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Compared with other global markets, the African diaper market has maintained a low penetration rate for many years, and now it seems to have reached a tipping point. Some recent investments in Africa by global hygiene manufacturers provide strong evidence from one side. We are also delighted to see the presence of Chinese companies. According to the China-Africa Trade Research Center, the Ghanaian government commissioned Chinese company Sunda international to produce baby diapers in Ghana. It is reported that Sengda Ghana Diaper Factory is located in Aman, a Bortianor Ngleshie at the southwest end of Accra, Ghana's capital, covering an area of 38000 square meters. It is the largest diaper factory under construction in West African countries.

In recent years, China's investment in Africa has grown rapidly. The trade volume between China and Africa has increased from US $0.765 billion in 1978 to US $170 billion in 2017, an increase of more than 200 times. In the first half of 2018, China-Africa trade amounted to $99.84 billion billion, up 17.3 percent year-on-year. It is estimated that by 2025, China-Africa bilateral trade is expected to exceed 400 billion US dollars.

More than 3000 Chinese companies are currently investing in Africa, including Sengda International, which has been operating in Africa for more than a decade and is committed to investing in production facilities for sanitary products and building materials and hardware. The establishment of the new diaper factory is based on Ghana's "One District, One Factory (1d1f)" industrialization policy, with an investment of approximately US $84 million. In addition to meeting the needs of the Ghanaian diaper market, it will also export its products to the sub-Saharan African market.

The "One District, One Plant" policy was a campaign promise made by Ghanaian President Akufo Addo in 2016 to increase the value of Ghana's raw materials. As a result, Mori's diaper factory can enjoy incentives such as tax breaks, import tax breaks and interest rate subsidies from the government to help increase productivity and efficiency. It is reported that the Ghanaian government has granted a five-year tax exemption period to companies operating under the "One District, One Factory" initiative for imported raw materials and machinery.

President Akufo Addo said the initiatives that the Ghanaian government has been implementing are not a gimmick but part of a well-thought-out plan to push forward the country's social and economic development. "These measures are conducive to improving our country's economy and bringing economic prosperity to Ghana." He said, "Sendai Group has opened different manufacturing plants in different parts of Ghana. Such expansion plans show that the company is confident in the profitability of the Ghanaian economy and local manufacturing operations."

Y.C. Chen, chairman of Sendai, said that the new factory is the company's largest company in Ghana. They plan to increase the production line of sanitary products in the new factory from 7 to 10 in 2019, and will produce diapers, sanitary napkins and wipes. He said: "The 'One District, One Factory' policy encourages investors to build one factory in each region of Ghana, which is what the Chinese government did 40 years ago and has enabled China to successfully industrialize and become one of the largest economies in the world. Industrialization remains the main driving force behind the growth of economies around the world today. We at Sengda International are pleased to be partners in the Government of Ghana's rural industrialization development project."

Africa: Great consumption potential

Africa currently has a very low population density of about 65 people per square mile, lagging behind Asia, Europe and South America. With little or no measures to address the population problem, Africa, which is on a growth inertia curve, is projected to have a population of 2.4 billion in 2050, doubling its current population. This will make Africa more important to the global economy than ever before.

While some regions have relatively low population growth rates, countries such as Nigeria and Uganda are experiencing rapid population growth. Africa's Nigeria is currently one of the most populous countries in the world. The United Nations predicts that if the current situation continues, the Nigerian population will reach nearly 1 billion people by 2100. Nigeria has one of the largest population surges in world history and is expected to grow eightfold in two or three generations.

As the proportion of the population in developed countries is slowing and the population is aging, the market for baby diapers is almost saturated. In developing countries such as Nigeria, the population ranges from zero to three years old, accounting for 14% of the total population in 2017, 26 million potential consumers of baby products. Therefore, more and more overseas investors are looking to the African market, where they promote their brands or set up factories. They compete with local brands to grab market share.

Hayat Kimya, for example, launched its flagship diaper brand Molfix in Nigeria three years ago. According to Nielsen's 2017 report, the brand has captured more than 44% of the market. As Africa's most populous country and largest economy, Nigeria has great potential, but it is not an easy market to operate, let alone make products. Unstable electricity supply and easy congestion of transportation networks have a negative impact on product distribution and limit consumers' disposable income.

Despite these challenges, the enormous opportunities are hard to resist. According to Euromonitor data, Nigeria had 26 million babies in 2017, about 14% of the total population. For any manufacturer with a plan and courage, the rewards of success are full of great temptation. Euromonitor predict that Molfix will come out on top in the next year or two, and they are likely to become the number one diaper brand in Nigeria (both in terms of volume and market value).

Molfix's success lies in being able to provide quality products to Nigerian consumers at below market prices, and they also ensure that they have a strong distribution partner. This success has also encouraged other global competitors to re-evaluate their plans in this market.

A Japanese diaper manufacturer is looking for a local production partner in the Nigerian market, senior analyst Danielle le Clus-Rossouw at South Africa in Euromonitor said in a report. Danielle's advice to Japanese diaper manufacturers is that, as Unicharm entered the Indian diaper market under the Mummy Baby brand, "If a new player enters the Nigerian market with high-quality diapers (but at a price as low as diapers), I have no doubt that they will take market share like Molfix. Local manufacturing is also a very good strategy. As more and more global companies produce locally, the government may increase import tariffs on diapers to exert pressure to protect local manufacturers."

Similarly, in 2017, Ontex Global opened a state-of-the-art diaper factory in Ethiopia, Africa's second fastest growing market. Ontex CEO Charles Bouaziz said that in June 2018, they will add new equipment that will exceed the existing equipment that can produce 700 diapers per minute; their goal is to achieve 15% growth within five years. This is Ontex's first major investment in sub-Saharan Africa and will make a significant contribution to Ontex serving the East African market and achieving the five-year target.

Growing retail market

The transformation of the retail industry is not only taking place in Nigeria, but also in many countries on the African continent. In Ghana, Kenya, Angola, Côte d'Ivoire, Cameroon, Gabon and Zambia, the retail sector is undergoing major changes. South Africa's top five retailers Pick n Pay, Spar Group, Shoprite Checkers, Woolworths and Massmart are all exploring regional opportunities. Even the French retail giant Casino has moved into the region. Another French retail giant, Carrefour (Carrefour), has also partnered with French West Africa (CFAO) to launch retail stores in French-speaking Africa.

The ARDI (African Retail Development Report) report of the management consulting company Kearney (A.T.Kearney) confirms that the development of the retail market to modern trade will increase the sales of fast-moving consumer goods such as diapers, because these retailers can take measures to improve consumer loyalty and private label profit margins. Most large diaper manufacturers already have strong relationships with these global retail players in their home markets, which puts them in a privileged position to leverage these relationships effectively in the continent's new competitive environment.

Related to the advancement of the retail space, shopping center culture has also become extremely popular at the regional level. More investors are willing to invest in real estate in Africa, giving large retail partners the opportunity to become anchor tenants, creating a win-win situation for real estate investors, FMCG/diaper manufacturers and consumers. It is conceivable that Africa will be the new frontier of the baby diaper industry and will be an interesting market for at least the next five years.