executive insights of the future of african chemicals

Executive Insights of the Future of African Executive Insights of the Future of African ChemicalsChemicals

PUTTING MEGA TRENDS INTO PRACTICE PUTTING MEGA TRENDS INTO PRACTICE –– MICRO TRENDS THAT MICRO TRENDS THAT DRIVE OPPORTUNITIES IN WATER AND CONSTRUCTION DRIVE OPPORTUNITIES IN WATER AND CONSTRUCTION

SECTORSSECTORS

Mani James, Regional Director

Carolyn Krynauw, Research Analyst

Chemicals, Materials and Food

15 May 2012

© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

Today’s Presenters

Mani JamesRegional Director - Africa

Frost & SullivanAfricaCape Town

Functional Expertise

• Over 13 years of management and strategy consulting experience, having worked for clients in North America, South East Asia, Asia Pacific and Africa.Particular expertise in:

- Market assessment and analysis

Functional Expertise

• Three years of experience in market research and consulting, with particular expertise in:

- Analyzing market trends and data in the retail and chemicals, materials and food industries

Carolyn KrynauwResearch Analyst

Frost & SullivanAfricaCape Town

2

- Strategy creation and implementation

- Market entry and expansion strategies

- Customer analysis and segmentation

- Competitive strategy

- Solutions modeling and implementation

Industry Expertise

� Experience base covering a broad range of sectors, working with senior executives to develop and implement strategies across a range of geographies, with particular expertise in:

- Petrochemicals, bio-fuels, materials handling, food additives and chemicals in Africa

- Industrial automation and supply chain management

- Manufacturing

- Market segmentation and assessment

- Presenting findings and interacting with top executives

Industry Expertise

� Experience base that covers various sectors, including:

- African Mega Trends

- Agriculture

- Chemicals (home and personal care, food and beverage detergents)

- Materials (renewable energy)

- Retail (FMCG)

Focus Points

1. Occasion for the Analyst Briefing

2. Three of the Six African Mega Trends

3. Water Treatment and Sanitation in Africa

4. Construction / Infrastructure in Africa

3

4. Construction / Infrastructure in Africa

5. Conclusions and Growth Challenge

`̀

The Occasion for the Analyst Briefing

This analyst briefing:

o Macro to micro viewpoint

o Market drivers and challenges

o Business opportunities in Africa

4

How you will benefit:

o Gain through involvement in Africa

o Opportunities presented by PPPs

o Challenge your current growth strategy

o Interactive Q & A session

Energy: $800 billionElectricity infrastructure,

renewable energy,

rehabilitation of existing

structures

Agriculture: US$50 billionIncludes fertilizers, crop

protection, animal health, feed

and additive products, and plant

biotechnology.

Infrastructure Development: >US$400 billionTransport infrastructure and

rehabilitation, housing, ICT, building and

other materials, construction and PPE

Manufacturing: $204 billion

Manufacturing, food packaging

and fortification.

Opportunities in Africa

5

Africa – The SummaryWater: US$700 billionIncludes sanitation,

water infrastructure

and chemicals,

renewable water,

and water and

wastewater

treatment.

Oil & Gas: US$3.6 trillionInfrastructure, extraction

chemicals, and rehabilitation

biotechnology.

Source: Frost & Sullivan analysis.

Mega Trends Driving Sector Growth

Focusing on Three of the Six Mega Trends

Sectors

Water Treatment

and Sanitation

Infrastructure Construction

Increasing Urbanisation

6

Public/Private Sector Investment to Drive Industry Development

Sustainable Development

Infrastructure Development

Health and Safety

Rebuilding War-torn Countries


Water Treatment and Sanitation in Africa

Water Treatment and Sanitation in Africa – Macro to Micro

Lack of Supply, Ongoing Maintenance, Reliable Water and Wastewater Treatment

Infrastructure Development Sustainable DevelopmentIncreasing Urbanisation

Econom

yB

usin

ess

Demand > supplyCatchment area problemsIncreased health expenditureUncertain water usage rights

Limits industrial developmentLeaking and water wastageUnsanitary water treatment

Impact of climate changeNon-compliance with treatment regulations or the lack thereofLimited treatment technology

Unreliable access and low qualityReduction in industrial productivity

Higher production costsLimits competitiveness

Changing water availabilityHigher production costs

8

Construction of plants

(treatment / desalination)

Infrastructure upgrades

Ongoing maintenance

Distribution of

potable water

Innovative or alternative solutions

Busin

ess

The Gaps

Infrastructure and water-

related chemicals

The Opportunities

Technology

Transfers

Water Manage-

mentContracts

PPP & Skill

Transfer

Water Treatment Chemicals

Construc-tion

Chemicals

Alternative Systems


Major Water Treatment and Sanitation Drivers and Challenges (Current and Future)

Mark

et

Dri

vers

Great need for water treatment and sanitation

Scarcity of water in some regions of Africa drives the demand

for water reuse

Governments are recognising the benefits of PPPs

Drive to reach the millennium goals

9

Mark

et

Ch

allen

ges

Increasing population and need for water infrastructure maintenance

Lack of local skills and knowledge

Problems obtaining tenders

Lack of adequate enforcement of water regulations


Public Sector Project Values and Major Companies

South Africa

182.2

78.2

218.5

93.5

0

50

100

150

200

250

Water Treatment

Wastewater Treatment

Re

ve

nu

e (

$ M

illi

on

)

2010

2015

Water and Wastewater Treatment Market, South Africa, 2010 and 2015

79.4

5.5

122.8

7.3

020406080

100120140

Water Treatment


Re

ve

nu

e (

$ M

illi

on

)

Water and Wastewater Treatment Market, Ghana, 2010 and 2015

2010

2015

Ghana

Major Suppliers:

• Süd-Chemie(Clariant)

• NCP Clorchem

• Buckman

• Improchem

• Zetachem

Major Suppliers:

• Nalco (Ecolab)


• Hiss Ghana Ltd

• Senmin

• Vinmar Ghana

10

94.6

31.5

127.943.3

020406080

100120140

Water Treatment


Re

ve

nu

e (

$ M

illi

on

)

Water and Wastewater Treatment Market, Kenya, 2010 and 2015

2010

2015

Kenya

82.7

27.1

105.1

33.2

0

20

40

60

80

100

120

Water Treatment


Re

ve

nu

e (

$ M

illi

on

)

Water and Wastewater Treatment Market, Tanzania, 2010 and 2015

2010

2015

Tanzania

Major Suppliers:

• Nalco (Ecolab)


• Marshall Flower

Major Suppliers:

• Wotech KenyaLimited

• Kel Chemicals

• Improchem

• Zetachem • Vinmar Ghana


Water Treatment and Sanitation—Locating Opportunities

In East Africa, the effect of climate change is expected to have a

AfDB is interested in financing the preparation and

implementation of the Sogakope-Lome TransboundaryWater Supply Project between

Ghana and Togo.

AfDB has agreed to fund 70% of the finance required for two wastewater purification projects in Morocco.

The total cost is estimated at $39 million.Tunisia has received $42 million from the AfDB to rehabilitate 30 wastewater treatment plants and to increase the

supply of treated water per year.

11

`̀

expected to have a negative impact on water availability.

BP Angola will finance a US$400 000 project to

provide rural communities in Huambo and Bié with potable

water (20 boreholes will be constructed in 18 months).

Ghana and Togo.

The AfDB has approved a US$100 million loan to rehabilitate, construct, and expand water and sanitation facilities in

Zaria (city in northern Nigeria).

Operation and maintenance of Tweefontein and Emfuleni Wastewater Treatment Plants ($11.4 million project

over 5 years)Source: Frost & Sullivan analysis.

Construction / Infrastructure in Africa

Construction / Infrastructure in Africa – Macro to Micro

Lack of Housing, Energy, Roads, Communication, and Water

Infrastructure Development Sustainable DevelopmentIncreasing Urbanisation

Econom

yB

usin

ess

Demand > supplyGeneral overcrowdingNegative impact on tourism

Reduced business activitiesUnhealthy workforce

Limits industrial developmentLowers economic incomeLimits FDINegative impact on regional trade

Higher production costsLimits competitiveness

Need for renewable energyDepletion of natural resources

Need more skilled labourHigh initial costsAcceptance

13

Formal construction

Infrastructure upgrades

Ongoing maintenance

Lack of skills

Innovative solutions

Busin

ess

The Gaps

Green building

materials

The Opportunities

Paints & Coatings

Building Materials

PPP & Skill

Transfer

Construc-tion

Chemicals

Fibre Optic

Cables

Local Manufac-

turing


Major Construction Drivers and Challenges (Current and Future)

Mark

et

Dri

vers

Need for investment in public infrastructure development and construction (housing, all-season roads, and energy plants)

Ambitious economic targets

Governments are recognising the benefits of PPPs

Low-cost solutions in Africa

14

Mark

et

Ch

allen

ges

Dilapidated and outdated infrastructure

Inability of governments to finance necessary construction projects

The lack of integrated transport routes


Infrastructure Chemicals and Materials Market & Decorative and Industrial Coatings Market

South Africa

Sales Breakdown:

Coatings (63.6%)

Thermal insulation material (23.7%)

Waterproofing material (9.3%)

Sealants & grouts (3.4%)

Major Suppliers:

• Crown Berger

• Basco Paints

• Sadolin Paints

• Regal Paints

416.8 453.6

0

200

400

600

2010 2015

Re

ve

nu

e (

$ M

illi

on

) Infrastructure Chemicals and Materials Market, South Africa, 2010 and 2015

Major Suppliers:

• Plascon

• Dulux

• a.b.eConstructionChemicals

• BASF

• Dow

East Africa

71.9

88.1

0

50

100

2010 2015Re

ve

nu

es

($

Mil

lio

n)

Decorative Coatings Market, East Africa, 2010 and

2015

15

Kenya

Major Suppliers:

• Sadolin Paints

• Kiboko Paints

• Insignia

• BPC Chemicals

• Crown Berger

Major Suppliers:

• Sika

• BASFConstructionChemicals

• Kenbro

• Mau West

Sealants & grouts (3.4%)• Dow

Sales Breakdown:

Coatings (62.1%)

Waterproofing material (31.2%)

Sealants & grouts (6.7%)

62.675.1

0

20

40

60

80

2010 2015

Re

ve

nu

e (

$ M

illi

on

)

Infrastructure Chemicals and Materials Market, Kenya, 2010

and 2015East Africa

9.511.7

0

5

10

15

2010 2015

Re

ve

nu

es

($

Mil

lio

n)

Industrial Coatings Market, East Africa, 2010 and

2015


Construction—Locating Opportunities

Ethiopia is going to construct hydropower plants in the

basin of the Blue Nile River to generate 5500MW.

Estimated completion: 2017

South Sudan requires more than $5 billion for 32,000 km to enable the country to be fully networked

Uganda has a housing deficit of more than

700,000 units. 60% of the urban population live in informal settlements.

16

`̀Central Africa (darker blue countries) have the worst infrastructure in Africa. Less than 20% of roads are asphalted.

However, significant hydro-power potential exists.

Despite significant delays, Tatu City and KonzaCity (outside Nairobi, Kenya) are expected to be built at an estimated $3 billion and $14

billion, respectively.

informal settlements.


Conclusions and Growth Challenge

Conclusion

Africa Opportunity Focus – Water Treatment & Sanitation, Construction & Infrastructure

1. Increasing urbanisation, infrastructure development, and sustainable development impact

multiple sectors and need to be examined carefully to optimally develop medium and long term

business strategies in current and new African markets.

2. Gaps are certainly evident in both the water and construction sectors and businesses would do

well to rethink strategy to incorporate the African market.

18

well to rethink strategy to incorporate the African market.

3. This can be done by developing a strategy to (a) analyse and (b) understand how Africa can play

a role in your future growth strategies.

4. However, businesses need to acknowledge that Africa is a unique segment

of the global market that requires a different business model to tap into

relevant opportunities.

5. PPPs provide access to markets and enable skill and technology transfers.


Are you geared up for growth in the water and construction industries?

the A

fric

an

Eco

no

my

Hig

hChemicals, Materials

& Food Business

Product porfolio differentiation

Africa as a low cost manufacturing hub

Customised solutions

More global chemical companies locating to Africa

Physical Proximity

May lead to more customised solutions to differentiate from

competitors...have you considered this?

Are you willing to customise?

19

Low Degree of Certainty

Deg

ree o

f Im

pact

on

th

e A

fric

an

L

ow

High

manufacturing hub

South Africa‘s dominance challenged

Not if, but when...

Delve Downstream

Consumer focus –Customer‘s customer

Where would you place:


Next Steps

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20

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For Additional Information

Christie Cronje

Corporate Communications

Africa

(+27) 21 680-3566

[email protected]

Carolyn Krynauw

Research Analyst


(+27) 21 680-3211

[email protected]

23

Mani James

Regional Director

Growth Partnership Services

+27 21 680-3208

[email protected]

Vassilissa Kozoulina

Account Manager


+27 21 680-3279

[email protected]