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Investing in the future of digital commerce in Africa

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Fortune at the middle of the pyramid

14 min readDec 9, 2020

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The data

First, what does the big picture look like?

What about the new generation of upwardly mobile, digitally connected, young urban consumers everyone talks about?

Countries sorted by number of people over $10/day.

Graph notes: This graph represents the 20 largest countries by population. The PovCalNet estimates are not likely very precise given the >$10/day are a very small population segment — in any of these countries (except South Africa) the true value could be double or one half the value shown. That said, even if many of the numbers were double, the qualitative story would not change much — less than 5% of the African population consumes more than $10 per day and of those nearly 1/3rd all live in one country (South Africa). China’s market has ~100X people at this income as any individual African market and 10X the entire continent.

Where is the biggest opportunity?

Graph notes: The area under the curve from $0-$4/day represents the spending power of the bottom 85% of the population and is roughly ½ the spending power of the area from $5-$10/day which is 10% of the population, $11+/day are the wealthiest 5% whose spending power is larger than $0-$4/day but smaller than the $5-$10 group.

Lowering the cost of acquisition and distribution is key!

Net annual spending after subtracting off cost to acquire and serve each customer (USD)

Graph notes: This graph shows what happens when we figure costs to acquire and serve each customer (which for digital goods, are driven by acquisition cost). When these costs are taken into account, the graph shows how the resulting economic forces strongly bias away from low income (who now represent negative value to the enterprise, when the curves dip below zero) and moves the peak towards much higher income levels.
Graph notes: This graph shows spending power decomposed into primary necessities in orange and discretionary in blue, which actually rises above necessities for the wealthier population.

So what do we learn?

Up Next

Previously

Annex: A primer on PovCalNet data from the World Bank

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DFS Lab

Published in DFS Lab

Investing in the future of digital commerce in Africa

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