Voracious demand for home appliances from Africa’s rising middle class is attracting Singaporean exporters such as Newmatic.
After a promotion, Grace Mutai, a 32-year-old marketing professional in Nairobi, planned a kitchen revamp. She chose a modern, modular design from Newmatic, featuring a fan-vented cooker to dispel food odours. Her selection is emblematic of Kenya’s growing appetite for high-end home appliances – a trend that the Singaporean firm, Newmatic, has been quick to capitalise on.
Newmatic broke into East Africa’s vibrant market in 2018, partnering with a financially distressed Kenyan company. The firm orchestrated supply chains with a Chinese manufacturer, transporting an array of kitchen appliances, from hoods to hobs, to the port in Mombasa. These were soon installed in showrooms dotted around East Africa before the onset of Covid led to country-wide restrictions.
“We were extremely lucky during Covid, as we went from two showrooms in East Africa to nine,” says Dave Choy, director at Newmatic. “Most of our competitors couldn’t get stock when there was huge post-Covid demand in 2021, whereas we had strong relations in Asia and maintained our supply lines.
“We were able to mop up whatever businesses the competition left behind, so much so that in Kenya we have roughly 90% market share,” Choy told African Business.
Now extending operations into Uganda and Tanzania, Newmatic is capitalising on the surging demand for home kitchen appliances across key East African markets.
According to market research firm Statista, revenue in Kenya’s household appliances market is projected to hit $124m in 2023. Furthermore, an anticipated annual growth rate of 14.28% from 2023 to 2027 anticipates a market volume of $212m by 2027.
Bolstered by steadily growing disposable incomes and a wave of advanced appliances, the Kenyan home appliances market is thriving. A robust middle class and an increased number of working women are driving this growth, say Statista, fuelling demand for efficient, time-saving appliances like cookers, washing machines and refrigerators. Newmatic delivers and installs orders across Kenya, from the shores of the Indian ocean to the port city of Mwanza near the Serengeti.
Construction growing
Kenya’s construction market, estimated at $17.3bn in 2022, is set for an annual average growth rate of 5% from 2024 to 2027. This projected growth, underpinned by the government’s embrace of public-private partnerships (PPPs) and a drive to entice private investment, is expected to be carried by the commercial construction sector. A rebound in tourism activities spurring investments in retail buildings and hospitality projects is projected to fuel the sector’s expansion, despite slight downward growth revision due to rising debt, inflation, food insecurity, and an ongoing drought.
From 2023 to 2026 the industry is expected to register an average growth rate of 5.7%, supported by investments in transport, electricity, housing, and manufacturing projects. These projects mirror the election promises of President William Ruto, which include a diverse range of initiatives, from constructing new affordable housing and hospitals to establishing extensive fibre optic connectivity, land settlement funds, and significant road infrastructure development. Despite potential austerity measures and budget cuts, the sector remains poised for steady growth, leveraging both public and private investments.
“With this current construction cycle, land is getting scarcer, and people are building upwards. So, to maximise space, modular kitchens go in,” says Choy. “Your kitchen no longer looks like Grandma’s kitchen, and with many urban Africans becoming increasingly houseproud the kitchen is a place to not only enjoy cooking but also to entertain in,” says Choy.
As Africa experiences an accelerated urbanisation rate of 4.4% annually, the fastest globally, at least 40% of its populace now resides in urban areas – a figure projected to double by 2050. This swift urban shift, underpinned by a booming housing market, is causing a significant demographic shift. Rapid urbanisation and a burgeoning middle class are increasing the demand for housing, stimulating the real estate sector.
Amid this housing boom, Knight Frank’s 2023 Wealth Report highlights a shift in Kenyan investment trends. In 2022, affluent Kenyans funnelled 40% of their portfolios into commercial real estate, eclipsing the meagre 18% dedicated to stocks. This year, over 60% of Kenyans with a net worth exceeding $1m intend to invest in private rental properties, a trend that could boost demand for kitchen appliances.
Despite growing disillusionment with the volatile domestic stock market and attractive yields of government bonds, the real estate market remains resilient. It serves as a hedge against economic uncertainties like inflation and currency depreciation.
Last year the wealth of high-net-worth individuals in the region shrunk by just 5%, significantly less than the global average fall of 10%. This disparity is testament to the robustness of real estate investments, a fact that’s becoming increasingly apparent to African investors, prompting their shift away from the stock market.
Despite initial scepticism from peers about the perceived challenges of doing business in Africa, Newmatic found itself seizing lucrative opportunities on the continent that surpassed those in the more crowded Southeast Asian markets.
The appliance industry, known for its intense competition in Asia, found an inviting business landscape in Africa, less contested and ripe with potential.
“Fellow Singaporeans or my Chinese colleagues can have the notion that Africa is unsafe. It can be challenging to a certain extent, but that way of thinking actually prevents people from exploring the business opportunities in Africa,” says Choy.
The company says it has a strong record in training and empowering local staff, proving a significant driver in its rapid expansion across three African markets, as has its drive for high service standards.
This approach, coupled with support from agencies like Enterprise Singapore, has made Newmatic compete against major international brands, demonstrating the power of local empowerment, high service standards, and governmental support in achieving business success in Africa.
Challenges and free trade opportunity
Yet Newmatic hasn’t had it all its own way. Facing challenges such as bureaucracy, safety, and political instability, Newmatic underscores the importance of agile business strategies. By leveraging its supply chain to tackle issues like high interest rates and currency depreciation, the company ensures timely delivery of the right products. Newmatic is set to expand its footprint to new African markets, including Somalia, Ghana, Morocco, and Nigeria, through strategic joint venture models.
Through these partnerships, Newmatic effectively engages and equips its partners, allowing them to tackle each unique market in a targeted manner.
Moreover, the African Continental Free Trade Area (AfCFTA) presents a significant opportunity, potentially transforming the business landscape. There is future potential for the establishment of manufacturing facilities in a free trade zone in Kenya, which could leverage the benefits of the AfCFTA, offering import duty advantages and easing cross-border trade.
“For Singaporean firms there are great opportunities in unsaturated African markets, but they have to exercise caution in an environment they can’t take for granted. And they have to plan ahead,” says Choy.