Producers of consumer goods were are still scouring the Kenya’s census results for new market opportunities or major shifts in demand for specific goods and services with the changing demographics. Top in the radar of many entrepreneurs and companies was the shocking finding that Kenya's urban population had risen by more than eight percentage points in a span of 10 years to hit 32.3 per cent potentially creating a large pool of consumers of essential goods such as maize meal, wheat products, milk, cooking fats, soaps, beef, clothes and footwear.
The newly urbanised population, which the census revealed are aged between 15 and 34 years, is mainly made up of primary, and high school leavers looking for jobs in towns. This is the segment of the population that economists refer to as constituting the "demographic dividend" that will open huge opportunities in the consumer goods and services markets. Though a large segment of this newly-urbanised group remains unemployed for an average of three years, a recent national household survey showed that the highly dynamic lot is able to significantly grow their purchasing power and become active consumers of goods and services produced and priced for the low end market. This means that entrepreneurs and manufacturers of consumer goods must deepen their recent foray into the small economy - the sale of consumer goods such as cooking fats in tiny low priced bits - to capture the 13.7 million market that is mostly made up of people aged between 20 and 35 years.
Essentially, the population figures point to both opportunities and threats for as the opportunities go, the potential benefits of a young and rising population is the possibility of kick-starting a virtuous cycle of rapid industrialisation, increased employment, enhanced productivity and ultimately rising prosperity. Citing the example of populous countries such as China that have benefited from similar demographics moving the economy to the critical point where the maximum number of people are in the working age bracket and therefore reducing the dependency ratio. Kenya’s dependency ratio has consistently dropped over the decades from 115.4 in 1980 to 85 according to the 2009 census. Seizing this opportunity however sooner than later would be critical for Kenya because fertility rates tend to fall as economies grow limiting its use as a driver of human development in the long term. Threshold is fast approaching for Kenya and if managed well could see the emergence of an invigorated and far more competitive economy. Although the last few decades have shown that a large and rising population is no guarantee of success, Africa's pattern of population growth is not the main constraint to the continent's development and could even become a positive force.
"Population growth and urbanisation go together, and economic development is closely correlated with urbanisation," that’s why. "Rich countries are urban countries."As is the case in many developing economies, Kenya's population is a pyramid structure that stands on a wide base of young people and very thin at the top. Nearly 33 per cent of Kenyans now live in the urban areas compared to 23.6 per cent in 1990, meaning an additional eight million Kenyans became urbanites in a decade. An interesting finding of the census is however that Kenya's urban population is wide in the middle with those aged between 20 and 34 as the majority. For the government, rapid urbanisation promises a policy and service provision nightmare that is also potent with risks of mass impoverishment, social tensions and insecurity.
Mass market
But consumer market data shows that Kenyan businesses - from manufacturers of fast moving consumer goods to commercial banks - have seen immense opportunities in the newly urbanised population targeting them with the bottom-of-the-pyramid goods and services. In this segment of the market, the business model is movement of volumes in competitively priced small quantity goods to reach the multi-million customer base that has grown by 25 per cent in the last 10 years.
Equity Bank blazed the trail for banks with its micro-lending business model that has seen it grow from a non-banking outfit to the country's fourth largest bank by asset base in six years. Kenya’s top mobile service provider Safaricom has captured its portion of this market with the sale of small denomination scratch cards that have helped popularize mobile telephony among rural population. These companies have captured the bottom end of market consumers with catchy jingles and witty phrases that target the youth with a large measure of success. Aggressive marketing has, for instance more than doubled the number of youths aged between 24 and 30 years opening a bank account in the past one year, according to a recent banking sector report."This group provides the bank with many years of business with the same customers," said a strategy paper produced by one local commercial bank as it rolled out an aggressive marketing campaign. Expectations are that the purchasing potential of this market will grow as the youth gain employment and seek out business opportunities.
Economists say that compelling drivers for an increase in Foreign Direct Investment(FDI) into the country and region as firms look to tap into the swelling consumer class. The potential of this growth is evident in the rise of telecommunications across East Africa. Despite relatively high levels of penetration, Kenya still offers abundant opportunities for growth in this sector, as well as a variety of others, such as financial services, tourism and BPO.Rapid urbanisation also has the potential to lift overall productivity and shift the economy from its reliance on agriculture to prop up output. According to the official statistics, Kenya is becoming increasingly urbanised .In 1950, less that 6 per cent of the population lived in urban areas. Since then urbanization has increased fourfold to 32.3 per cent in 2009.However, achieving the demographic dividend is not a foregone conclusion. In general, Africa's economic growth has largely failed to generate employment and significantly reduce poverty due in large part to low factor accumulation and low productivity growth.
Economists, however, argue that should Kenya's youthful population fail to find meaningful employment, the thrust of development will be reversed and the potential benefits of such an increased population will convert into an intensified burden on the state to provide support. The UN predicts that by 2050 Kenya will have around 85 million people, with the economically active population swelling to 55 million of 65 per cent of the total. While observers contend that this does provide a unique and abundant opportunity for growth, the critical policies need to support industries with high labour absorption capacities across the region in order to unlock this potential.In this, intensified investment in critical infrastructure is an absolute must, particularly power.
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