Slide of the month July – Investment horizon in Africa

africon GmbH has made over 130 interviews with sub-Saharan African steel manufacturers between 2016-2017. In these interviews, one of the key issues holding back Western manufacturers was the risk perception of management, reflected in the preferred payback periods of the machinery. The management of steel companies was hesitant to make too large investments in machinery that would require long payback periods, mainly because of political, regulatory and other economic risks. The preferred payback horizon is 2-5 years, whereas most high-end Western equipment requires 8-12 years of payback time in Africa. Providing machines that fits risk perception or intended payback period is one of the main challenges of western engineering companies.

 

Slide of the month June – Automotive Kenya vs. Nigeria

In two different projects, both concerning the automotive industry in Kenya and Nigeria, africon has been conducting more than 65 interviews with vehicle assemblers, coach builders, repair garages and distributors of vehicles. Aim was to understand the current maintenance of windscreens in Africa to develop a go-to market strategy for a leading adhesives company.

These interviews as well as the analysis of general market data shows that the size of the automotive market in Kenya and Nigeria is quite different, which comes naturally when looking at the size of the population (46,05 million in Kenya vs. 182,2 million in Nigeria). But the proportion of new vs. second hand vehicles is very much the same.

Having 75% and 80% of second hand vehicles cruising the streets in Kenya and Nigeria the market for spare parts as well as chemical materials needed in the repair sector – like adhesives, sealants, paints, etc – is huge.

 

Slide of the month May – Steel investment Africa

During 2016 -2017 africon GmbH conducted over 130 interviews with the management of sub-Saharan African steel manufacturers. In these interviews, we were able to discover that the current steel plant equipment and machinery market is dominated by low-price segment mainly consisting of Chinese and second-hand equipment. However, discussion with top managers on future investments in the next 10 years, the steel plant equipment landscape will change dramatically. Most of the new growth will come from mid-high price segment, with a total market share of over 50 % by 2025. This will open up great opportunities for steel plant engineering companies in sub-Saharan Africa.

Slide of the month April – Spark plug market Nigeria

Within a large independent aftermarket (IAM) project in the automotive sector for Nigeria, africon GmbH had the chance to interview more than 50 experts and found that the IAM market in Nigeria is strongly dominated by fake products. A good example is the spark plug market where fakes in 2015 were at 65% but increased to almost 80% in 2016. According to an expert in the IAM market in West Africa, Chinese suppliers have lowered the quality of fakes to meet the lower buying power of Nigerian clients. The current market leader is NGK from Japan with a strong distribution by Asahi Brands. Other brands are distributed through various players e.g. Hydrotrans but also by OEMs e.g. Bosch.

Slide of the month March – Kenyan mobile money transfers

Mobile money has become the most important money transfer system in Kenya by far, in contrast to the European continent where people mostly stay suspicious to such paying systems. africon GmbH with its long-term experience in the payment sector did a research for a leading manufacturer of chip for payment cards. In this context, the Kenyan market of banking and credit cards has been analysed and an important data base including information from more than 50 expert interviews in Nigeria and Kenya with banks, personalisation bureaus, distributors and other key organisations was constituted. Thanks to this extensive research, africon can resume that the Kenyan banking market is saturated. Investments into this sector can hardly be profitable besides banks and telcos who still buy payment cards. The Nigerian market currently shows a strong margin drop for payment chips and new technologies are being explored by banks and payment providers. Nevertheless, the dynamic development of mobile money is an important opportunity for the IT sector and internet security companies.

 

Slide of the month February – segmentation of the Nigerian sanitary market

The slide of the month January showed that Western Africa is a very active region for hotel development. The rise of the construction sector also drives the need of interior design and sanitary products. Two third of the total Nigerian turnover in sanitary products come from retail business. Only one third of the products are sold in construction projects such as hotels or office buildings. Whereas, when it comes to high-end class, the ratio changes and project business dominates the selling of sanitary and interior decor. Key to success in Nigeria is the identification of key players.

The segmentation of the Nigerian market illustrated by the sanitary sector is typical for Africa. Small distributors and unofficial markets dominate. Still, africon sees an opportunity for large contracts in high-end projects. A successful market entry must cover the whole distribution chain.

Development of hotels in Africa

Some African countries are known for its dynamic tourism such as Kenya and Tanzania, Namibia, Botswana and South Africa. Idyllic pictures of Safari-tourists can be drawn out of this imagination. However, the hotel industry that is also linked to business travelling is the most prospering in Western Africa. The first slide of the month in 2017 indicates that 45% of the African new hotel rooms were built in Western Africa. Also, in Nigeria more than 10.000 hotel rooms were planned in 2016, that is more than in any other African country. Angola and Kenya also show an interesting number of 3.000 to 8.000 rooms planned in 2016.

Thus, africon sees interesting potentials in the construction and interior furnishing sector. German companies can profit from the African construction boom as much in providing services as in selling sanitary equipment, furniture and floor covering.

 

African hotel development

Slide of the month December – tractor brands in Nigeria

The slide of the month December illustrates the market shares of different tractor brands in Nigeria which was researched in a large filter project over the past 6 months. The market leader is New Holland with about 20% of the present tractors in the country, followed by John Deere and Mahindra. Different Chinese products also take a big part of 20% on the market and are partly locally produced within a SKD production. As africon GmbH we believe that the market in Nigeria will continue to grow strongly as various initiative programs by the government will drive local production and imports.

 

Nigerian market shares on operational tractors

Slide of the month November – steel industry and governmental decisions

While the slide of the month October showed an increasing demand of steel in African countries, the slide of the month November analyses the government’s role in steel projects. A serie of 101 interviews with executive managers in the steel industry showed, that in countries having an incentive program for steel projects, politicians have real influence on the sector’s decisions. Politics and economy can be linked strongly in these countries, a factor that must be considered when choosing geographical centers for the market entry of your company.

Slide of the month October – numbers on steel in Africa

The slide of the month October shows that more and more steel is used on the African continent while steel production does not increase significantly. This gap must be disserved by imports but it also indicates interesting investment possibilities for the steel processing industry. Seeing the need of steel increasing, we can also resume that construction is going up since 2005.