How to invest in Consumer Electronics in Africa

HomeBlogBusiness

How to invest in Consumer Electronics in Africa

"The launch of the How to Invest series on IMovedBack.com aims to produce easier access to information for homegrown and diaspora Africans regarding investment opportunities in Africa." - Joy Isaac (Founder of IMovedBack.com)

Why do Igbo people do well in business? Ft. Micah Erumaka – [I Moved Back Podcast – Episode 12]
Looking for places to go on a night out in Abuja?
You can now learn African History on Telegram!

This post will be the second in our How To Invest series. I’ve written a post that listed 70 business ideas for Africa. Each week, we will do a deep dive into one idea. Last week, we started with fertiliser and today, we are covering Consumer Electronics.

Traditionally known as a continent abundant in natural and mineral resources, the African market has always been seen as a dumping ground for surplus electronic products. While that may have been the reality in the past, the African market is changing rapidly. This is primarily due to the African consumers’ increased demand for technological products tailored for their environment. 

This yearning for high tech goods is responsible for the number of companies set up in the African Consumer sector with a skyrocketing presence in Consumer electronics. Above all, Africa’s growth has appreciated with more investors plunging into Consumer electronics. Hence, the market is becoming more profitable, with manufacturers discovering more ways to meet the demands of the ever-changing market.

What is Consumer Electronics?

Consumer electronics are a broad range of functional electronic devices used in our everyday lives. In addition, electronic devices deliver huge convenience and efficiency gains by enhancing connectivity and digitalisation.

Before digital technologies, consumer electronics were limited to housekeeping tasks such as refrigerators and air conditioners and were referred to as white goods. However, the internet boom has expanded the consumer electronics market considerably.

Hence the addition of smartphones, laptops, computers, TV sets, tablets, game consoles, GPS systems, smartwatches, speakers and headphones, digital cameras, microwave ovens, coffee makers, blenders, VR (Virtual Reality) & AR (Augmented Reality) devices. We are now at the Fourth Industrial Revolution, which has led to more innovations in technology. The market will continue to grow as we see a demand for more technologies.

. Fourth Industrial Revolution technologies (World Economic Forum and Accenture, 2018)


What is the market size of the African Consumer Electronics market?

According to Fortune Business Insights, it is projected to grow from $689.45 bn in 2020 to 989.37 billion USD  in 2027. And Saudi Arabia, South Africa, and the United Arab Emirates are projected to lead the region’s growth. With this rise, the revenue in the electronics segment is projected to reach US$14,351m in 2022.

According to Statista, the Electronics market in Africa will reach $14.35bn in 2022. Revenue will have an annual growth rate between 2022- 2025 of 20.28%. Most income is generated in China currently. By 2025, Africa will have 350m electronic users and a user penetration of 26.6%; they believe it will be only 19.4% in 2022. The average revenue per user is $60.34.

Portable devices are the driving force of growth for the industry in Africa and the Middle East, with smartphones spearheading the demand across all countries.

However, the outbreak of the Coronavirus pandemic changed the way Consumer electronics was viewed. With government measures that closed all borders and forced the world to sit indoors, an alternative form of communication came into place. With the world still simmering, the demand for portable consumer devices increases to meet the target audience. Thus it is safe to say that the best of the market is yet to be explored.

What countries in Africa have the biggest market?

According to the Brookings Institution, Africa is home to more than 1.2 billion potential electronics consumers today and is projected to increase to 1.7 billion by 2030. In South Africa, the consumer electronics sector alone was projected to be worth $9.4bn in 2012 and is estimated to increase to $13.6bn by 2026. The rising economic growth and urbanisation of the cities are also contributing factors. 

Africa’s most populous country -Nigeria- has cornered much attention due to its growing consumer technology market. Over the years, Nigerians have displayed a preference for hi-tech goods, from smartphones to televisions to cameras. 

In research by Statista, around 52% of consumers in Nigeria would pay more for higher quality home electronics. In the same view, 51% of respondents in Ethiopia reported that they were willing to pay more for premium home electronics. However, consumers in the 12 African markets surveyed did not value quality over price for such items.

Similarly, Ghana, The Democratic Republic of Congo, Egypt, Tanzania and Kenya are also multiplying and will soon hold half of the consumer electronic population in Africa. This inflating appetite for consumer technology-based products is responsible for the high entry of consumer electronic multinational corporations into the continent.

What companies are the big players in this space?

Despite the intricacies of the market, more manufacturers are delving into the market daily. We can see this in the new range of products custom-built to meet consumers’ wants, from price to quality to specifications and other factors, making consumer electronic devices available to everyone. For example, consider products like solar-powered personal computers, rechargeable blenders, drones, power banks, etc. 

The earliest key players in the global market with a significant chunk of the market are Sony, LG, Samsung and Panasonic. And what makes these brands thrive is their cost-effective product offering that matches consumer demand and times. 

Although Japanese and South Korean companies dominate the global consumer electronics manufacturing industry, African startups are gradually penetrating the market with new and innovative solutions.

Major Companies in the Sector Include:

1. Apple 

Consistently ranked as the world’s most valuable brand, the brand has been able to get a cult following globally by producing quality and serving disruptive products.  Makers of smartphones, laptops, personal computers, tablets, smartwatches, wearables and accessories. Apple’s current market value is 2,825.000 Billion USD,  making it one of the top brands in the industry, 

2. Microsoft 

Traditionally known for its software packages, windows operating system and consumer electronics. Microsoft has evolved over time and now provides cloud computing technology solutions such as the Xbox, keyboards, etc. Microsoft’s current market value stands at 2,358.000 Billion USD and is still growing.

3. Samsung

A South Korean company founded in 1938 with subsidiaries across the globe. Samsung is one of the biggest in terms of sales of phones and smartphones across the world. Innovation and research are responsible for the growth of this brand over the years. They are often referred to as Apple archival. Samsung’s current value is 438.840 Billion USD

4. Sony 

Sony Corporation is an Electronics and Gaming company with headquarters in Tokyo, Japan. It has a market value of 156.010 Billion USD. The Tokyo-based company also licences song lyrics and music and creates and distributes animated films. It is also known for its cameras, movies, television content, and digital networks.

5. Panasonic 

From producing bulbs, batteries and other electrical fittings. Panasonic has delved into other consumer electronic products. And over the years has earned its place in the marketplace as one of the most long-lasting brands. Its market value as of 2021 was placed at 70 Billion USD.

6. LG

A South-Korean country with a presence in over 80 countries worldwide. LG has become a household name in home electronics and other consumer goods. Their sales revenue as of 2021 is 53 Billion USD. They are known for their televisions, notebook computers, desktop monitors, tablet computers, mobile gadgets, and automotive displays, all employing their TFT-LCD and OLED technologies.

5. CZ Electronics 

CZ Electronics is an Original Equipment Manufacturer (OEM) with decades of experience in consumer electronics, broadcasting, telecommunications and other industries. They are located in South Africa and are dedicated to producing bespoke electronics for South Africans. 

6. Xiaomi Corporation 

Ranking 312 in the world, the China-based multinational electronics manufacturing company has been able to get a sizable portion of the market with their smartphones, TVs, Smart Devices, Powerbanks and other Consumer Electronics. They have a current market share of 58.447 Billion USD. 

7. Mara Corporation Limited

Mara is a young and dynamic African group with technology, banking, real estate, and infrastructure operations. Established in 1996 in Uganda, Mara has been active on the continent for 23 years. It has grown from a small computer hardware trading firm in East Africa to a multi-sector group with investments and operations in 25 countries across the African continent. 

What startups are entering this space?

1. Onyx Connect 

According to a report by TimesLive, South African startup Onyx Connect is set to become the first company to manufacture smartphones in Africa. Onyx is licensed to load Google software like Android and Chrome onto devices sold under the company’s brand or products. The company raised $10.8 million from investors, and production began in the first quarter of 2017.

2. Arab Hardware 

ArabHardware is an online IT and electronics community founded in 2002 in The Middle East. It is the only specialised website in The Middle Eastern region. Arabhardware now has the power to control what products would sell in the area. One negative review on a product will drop the sales in the middle east.

3. Mint Electronics 

Mint Electronics is a subsidiary of the South African company Sekoko Holdings. The company acquired a 75% share in CZ Electronics and launched the first-ever line of South African-made smartphones and tablets. According to the Mobile technology company, its low-cost device, the Mint Fox, was the best-selling smartphone in South Africa for seven months in a row in 2018.

4. Afrione 

Incorporated in 2016, Afrione is the first smartphone to be produced in Nigeria and specialises in the production of mobile phones, laptops and other consumer electronic gadgets. The company was established to deliver innovative, sleek, and affordable smartphones, tablets, and laptops accessible to everyone under the brand name “Afrione”. 

5. Imose Mobile 

Imose Technologies Limited, since its creation in 2014, has been proudly African with devices customised with quality, affordability and promotion of African values as core objectives. Situated in the capital hub of Lagos in Nigeria, Imose technologies limited produces mobile devices, personal computers, tablets and other accessories.

How can I invest in Consumer Electronics in Africa?

Consumer electronics have revolutionised our lives and opened our eyes to the endless possibilities of convenience and ease. 

Here’s how to be a part of the billion-dollar industry in Africa:

1. Invest as a Reseller

This is one of the common ways to get into the market. However, it requires a more significant capital investment. You can become a reseller for international brands like Samsung, Apple, LG etc. However, to become a reseller, you would need the brand’s permission. Most companies would only agree to do business with established businesses. Hence your business must be incorporated as a company in its state. With this in place, you can now apply as a distributor or dealer through their websites. 

2. Invest in a repair shop

Electronic devices are usually built to have Planned obsolescence. This is where they have a limited useful life to encourage consumers to buy new devices or pay to fix their current ones. As a result, the Consumer Electronics Repair and Maintenance Global Market is Expected to Reach $9.6 Billion by 2026. If you have the skills or can hire people to repair electronics at a reasonable price, you would make a considerable amount of money in Africa. All income levels will need your services at some point in time for a range of products such as phones, drones, cameras, vacuum cleaners, televisions, POS systems, GPS trackers etc.

3. Invest as an Importer

African investors can get a slice of the African Consumer Electronics market by importing products. Alibaba, the world’s biggest commerce store, provides investors with a platform where they can buy consumer electronics products from China manufacturers. The consumer electronics category gives investors ample product samples with a warranty for investors to choose from. Importers can retail these products on smaller e-commerce sites like Jumia, Konga and the open market. Think of products such as chargers, converters, power banks, electric grills, headphones, kettles, smart scales, lawnmowers, hair devices, meat grinders, drills, doorbell cameras, cameras, printers, fryers, microphones, rice cookers, torches, walkie-talkies, webcams, drones, diffusers, water purifiers and more!

4. Invest in startups 

You can invest in tech startups using crowdfunding sites which gives you an investment share of the company. Major startup companies where you can access startups are 

5. Invest using Consumer electronic stocks 

Consumer electronic apps give you the best and leading stocks in the marketplace. For instance, Gainy app creates stock lists and categories depending on current market information to aid your investment. 

6. Creating a way to recycle Consumer electronic waste

Electronic waste is also the world’s fastest‑growing waste stream. Due to design choices and infrastructure deficiencies, many of those built‑in materials cannot economically be recovered. This adds pressure on the supply of metals such as lithium and cobalt that are critical for electronic devices and the growing number of electric vehicles. Due to supply fluctuations and high demand, cobalt prices have almost doubled in the past three years. Meanwhile, the benefits and burdens of electronic devices are unequally distributed. Africa produces less electronic waste per head than any other continent (1.9kg annually), but it has become an illegal dumping ground for e‑waste worldwide. Informal processing poses severe threats to human and environmental health. 

If you can find an efficient method of recycling electronic waste, you will undoubtedly position yourself to make a significant amount of money. It is also a business that would attract funding and grants from many national and international organisations.

Taking everything into account, it is pertinent to carry out a feasibility market research before investing. You need to be fully aware of the products and brands in high demand. You can achieve this by talking to investors in the same line. Tradeford keeps a list of Nigeria Wholesale Consumer Electronics importers, buyers and purchasers who want to import wholesale consumer electronics in Nigeria. It is essential to consult a financial advisor to guide you on the risks involved before investing.

What are the risks associated with investing in this industry?

Despite being a very profitable market, only a few global players are. This is due to the high risks involved, discussed below. 

1. Evolution in technology 

Even though technology is responsible for the growth in the consumer electronics market place, it can also create some risks. The high rate of technology evolution requires significant investments without any guarantee of proportional returns. In addition, the unpredictable taste in consumer demand can be a risk to businesses exposed to Consumer Electronics.

The industry faces consumers with unpredictable tastes on the demand side, supplier-related delays or disruptions on the supply side, and production challenges in the middle. 

2. Political risks in home country

In a politically unstable country, investing is a high risk. This is because it is difficult to change the home country or to decrease involvement there. In a country like Nigeria, labour strikes can shut down production and crippling distribution worldwide.

3. Supplier delays

It is not uncommon for the same supplier to supply goods to the competitors. And with this influx of orders, the supplier may not be able to meet demand. This can affect the flow of your business. 

4. Change in consumer preference 

Consumers are constantly changing, and their taste in products can change over time with the change in trends. Here is why it is advisable to diversify product range and markets. 

We hope you enjoyed reading. Please let us know your personal experiences investing in consumer electronics in Africa and your suggested do-s and don’ts to help other readers.

COMMENTS

WORDPRESS: 0
DISQUS: 0