Singaporean Firm Newmatic Seizes Growing Demand for High-End Home Appliances in East Africa

Grace Mutai, a 32-year-old marketing professional in Nairobi, recently undertook a kitchen transformation after a promotion, opting for a sleek, modern design from Newmatic, a Singaporean firm. Mutai’s choice, which included a state-of-the-art fan-vented cooker, mirrors the escalating trend of Kenya’s affinity for premium home appliances – a market movement Newmatic has astutely capitalized on.

In 2018, Newmatic made its foray into East Africa’s vibrant market through a strategic partnership with a financially distressed Kenyan company. Through meticulous orchestration of supply chains with a Chinese manufacturer, Newmatic successfully transported an extensive array of kitchen appliances, from hoods to hobs, to the port of Mombasa. These innovative appliances adorned showrooms across East Africa, just before the onset of the Covid-19 pandemic and ensuing country-wide restrictions.

image source: Newmatic Kitchen Appliance (James Gichuru Showroom)

Amid the challenging times of the pandemic, Dave Choy, Director at Newmatic, states, “We were exceptionally fortunate during the Covid-19 period, expanding from two showrooms to nine across East Africa. While many competitors faced supply chain disruptions, we maintained our strong relations in Asia and ensured uninterrupted supply lines.”

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Choy adds, “This enabled us to meet the rising post-Covid demand in 2021, a feat that allowed us to fill the gaps left by our competitors, resulting in approximately 90% market share in Kenya.”

Currently extending its reach to Uganda and Tanzania, Newmatic is poised to leverage the burgeoning demand for premium home kitchen appliances in key East African markets.

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Thriving Kenyan Home Appliances Market Fueled by Growing Middle Class and Urbanization

Kenya’s household appliances market is projected to generate a revenue of $124 million in 2023, as indicated by market research firm Statista. Further buoyed by an expected annual growth rate of 14.28% from 2023 to 2027, the market volume is anticipated to reach a remarkable $212 million by 2027.

This robust growth is largely attributed to rising disposable incomes and a wave of technologically advanced appliances. A burgeoning middle class, combined with an increasing number of working women, is propelling the demand for efficient and time-saving appliances such as cookers, washing machines, and refrigerators. Newmatic’s reach extends across Kenya, delivering and installing orders from the Indian Ocean coastline to the bustling port city of Mwanza near the Serengeti.

Construction Boom Creates Opportunity for Newmatic’s Modular Kitchens

Kenya’s construction market, valued at $17.3 billion in 2022, is projected to experience an average annual growth rate of 5% from 2024 to 2027. This growth, fueled by government support for public-private partnerships (PPPs) and initiatives to attract private investment, is primarily expected in the commercial construction sector. Tourism-related investments in retail buildings and hospitality projects are set to drive sector expansion, despite minor adjustments due to factors like rising debt, inflation, and food insecurity.

Projected growth in the construction industry, averaging 5.7% from 2023 to 2026, is driven by investments in transport, electricity, housing, and manufacturing projects. These endeavors align with President William Ruto’s campaign promises, encompassing a diverse range of initiatives from affordable housing and hospitals to extensive fiber optic connectivity and significant road infrastructure development.

Choy notes, “With the ongoing construction boom and increasing scarcity of land, the demand for modular kitchens is on the rise. Urban Africans are increasingly house-proud, and kitchens are transforming into spaces not only for cooking but also for entertaining.”

Real Estate and Urbanization Drive Demand for Home Appliances

As Africa’s urbanization accelerates at a rate of 4.4% annually, the fastest globally, more than 40% of the population now resides in urban areas – a figure projected to double by 2050. This rapid urban shift, coupled with a thriving housing market, is driving a significant demographic transformation. A burgeoning middle class and swift urbanization are contributing to increased housing demand, particularly stimulating the real estate sector.

In 2022, affluent Kenyans allocated 40% of their portfolios to commercial real estate, surpassing the 18% allotted to stocks, according to Knight Frank’s 2023 Wealth Report. This year, over 60% of Kenyan individuals with a net worth exceeding $1 million express intentions to invest in private rental properties, potentially further amplifying the demand for home appliances.

Despite stock market volatility and attractive government bond yields, the real estate market remains resilient, serving as a hedge against economic uncertainties like inflation and currency depreciation. The sector’s resilience is evident as regional high-net-worth individuals experienced a mere 5% decrease in wealth, in contrast to the global average decline of 10%.

Navigating Challenges and Seizing Opportunities in Africa

While Newmatic’s venture into the African market was initially met with skepticism about the continent’s business environment, the company discovered abundant opportunities that outstripped those in more saturated Southeast Asian markets.

Choy notes, “Perceptions of Africa as unsafe can be limiting, but such thinking prevents people from exploring the vast business potential in Africa.”

Newmatic’s success in Africa is attributed to its investment in local staff training and empowerment, as well as its unwavering commitment to high service standards. Supported by organizations like Enterprise Singapore, Newmatic competes effectively against major international brands, highlighting the potency of local empowerment, exceptional service quality, and governmental support in achieving business triumphs in Africa.

Despite challenges ranging from bureaucracy and safety concerns to political instability, Newmatic has thrived by adopting agile business strategies. Leveraging its robust supply chain, the company has managed to overcome issues like high interest rates and currency depreciation, ensuring punctual delivery of the right products. Newmatic’s expansion plans include entering new African markets, such as Somalia, Ghana, Morocco, and Nigeria, through strategic joint ventures.

As the African Continental Free Trade Area (AfCFTA) unfolds, it presents a transformative opportunity for businesses. The establishment of manufacturing facilities within a Kenyan free trade zone is a possibility, potentially leveraging AfCFTA benefits like import duty advantages and smoother cross-border trade.

Choy concludes, “Singaporean firms can find lucrative opportunities in untapped African markets, but they must exercise caution in an environment that cannot be taken for granted. Strategic planning and foresight are essential.”

In a dynamic and evolving African business landscape, Newmatic’s journey stands as a testament to the potential rewards awaiting those willing to explore, adapt, and contribute to the continent’s growth story.

Source: African.Business