Although African consumers are emerging as a huge global economic powerhouse, scant few are buying new Ferraris or purses from the Burberry Group (London: BRBY). Rather, for most Africans rising incomes mean moving out of shantytowns, access to a greater diversity and better quality of food and finally being able to afford what most citizens of developed countries consider the necessities of life.

Many African governments have implemented economic liberalization measures that have given a shot of adrenaline to the continent’s markets. They’ve privatized sclerotic state-owned enterprises, pushed for freer trade, slashed corporate taxes, cracked down on cronyism and corruption, and invested in crucial physical and social infrastructure.

These long-belated reforms have greatly enhanced African productivity and helped fuel the emergence of a consumer sector—and with it, a consumer class with more and more cash in its pockets.

While Africa is clearly on the right track in terms of reducing poverty and transitioning to more stable, democratic governments, risks still remain across the region. For instance, while the Arab Spring is probably the best-known African political event of last year, in 2011 Sudan split in two after a nationwide referendum. Most of the country’s abundant oil resources went with what is now South Sudan and tensions have been simmering ever since. And as the Arab Spring demonstrated, political upheaval still has a way of cropping up on the continent.

Instead of focusing on discretionary spending items such as automobiles and fancy handbags, investors interested in tapping into the growth of African incomes should focus on the consumer staples sector. In addition to being the fastest growing spending category on the continent, the staples sector there provides the same sort of predictability and stability as it does in the rest of the world.

Shoprite Holdings (South Africa: SHP, OTC: SRHGY) is my favorite play in the consumer staples sector.
Indigenous to South Africa, Shoprite has grown from 8 supermarkets in Cape Town in 1979 to a chain of almost 300 stores stretching from South Africa to Nigeria in the north and from Ghana in the west to Mauritius in the east.

Shoprite’s locations include Shoprite supermarkets catering to mid- to high-income consumers; Usave markets catering to lower-income consumers; Hungry Lion fast food shops and liquor stores; and furniture shops and pharmacies. They’re all located in the faster growing and more politically stable sub-Saharan Africa.

To support its geographical spread, Shoprite has invested heavily over the years in developing a massive logistics infrastructure. On any given day, Shoprite’s trucks rack up enough mileage to circle the earth twice. While that leaves the company with large exposure to volatile fuel costs, that network ensures timely delivery of fresh product and drastically reduces its shipping costs versus its competitors, allowing Shoprite to offer some of the lowest prices on the continent. As a result, Shoprite has a clear competitive advantage in its markets.

Shoprite also has a distinct advantage given its massive geographic footprint. While most African retailers and supermarket chains specifically tend to be very geographically concentrated, Shoprite has been able to generate compound annual revenue growth of nearly 15 percent for more than a decade, despite the ebb and flow of individual economies.

It has also allowed the company to tap into higher growth regions outside of the Republic of South Africa where high unemployment and volatile inflation have weighed on the economy. While Shoprite’s South African sales growth has averaged around 10 percent annually, its sales outside of South Africa have managed a growth rate of nearly 25 percent.

The chain’s phenomenal sales growth over the years has largely been driven by rising consumer incomes across the continent. In addition to capturing the spending that’s created on food items, Shoprite has positioned itself to take advantage of the growing spending on Western-style health care throughout Africa, with its string of more than 130 MediRite pharmacies. Its OK Furniture chain with 248 stores across the continent also captures discretionary spending on household furniture and appliances as well as consumer electronics.

In the first quarter of Shoprite’s fiscal 2013 which ended in September, the company reported that its overall turnover grew by 15.6 percent compared to the same period last year. Within South Africa, turnover grew by 12.2 percent and its ex-South Africa operations experienced turnover growth of 26.4 percent. While the company doesn’t report specific financial data for another three months, overall sales grew by about 19 percent in the period and earnings should have been up by about 10 percent in the quarter.

That strong growth came against a backdrop of economic weakness. South Africa has been experiencing a depreciating rand because of the country’s slow economy, while the continent as a whole has been dealing with weak demand for natural resources. Given Shoprite’s ability to grow earnings even during downturns, the strong economic growth expected over the coming years should provide a major boost for the company.

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