Why informal retailers in sub-Saharan Africa cannot be ignored

By our News Team | 2022

Informal channels account for between 40% and 90% of total food sales in most countries in the region, international market researcher says.

Across Africa, informal retailing continues to play an important role – even as modern retailing and, more lately, e-commerce – expand alongside traditional stores. This is according to market research company Euromonitor International in a strategy briefing document.

The company says that acknowledging informal retailing’s importance, busting the myths around which consumers shop there, and understanding the interplay of economics, the state of supply chains, consumer preferences and local culture in each market will help manufacturers position their brands in this important sector in sub-Saharan Africa.

Euromonitor estimates the combined value of traditional, modern and e-commerce retailing in the region at US$380-billion in 2021, contributing 20-50% of GDP on average.

Informal Retailing

Olasunkanmiariyo via Wikimedia Commons

However, informal retailing is much more difficult to quantify. Statistics from the International Labour Organization indicate that informal employment accounts for over 80% of total employment in some economies in sub-Saharan Africa, and informal output accounts for more than 50% of the region’s overall official GDP, indicating the sector’s broad significance.

Defining informal retailing in Africa
As defined by Euromonitor International, informal retailing involves trade conducted by unregistered or unlicensed retailers, which are typically not reported to tax authorities. In general, such retailers operate primarily (but not exclusively) as street hawkers, at open market stalls, or at informal shops. This makes them more difficult to monitor than permanent outlets. 

The company says informal traders are common across sub-Saharan African cities and rural areas. Spaces for trading can range from as little as 1sq. m up to 30 sq. m, depending on the setting. Due to their small footprint, traders are located closer to consumers, along transport routes and hubs, or within local communities. 

Furthermore, proximity extends to knowing and stocking customers’ preferred brands and products, and offering credit to loyal customers.

Informal market reflects where many consumers shop
Regardless of income levels, most consumers still buy groceries through informal channels, even though modern grocery retail outlets have increased in number across sub-Saharan Africa. The informal channel also handles a substantial proportion of sales to Bottom-of-the-Pyramid (BOP) consumers. BOP households typically earn less than US$2,500 annually, and in 2021 they represented more than 20% of the sub-Saharan African population.

Euromonitor notes that, interestingly, the informal channel caters to consumers of all income levels and is popular with people from all economic backgrounds due to its convenience, credit-based payment flexibility, fresh foods and lower prices. 

Outside of South Africa, which has a high level of formal retail, industry sources estimate that informal channels account for between 40% and 90% of total food sales. Businesses seeking to expand their distribution networks and access the region’s growing consumer market will have a considerable amount of market potential by selling in the informal market.

Route to market is fragmented
Logistical costs and lead times required to access markets in sub-Saharan Africa can make it difficult to reach the last mile of distribution. Informal channels are stocked through a complex network that includes distributors, agents, manufacturers (brands), farmers and modern retail outlets. 

The supply chain is often highly fragmented, but partnering with reputable local companies which have established connections throughout the value chain allows brands to reach consumers effectively and efficiently.

Informal retailing is here to stay

Africa’s retail landscape is complex, making the last mile to intermediaries an important way of reaching underserved populations, Euromonitor notes.

Development of diverse products and services that meet different socioeconomic needs is essential to the growth of the region. Informal shopping is likely to remain relevant for the foreseeable future as it is an integral part of sub-Saharan Africa’s food economy and its consumers’ shopping habits. 

More information on Euromonitor International’s strategy briefing is available here: Opportunities in Informal Retailing in Sub-Saharan Africa.

Dr Kin Kariisa

Group CEO - Next Media

Dr. Kin Kariisa is an extraordinary force at the helm of Next Media Services, a conglomerate encompassing NBS TV, Nile Post, Sanyuka TV, Next Radio, Salam TV, Next Communication, Next Productions, and an array of other influential enterprises. His dynamic role as Chief Executive Officer exemplifies his unwavering commitment to shaping media, business, and community landscapes.
With an esteemed academic journey, Dr. Kariisa’s accolades include an Honorary PhD in exemplary community service from the United Graduate College inTexas, an MBA from United States International University in Nairobi, Kenya, a Master’s degree in Computer Engineering from Huazong University in China, and a Bachelor’s degree in Statistics from Makerere University.
Dr. Kariisa pursued PhD research in Computer Security and Identity Management at Security of Systems Group, Radboud University in Nijmegen, Netherlands. As a dynamic educator, he has shared his expertise as a lecturer of e-Government and Information Security at both Makerere University and Radboud University.

Dr Kin did his PhD research in Computer Security and Identity Management at Security of Systems Group, Radbond University in Nigmegen, Netherlands. He previously served as a lecturer of e-Government and Information Security at Makerere University in Kampala, Uganda and Radbond University in Netherlands.

Dr Kin did his postgraduate courses in Strategic Business Management, Strategic Leadership Communication and Strategies for Leading Successful Change Initiatives at Harvard University, Boston USA.

  • Other current and previous roles played by Dr Kin Kariisa:
  • Lecturer of e-Government and Information Security to graduate students at Makerere University, Kampala and Radbond University in the Netherlands
  • Director of Eco Bank Uganda Limited, one of the largest banks in Africa
  • Chairman of the National Association of Broadcasters, an umbrella industry association for all Television, Radio and online broadcasters in Uganda.
  • Chairman of Board of Directors of Nile Hotel International, that owns the leading hotel in Uganda, Kampala Serena Hotel.
  • Chairman of Board of Directors of Soliton Telmec Uganda, the leading telecom company in Optic fibre business managing over 80% of optic fibre in Uganda.