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African Mega Trends: Shaping and Prolonging the Future of Lubricants

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Anthony Lawrence of Frost & Sullivan presents on "African Mega Trends shaping and prolonging the future of lubricants" at the 2nd ICIS African Base Oils & Lubricants Conference in Cape Town. Mega …

Anthony Lawrence of Frost & Sullivan presents on "African Mega Trends shaping and prolonging the future of lubricants" at the 2nd ICIS African Base Oils & Lubricants Conference in Cape Town. Mega Trends not only open up substantial opportunities to companies on a global level, but they also significantly alter the competitive structure of the industries in which companies operate, and the players within them.

Frost & Sullivan analysis indicates a positive outlook for lubricant manufacturers and distributors in Nigeria, as a study reveals significant growth from a total estimated volume for lubricants of 185,000 metric tonnes in 2011 to more than 274,000 metric tonnes in 2012. Nigeria’s total lubricants volume for 2012 is expected to reach just short of three times its volume by 2022.

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  • 1. 1 We Accelerate Growth African Mega Trends: Shaping and Prolonging the Future of Lubricants Unlocking Africa’s potential “The 2nd ICIS African Base Oils & Lubricants Conference” by Anthony Lawrence
  • 2. 2 Africa’s Mega Trends – The Future for Lubricants Table of Contents Why Frost & Sullivan Mega Trends & Africa Perspective What does this all mean for the Lubricants Market? Snap shot into key African Markets What does the future hold for the lubricants market?
  • 3. 3 Why Frost & Sullivan  Founded in 1961 • African office based in Cape Town • Staff compliment of 70 focussed on Africa  Clients worldwide, including emerging companies, the global 1000, and the investment community Growth Partnership Services Growth Consulting Events  Pioneered emerging market & technology research  Partnership relationship with clients, via consulting services and cross-industry events  Visionary innovation support via megatrends research, development of the GIL global community
  • 4. 4 Mining & Manufacturing Industrial, Automation & Process Control Business, Financial Services & Education Environmental & Building Technologies Healthcare Energy & Power Systems ICT Chemicals, Materials & Food Aerospace & Defense Automotive & Transportation A wide industry and technology breadth uncovering new creative markets and ideas Global Industry Research Focus  
  • 5. 5 How we align our research with your needs Relevant Global/ African Mega Trends Selection of relevant Mega Trends in Africa Design the research for most relevant sectors Frost & Sullivan’s Mega Trends / Theme based approach to designing a research strategy  Analyzing the key mega trends from the Global / African perspective – Key drivers of growth  Selecting the most relevant specific trends and identify themes / concepts for Africa - Identifying growth opportunities together  Africa Focus – Transportation Chemicals, Water Treatment & Sanitation, Agriculture, Oil & gas, mining, renewable energy, construction & infrastructure, manufacturing, consumer products & materials MT MT MT MT MTMT Aligning our research with your requirements and needs
  • 6. 6 Mega Trends & Africa Perspective What is a Mega Trend? Impact of Mega Trends on Key Organisational Functions Mega Trends are global, sustained and macro economic forces of development that impact business, economy, society, cultures and personal lives thereby defining our future world and its increasing pace of change Marketing and Strategy R&D Budget Spending Product Planning and Development Technology Planning Innovation Scouting
  • 7. 7 Regional Integration Public/ Private Sector Investment to Drive Industry Development Infrastructure Development Sustainable Development Connecting the Unconnected Urbanisation Chemicals Materials Food Rebuilding War Torn Countries Health & Safety Understanding the role of Mega Trends in order to Respond to Opportunities and Threats
  • 8. 8 Unlocking the Opportunities presented by Mega Trends What are the key mega trends that would drive business for chemicals and materials companies in Africa? When can you expect to see the impact of micro trends on the business environment? Where are the key opportunities that would manifest in Africa by 2020? Why is Africa the next big opportunity for chemicals and material suppliers? How can you adapt your strategies to tap into this massive opportunity Africa presents?
  • 9. 9 HOW DOES URBANISATION INFLUENCE YOUR BUSINESS? What does this mean for the Lubricants Market…
  • 10. 10 Increasing Urbanisation: Creating, Maintaining and Improving Existing Capacity o Water abstraction o Water and wastewater treatment plants o Water distribution o Energy infrastructure o Renewable energy o ICT o Transportation o Mega cities o Mega slums By 2020, about 43% of the people living on the African continent will live in urban areas Urban population in Africa (millions): 205 1990 2010 400 2050 1,230 ` South Africa Angola Tanzania Kenya Ethiopia Egypt Algeria Morocco Cameroon Nigeria Cote d’Ivoire Ghana Senegal Did you know?
  • 11. 11 HOW DOES INFRASTRUCTURE INFLUENCE YOUR BUSINESS? What does this mean for the Lubricants Market…
  • 12. 12 Africa – Key Infrastructure and Trade Statistics $403 billion Current spending on infrastructure development in Sub-Saharan Africa amounts to of investment in Sub-Saharan Africa is on transport infrastructure 56%In land-locked countries, transport accounts for 70% of the value of exported goods countries in Africa have regular power outages (out of 55) 30 It will take 50 years for most countries in Africa to reach universal access to modern infrastructure 50% Of infrastructure development has been responsible for more than half of Africa’s improved economic performance *based on active projects in 2011 Source: World Bank and Frost and Sullivan analysis $810 billion in spending is needed over the next 5 years to upgrade, rehabilitate and expand Africa’s infrastructure
  • 13. 13 A brief Snap Shot into Key African Markets for Automotive and Industrial Lubricants AFRICA: 5.3% Growth (2012) 5.6% Growth (2013)f
  • 14. 14 Country Indicators: South Africa, Egypt and Nigeria, 2013 Egypt Nigeria ` The combined South African, Egyptian and Nigerian lubricants market accounted for 57.5 percent of the total African lubricants market size by volume South Africa
  • 15. 15 Country Indicator: Nigeria, 2013 Nigeria GDP (Current US$) $272.6 billion GDP growth: 6.9% Population: 170 million GDP/capita (PPP): $2,70 Number of vehicles: 6.0 million Road Network Consisting of: 200,000 KM Land Surface Area: 923, 768 S/km Industrial production growth rate: 3.8% ` A Brief Look Into Nigeria
  • 16. 16 Note: All figures are rounded. Source: Frost & Sullivan Total Lubricants market, Nigeria, 2012 Key Market Findings  The total lubricants market has grown substantially between 2011 and 2012,  It is expected to grow to 805, 300 MTPA by 2022.  The percentage split between automotive and industrial lubricants market has changed slightly from a 70:30 split to a 69:31 split between 2011 and 2012, indicating a slight shift in the market toward industrial applications.  This was probably driven by increased manufacturing activity. The total lubricants market is expected to increase to 805, 300 MTPA by 2022 192 137 555 657 82 345 249 643 - 100 000 200 000 300 000 400 000 500 000 600 000 700 000 800 000 900 000 2012 2022 Volume(metrictonnes) Forecast Growth Rate Industrial Automotive 274, 482 805, 300
  • 17. 17 Note: All figures are rounded Base year is 2012 Source: Frost & Sullivan Key Market Findings  Engine Oils as a segment is set to grow due to rapid increase in vehicle population in Nigeria.  Although growth is forecast at 11.1 percent per annum, the market is highly competitive.  The proportion of multigrade engine oils is expected to reverse relative to monograde engine oils by 2022.  Consumption of synthetic engine oils is set to grow off of a very low base. Engine Oils make up the biggest volume of lubricants consumed in Nigeria Engine Oils: Percentage Volume by Grade, Nigeria, 2012 68.0 33.9 31.0 65.7 0.3 0.4 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2012 2022 Volume(%) Monograde Multigrade Synthetic
  • 18. 18 Total Nigeria Plc hold the leading market share in terms of the total market for lubricants in Nigeria • Six tier one suppliers hold about just over 70 percent of the total lubricants market in Nigeria. • TOTAL Nigeria Plc is Nigeria’s lubricant market leader in terms of the total market share, followed by the leading indigenous company, Conoil Plc. • TOTAL was the only Tier 1 supplier that grew its market share since 2011, as well as its revenue from lubricants. • The remaining Tier 1 suppliers lost market share, predominantly to an increase in the number of independent suppliers. Analysis of the competitor market
  • 19. 19 Country Indicator: South Africa, 2013 ` South Africa GDP (Current US$): $384.3 billion GDP growth: 3-4% Population: 51.2 million Road Network Consisting of: 750,000 KM Land Surface Area: 1,219,090 S/km A Brief Look Into Nigeria
  • 20. 20 Note: All figures are rounded. Source: Frost & Sullivan Industrial Lubricants market opportunity, South Africa, 2012, 2015 and 2018 Key Market Findings  The total market size for industrial lubricants in South Africa was 160 million litres in 2012, or just over 137,000 metric tonnes.  The industrial lubricants market is expected to grow to just over 151,000 metric tonnes by 2018. Market size for Industrial Lubricants has been assessed across four key application sectors 130000 135000 140000 145000 150000 155000 2012 2015 2018 Volume(MT) Forecast Growth Rate
  • 21. 21 Note: All figures are rounded Base year is 2012 Source: Frost & Sullivan Key Market Findings • Hydraulic Fluids, Gear oils and greases make up 80 percent of the volume of industrial lubricants consumed in South Africa. - Hydraulics at 45% - Gear Oils at 20% - Greases at 15% • An opportunity may lie within the market for “Food Grade oils”, as the food and beverage industry is expected to expand. Market size by product for Hydraulic Fluids, Industrial Gear Oils and Greases Product Market: Market Volume per Product as a Percent, South Africa, 2012 45% 20% 15% 7% 13% Hydraulic Fluids Industrial Gear Oils Greases Metal Working Fluids *Other * Other, includes compressor fluids, rolling oils and food grade oils
  • 22. 22 Five of the major oil companies make up 80-90 percent of the industrial lubricants market • The major oil companies make up 80 - 90 percent of the industrial lubricants market. • Shell and Chevron have the largest shares of industrial lubricants. • Engen, Castrol BP and TOTAL hold the 3rd, 4th and 5th position, respectively, in terms of market share for industrial lubricants in South Africa. • The remainder of the market is split between Fuchs, SASOL and a multitude of independent blenders manufacturing a wide range of products. Analysis of the competitor market
  • 23. 23 Africa’s fundamentals are changing - will you be ready? To take advantage of this long-awaited growth cycle, early entry is vital to ensure competitive positioning The time is now! GDP Growth 1990’s 2000’s FDI Inflows Civil Wars 2.2% 5.5% 1990 2010 1990’s 2000’s 15 5 $66.32bn $342.51bn Foreign Debt to GDP 1990’s 2000’s 61.8% 37.4% • Agriculture & Agro- processing • Agricultural chemicals • Oil extraction and investment in refining capability • Construction • Transport, energy, water supply/treatment • Healthcare Nigeria Zambia Ethiopia DRC Ghana Note: Countries based on score determined from weighted average of per capita GDP and potential growth, GDP & GDP potential growth, FDI stock and growth, political stability, export and import growth potential, and population size and population growth potential Countries with High Growth and Investment Potential in Africa, 2013-2015 • Retail • Financial services South Africa Gabon
  • 24. 24 How do I grow successfully in the Lubricants Market in Africa? Risk / Challenge Identification Identify Key Opportunities - fast emerging countries in SSA Identify Market Opportunities - Product & customer Segments Distribution / Supply Chain / Partners Customer Preferences Devise Growth Strategy
  • 25. 25 Frost & Sullivan’s Lubricants Multi Client Project in Sub-Saharan Africa 1. The emerging markets for lubricants. 2. Key end-user sectors (both within automotive and industrial lubricants). 3. Strategic insights into product technologies and customer trends, “voice of customers”. 4. Identifying growth opportunities for lubricant suppliers. Mani James Operations Director Chemicals, Materials & Food (0027) (0)21 680 3208 Mani.James@frost.com Kholofelo Dzvukamanja Programme Manager Chemicals, Materials & Food (0027) (0)21 680 3261 Kholofelo.Dzvukamanja@frost.com The project will ultimately aim to provide an overall strategic market analysis identifying emerging markets for lubricants in sub-Saharan Africa, and their respective customer/product requirements
  • 26. 26 Thank You

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