The increase in infrastructure and maintenance spending by the private and public sectors in South Africa, Nigeria and Kenya is lending momentum to the growth of the industrial paints and coatings market in these countries, says consultancy Frost & Sullivan.
Nigeria presents the most opportunities owing to its government’s success in stimulating private and public involvement in development projects, such as the landlord management model, introduced in 2006, to enable private companies to handle operations at Nigeria’s ports.
With the expected roll-out of several new development projects by Nigeria’s government as well as private players, the amount of locally produced paints and coatings in the country will increase significantly from its 2010 level of 35% to 40%.
Soon-to-be-released analysis from Frost & Sullivan, titled ‘Analysis of the Industrial Paints and Coatings Market for South Africa, Nigeria and Kenya’, finds that the sales volume of industrial paints and coatings across the three countries stood at 101.2-million litres in 2012. This is estimated to reach 142.1-million litres in 2017. The study covers wood, powder, can and coil, marine, and industrial protective coatings. Powder, marine and industrial protective coatings represent key growth areas within the market.
“New projects announced in the oil and gas sector and allied industries in South Africa, Nigeria and Kenya are fuelling the demand for industrial paints and coatings products. In South Africa, the government and other private companies such as Sasol and PetroSA are the key forces driving the launch of new projects and, in turn, widening market potential,” says Frost & Sullivan chemicals, materials and food industry analyst Anthony Lawrence.
However, the rising price of raw materials is pushing up the cost of industrial paint and coatings production. The fluctuating exchange rates are also a cause for concern, particularly for Kenyan industry participants, as most raw materials used in the manufacturing of paints and coatings are imported.
Further, the influx of competitively priced paints and coatings into South Africa from countries such as China and India is diverting customers from local manufacturers.
To remain competitive, local participants in the South African, Nigerian and Kenyan industrial paints and coatings markets should offer products with a high price-performance ratio and ensure availability. Industrial paints and coatings companies from these countries must also provide robust customer service and technical support to build and strengthen relationships with suppliers, add value and retain customers.
“Local market participants should con- sider affiliating with well-established international brands in order to maintain high quality, while respecting the relevant health standards, as well as obtain environmental compliance accreditation. These affiliations will also assist in making customers completely aware of the grades of paints and coatings so that they can use the right product for the right application,” Lawrence advises.
The frenzied pace of infrastructural development in South Africa and Kenya is also increasing the market for thermoset resins in both countries. Significant government investment, especially in low-cost housing, roads and other nondomestic structures, has given a boost to the paints and coatings, construction chemicals and composites markets. These markets, in turn, have raised the demand for thermoset resins.
New analysis from Frost & Sullivan, titled ‘Analysis of the Thermoset Resins Market in South Africa and Kenya’, finds that the market earned combined revenues of $280.8-million in 2013 and estimates this to reach $339.4-million in 2017. South Africa accounted for 97.5% of total sales, and Kenya the remaining 2.5%.
“Although South Africa’s economic growth has slowed, a $360-billion government infrastructural development plan is likely to keep its thermoset resins market afloat until 2030. The growth rate in Kenya is expected to be much higher, as the country is sorely lacking in modern infrastructure and is aggressively pursuing its development goals in line with its vision of becoming a middle-income nation by 2030,” says Frost & Sullivan chemicals, materials and food industry analyst Dilshaad Booley.
South Africa has adequate resources to supply almost 90% of its thermoset resins demand domestically. Its local refineries are the most efficient in Africa, with an average use capacity of 85%.
Although this insulates the market from import price fluctuations, the country’s escalating production costs are exposing it to competition from cheap imports. Government can attempt to stave off this challenge by imposing higher import tariffs and companies can use energy more efficiently during the manufacturing process.
Kenya, on the other hand, imports almost all its thermoset resins and is vulnerable to constant currency volatility and high transport costs owing to poor rail and road conditions. However, this is being remedied by government’s investment into the sector.
“Rail transport is performing at 10% of its capacity owing to the deterioration of infrastructure and operational inefficiency in Kenya, resulting in higher thermoset resins prices. South Africa, meanwhile, is threatened by imports from China, which is able to manufacture and trade products at lower costs owing to economies of scale, lower labour costs and preferential trade tariffs,” Booley explains.
She adds that Kenya can lower the prices of thermoset resins and increase local manufacturing through proper maintenance and better infrastructure, with longer rail networks from the ports. In South Africa, overcoming soaring energy costs is key to making locally produced products price competitive with imports. Local content policies in both countries will also aid the use of thermoset resins in their respective domestic markets.