Africa’s growing middle class

By Paul Ndiho

One of Kenya’s biggest stores – Uchumi, is planning to spread its footprint across east Africa.  The retail giant is bouncing back several years after it was declared bankrupt.  Uchumi hopes to open at least eight new branches by 2014, as it expands into Rwanda and South Sudan to tap into the growing middle-class market.

Africa's Middle Class

The African development bank says Africa has the one of the fastest growing middle class populations in the world.  Some financial experts attribute the growth to increased investments in the service sector– and sound economic and business policies.  As a result, both foreign and local investors are considering investing in Africa, especially in retail stores. Kenya’s Uchumi supermarkets is one of a kind, it is the only stocks-listed supermarket group in east Africa.

Jonathan Ciano, Uchumi’s chief executive officer says the company is preparing to tap into the growing middle class, and take the supermarket concept to communities that have never had one.

“We have cast our eyes even further, saying we want to have at least five more branches in Tanzania, additional branches in Tanzania, three more in Uganda and approximately six or seven in Kenya in the next two years. Minimum and that is what it is, we are counting on those that we have precipitated their growth, or they are building up or be determined.

Economic forecasters say investors expect Uchumi to perform better in the medium term, after making significant investments in branch expansion in the region over the past two years.

The company emerged from a four-year receivership in early 2010 and its shares were re-admitted for trading on the stock exchange in mid-2011.

The firm is still working on how it will get into Rwanda and south Sudan, but the first six stores to be opened elsewhere this year have been approved by the board of directors.  The C.E.O. says that the opportunities for retailers are not confined to big cities like Kampala, the Ugandan capital.

“Most of us are spoiled because we have been brought up in the cities – Kampala, Dar es Salaam, but we have our brothers and sisters who are 300 kilometers in the hinterland, who have never seen a supermarket and you open one there and you can see the excitement as they all get employed and embodied into it, quite interesting,”

Critics say that Uchumi’s sluggish sales in the last two months of 2012 sent pretax profits plunging by 35 percent– to $1.56 million dollars, for its fiscal first-half year that ended December.

However, Ciano dismisses those claims and says that the sales have been going on well, adding he expected that trend to continue and that the growth of the company showcases the numerous opportunities available in Africa.

“Africa was called the dark continent. They didn’t know the sun was right in the middle of Africa. It is a very bright continent, when you come to the infrastructure; it’s an ongoing development that is why we are developing countries.”

Some analysts say that both foreign and local investors have nearly tripled their shares in Uchumi since last year and the demand for quality products in supermarkets will continue to climb because more and more people are rising into the middle class.

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