Luring Luxury Brands

The growing number of high-net-worth individuals in Africa offers a compelling opportunity for proprietors of luxurious brands seeking new markets.

The spate of oil and gas discoveries on the continent is fuelling economic growth and spawning a set of super-wealthy individuals with expensive taste in countries such as Nigeria, Angola, Ghana and Mozambique. According to Capgemini’s World Wealth Report 2012, the total investable wealth of high-net-worth individuals in Africa totalled $1.1-trillion by 2011.

Michael Lieblich, a contributing analyst at Euromonitor International, said with growth slowing in India and China, it was essential that other markets were explored. "As with any industry, being the first to offer a brand offers the opportunity to gain the much-coveted first-mover advantage," he said.

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With 60%, or about 71,000, of Africa’s millionaires in South Africa, the country has the continent’s most developed luxury retail sector. Late last year, global consultancy Bain said South Africa’s luxury goods market was expected to grow between 20% and 30% over the next five years.

Apart from South Africa’s affluent, rising fortunes in other African countries have also contributed to the sales uptick of luxury goods and services, as big spenders flock to boutiques in Johannesburg and Cape Town because their home markets are still comparatively small.

Claudia D’Arpizio, a Bain partner in Milan, said South Africa would continue to attract international brands, and the potential for luxury players elsewhere on the continent was "big". Despite the complexities of doing business, logistical risks and the lack of suitable real estate, opportunities in Africa are still proving tempting for yield-hungry investors.

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Ermenegildo Zegna, which the makes made-to-measure suits worn by Hollywood stars Tom Cruise and Robert De Niro, will open a store in Nigeria this year. German fashion house Hugo Boss already has a presence in several countries including Nigeria, Mozambique, Angola, Côte d’Ivoire and South Africa. Other luxury players such as Louis Vuitton, Burberry, Fendi, Gucci and Salvatore Ferragamo have stores in Johannesburg and Cape Town.

However, the upmarket trappings favoured by African consumers are not limited to clothing, handbags and "bling" — spending lavishly on alcohol and fast cars is also on the rise.

In 2011, Nigerians drank 752,879 bottles of bubbly, more than were consumed in Russia or Mexico, according to Euromonitor International. That made Nigeria, where most people live on less than $2 a day, the 17th-biggest market for champagne in the world. Porsche opened its first Nigerian dealership in Lagos this month. It also plans to open in the capital, Abuja.

Read more at Business Day