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H&M shifts focus to African middle class

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H&M shifts focus to African middle class
File photo: Hjalmar Hjalmarson Neideman/TT
11:50 CET+01:00
With production up and running in Ethiopia, Swedish clothing giant H&M said Africa could also be key growth market as the middle class continues to swell.
"I think there is huge potential in Africa south of the Sahara when it comes to production," CEO Karl-Johan Persson told the Dagens Industri (Di) newspaper on Wednesday. "We started production on a small scale in Ethiopia and we'll see how it goes. It feels very interesting." 
 
With stores about to be opened in South Africa, the clothing chain is homing in on the growing middle-class. World Bank data on Purchasing Power Parity (PPP), a measure of what citizens' income affords them at home, showed that South Africans's cash clout rose by 10.6 percent between 2009 and 2012.
 
Estimates of the size of the middle class vary, but  Mthuli Ncube, vice president of the African Development Bank, told the IMF last year that some 300 million citizens of African nations are considered middle class - earning between $2 and $20 a day. There is, however, an important caveat.
 
"Half are what you call the floating middle class. They could revert into poverty very easily because of a death in the family, or some other shock," Ncube said.
 
The H&M CEO remained upbeat about the growth potential, and said, without specifying which markets, that the chain would likely add stores in other Sub-Saharan nations in addition to South Africa. 
 
"Africa is a continent where many countries are growing very quickly, where there is a growing middle class, and in the longer term a huge potential for sales," Persson told Di. 

The company's December sales were up by 12 percent, compared to the same month the year prior. The number of stores went up to 3,176 from 2,809 worldwide in the past year, the company noted.  

 
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