads, railways, and power plants attracting foreign capital, in particular from Asia. In regard with the Disposable Hygiene industry, despite 25 million girls and women aged 15 to 49 that need sanitary pads, there is no local production.
Kenya is growing at 5.8% and shows a lot of potential within the Disposable Hygiene market, as it is a rapidly modernizing and developing country. As of today, more than 75% of the Disposable Hygiene products are imported from China, Nigeria, and South Africa[16]. The area has consistently attracted foreign direct investment over the years as well as a growing interest from local leaders. The Femcare market is certainly the most promising segment, anyhow with a low penetration[17]. This is because Kenya has abolished the value-added tax on feminine hygiene products, and also promotes education among young girls about sanitary pads, which it’s helping distribute in schools.
Last but not least, Nigeria, an area with strong investments from Turkey, differs for the very high market share held by local Disposable Hygiene manufacturers, equal to 80%. That said, there is a vast array of international and local brands for the 43 million consumers aged 15 to 49[18].
In conclusion, despite low disposable income, political uncertainty, and increasing public debts, Africa represents a golden opportunity for Baby Diapers manufacturers due to rising living standards, hygiene and health education becoming more widespread and a staggering population growth.
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