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SOTM December

Slide of the month (SOTM) December. Aluminium market growth in sub-Saharan Africa

SOTM December

The Aluminium market in sub-Saharan Africa has been experiencing a steady growth in the past decade.

The major contribution to this, is the increased import of hollow profiles of aluminium alloys into sub-Saharan Africa which has grown by 467%, from 23 million tonnes to 107 million tonnes between 2008 and 2017, compared to other profiles.

The non-alloyed profiles which has the lowest contribution seems to be dwindling in import size, as they only increased between 2009 and 2012, after which they began to decline.

africon publishes African steel insights on the ITA Journal.

Last October and in the International Tube Association 3rd journal edition, africon published an article about the Steel industry in East Africa. The article started by portraying the image of Africa that is perceived by the rest of the world. Many countries in the continent have started to change their image from a crisis centre to a potential emerging market. The macro economic factors strongly indicate positive changes that will lead the continent to be the next emerging market. The growing young population together with economic growth on the continent lead to a growing labour force and cities which lead to a significant increase in middle class. Furthermore, the continent is pushing towards manufacturing and automation as this sector remains as the continent weakest link. Also, constant rise in foreign direct investment over the past decades is further boosting the economy not only in financial terms but as well in terms of knowledge, expertise and technology.  Industries of almost all kind will experience a rapid growth due to this economic boom, however the African market is still very diverse as the continent host 54 countries.

East Africa currently distinguish itself by economical growth and political stability in the region and the least dependent on commodities such as gold or oil. The region was projected to capture the highest regional economic growth over the past year in Africa. The article went in depth to analyse those macro-economic factors and focused on the drivers of steel industry that promote economic growth in Africa and especially in East Africa

Overall, Africa does host enormous opportunities for firms from around the world. With its diversity and complicity however comes the need to evaluate closely where they are and how to make use of the it.

To access the full article, please use the link below:
The East African Steel Industry

Automotive projects conducted by africon

Over the past years, more and more automotive firms have shown increasing interest in Africa. Even though OEMs like VW and Nissan have dominated the news with their announcement of establishing assembly plants in Africa, the largest immediate automotive business potential lies elsewhere: in the automotive aftermarket.

With more than 12,7 million vehicles on the road in Nigeria, more than 6 million in Egypt and almost 2 million in Kenya, more and more automotive parts are sold in Africa. The main challenge especially for global aftermarket leaders from Europe and Japan: the sector requires large amount of data to efficiently and effectively increase sales. With data availability in Africa being a major challenge, africon has successfully plugged this gap and supported aftermarket firms from around the world and in different product segments on their Africa strategy.  Amongst other points, we supported firms with market sizes, details on vehicles in operation, suitable import partners and even research on specific part numbers. For the upcoming years, africon has set an increased focus on the sector and expects more companies to follow current early movers to the continent.

africon CEO moderates the African Investment Day in Erkrath

Marc-Peter Zander, CEO and Partner of africon GmbH has been invited to moderate the African Investment Day which was held on the 29th of November 2018 to discuss the opportunities and challenges for investment in Africa.

The platform of distinguished African speakers gave a platform to the audience to discuss the first-hand access to investment, find out more about upcoming chances and also things to observe when investing in Africa. Key learning from the discussion steered by Mr. Zander was that investment in Africa needs strong local information basis, involvement with all stakeholders in African countries and the readiness to be locally present. In addition, it was summarised that there are great chances for investors at this moment in time as countries like Rwanda, Nigeria and Kenya offer great opportunities for European investors.

africon named official foreign representative for the BVMW

Since October 2018 africon GmbH is the official foreign representative for the BVMW “Bundesverband der Mittelständischen Wirtschaft” (German Association for the SMEs) for the countries of Nigeria, Ghana, Tanzania, Kenya and Ethiopia. The BVMW has 18.000 direct company members in Germany and 700.000 indirect contacts within Germany. At the moment the BVMW is strengthening their presence in Africa together with the help of their foreign representatives and a new alliance they formed called the “Mittelstands Allianz für Afrika” (The SME Alliance for Africa).

The SME Alliance for Africa will cover all industrial sectors and will be supporting the German-African business network in order to form sustainable development of their effective economic cooperation. This Alliance has the target to act as a service provider for the German government and German companies in realising projects locally in Africa.
africon GmbH already ventured into first discussion with local African associations that are very interested in partnering with BVMW to form effective partnerships to connect their members with the members of BVMW.

It seems “The SME Alliance for Africa” as well as the local business associations are both eager to present Africa as a continent full of potential business opportunities and business partners. And africon is more than happy to be the matchmaking party in between and let our broad African network come into play.

Successful Plastic Sector Projects Done in East & West Africa

In the past months africon conducted two market assessment projects and one very successful business trip to Kenya for major international players of the plastic packaging sector.

Promising future market in Nigeria

The two market assessment projects had Nigeria as their focus market and more than 100 interviews were conducted with all relevant players of the plastic packaging sector locally.
The results concluded from the analysis of all interviews and market data in Nigeria is very clear: the plastic (packaging) sector in Nigeria is very vivid and growing at a high pace. Nevertheless, the Nigerian market is highly cost conscious. Competition is set on pricing strategy: the cheaper the product, the more sales a company makes. Most manufacturers still shy away from cost increases even marginally. The majority of consumers do not care much about quality as they do have an open eye for the cost.

At the same time the future is certain to come with changes. The upper middle class is expanding and there’s a growing awareness on quality products among Nigerian consumers generally.Any high quality / high price level company entering the Nigerian market will need a targeted product awareness campaign to help realize the market potential for their products. Both end users and converters need some form of education on the use of the products.

Modest expectations in Kenya

For Kenya, which has only a quarter of the population that Nigeria has and which’s BIP is 5 times smaller, the picture looks a bit different. The local production of BOPP film is for example not meeting its expectation in terms of capacity as it stands at around 30,0000 tons per year in Nigeria. Also, the import of machinery to manufacture plastic film stands at $ 87m in Nigeria but only at $ 38m in Kenya. But with the growing food manufacturing sector in both countries it is expected for the plastic packaging industry to grow as well. Since importing ready-made plastic film comes definitely more costly at one point than local production.

For any questions regarding this project please feel free to contact our practice leader Ms Lena Schwoerer.

Slide of the month (SOTM) September. Woodworking machinery importation

During a recent project conducted by africon with focus on the wood working machinery market in Nigeria, africon GmbH identified 107 furniture manufacturing companies and 14 machine distributors focusing specifically on the furniture manufacturing market.

By holding expert interviews with a big number of manufacturers and distributors it became quite clear that the furniture manufacturing sector in Nigeria is very much quality oriented when it comes to purchasing machinery. This stands in contrast to many other industrial sectors that are clearly driven by price when it comes to purchasing e.g. in the steel industries.

The slide of the month August 2017 shows that during economically difficult periods price is starting to become the underlying factor even though quality is still considered to be very important. Therefore, the countries exporting high quality machinery have lost a big market share to countries exporting low price machinery. Consequently, it would be important for high quality machinery suppliers to widen their portfolio containing a lower priced machine that still meets all basic quality requirements.

 

 

Slide of the month (SOTM) August. Plastic pipes

During a period of 3 years africon GmbH conducted more than 140 interviews with manufacturers of plastic pipes as well as distributors, hardware stores, construction companies and contractors in 11 countries in west and east Africa. Through all these interviews africon gathered extensive knowledge on the local manufacturing market of plastic pipes, the importation as well as the trends of different materials in different countries.

The following slide shows very well that when entering the African market a company needs a clear strategy for different regions of the continent since trends, developments and market sizes can differ quite a lot between the different regions of this vast continent.

 

Slide of the month (SOTM) 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 (SOTM) 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.

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