African Growth Series - Africa’s East and West Growth Frontiers


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Frost & Sullivan recently hosted a web conference on the ‘African Growth Series - ‘Africa’s East and West Growth Frontiers’ focusing on ‘Kenya and Nigeria – Growth Predictions and Opportunities within Key Industries’

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African Growth Series - Africa’s East and West Growth Frontiers

  1. 1. African Growth Series - „Africa‟s East and WestGrowth Frontiers‟Kenya and Nigeria – Growth Predictions and Opportunities within KeyIndustriesFrost & Sullivan AfricaFebruary 2013© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property ofFrost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
  2. 2. 2Focus Points1. Occasion for the Analyst Briefing2. Africa – Current state of the African economy3. Key sectors to watch out for in 20131. Information & Communication Technology2. Agriculture3. Cement Manufacturing Industry4. Infrastructure5. Healthcare: Life Sciences6. Energy & Environment4. Key challenges and growth opportunities5. Growth predictions for 2013 by sector`
  3. 3. 3Briefly Discuss Occasion for the Analyst Briefing• Urgency of the topic• Africa is emerging as the next growth frontier and the continent thathas shown significant opportunities for organisations wanting togrow into emerging markets. What are the hot growth countriesamongst the African nations ?• Newsworthiness of topic• Nigeria and Kenya remain two of the Africa’s most robusteconomies. As the new gateways to emerging markets within theirrespective regions, these two counties possess numerous domesticmarket opportunities across various industries. Given theirprospects, what are the core opportunities that exist within thesetwo unique markets?• How this will affect the participants• Learn more about Frost & Sullivan’s growth predictions for 2013about the key sectors in Nigeria and Kenya
  4. 4. 4The BIG global picture – game changers beyond 2020India:$4.5TrillionChina: $8TrillionRussia: $7TrillionBrazil: $2.7TrillionEgypt:$490BillionMexico: $1.5TrillionIndonesia:$800BillionThePhilippines:$250 BillionBRIC CountriesNext Game Changers includes:Mexico, Argentina, Poland, Egypt, Turkey, Indonesia, Philippines, VietnamTurkey: $790BillionVietnam: $175BillionNote: The figure denotes GDP atmarket pricesPoland:$650BillionSouth Africa:$555.5 BillionNigeria GDP:$510.5 billionAngolaGDP: $201billionAlgeria GDP:$310 billionOther Emerging Countries (Africa)
  5. 5. 5Will Africa Provide Sustainable Growth Opportunities?Economic growth is up and isexpected to stay up.> 7.0% Growth5.0% > 7.0% Growth3.0% > 5.0% GrowthNote: Chart reflectsaverage, yearly GDP growthfrom 2011-2016South AfricaEgyptNigeriaAlgeriaMoroccoAngolaSudanKenyaGhanaNamibiaBotswanaMadagascarZimbabweMozambiqueZambiaTanzaniaDemocraticRepublic ofCongoEthiopiaSomaliaCameroonGabonChadLibyaMaliUgandaAverage Expected GDP Growth (Africa), 2011-2016TunisiaNigerMauritania
  6. 6. 6Africa – TheSummaryEnergy: $450 billionElectricityinfrastructure, renewableenergy, rehabilitation ofexisting structuresWater: US$250 billionIncludessanitation, waterinfrastructure andchemicals, renewablewater, and water andwastewater treatment.Oil & Gas: US$300 billionInfrastructure, extractionchemicals, andrehabilitationAgriculture: US$120 billionIncludes fertilizers, cropprotection, animal health, feedand additive products, andplant biotechnology.Infrastructure Development:>US$500 billionTransport infrastructure andrehabilitation, housing, ICT, building and othermaterials, construction and PPEManufacturing: $130 billionManufacturing, food packagingand fortification.Summary of Key Opportunities by 2020 across keyapplication sectors
  7. 7. Information & Communication Technologies - Ishe Zingoni, Industry Analystfor ICTAgriculture - Carolyn Krynauw, Research Analyst for CMFCement Manufacturing Industry - Yeukayi Kadzere, Research Analyst forIndustrial Automation, Mining & ManufacturingInfrastructure - Kudzanayi Bangure, Programme Manager for InfrastructureHealthcare: Life Sciences - Ryan Lobban, Industry Analyst for HCEnergy & Environment - Cornelis van der Waal, Business Unit Leader forEnergy & EnvironmentOur Presenters Today
  8. 8. ICT: Data Centre Markets
  9. 9. ICT: Data CentresMajor infrastructural developments have increased bandwidthavailability in Africa, leading to the proliferation of data centres• African countries have benefitted fromunprecedented levels of infrastructureinvestment in the telecommunications sector.• Major undersea cables have landed onAfrican continent as follows:• Seacom, July 2009• TEAMs, Sept 2009• MainOne, Q2 2010• EASSy, July 2010• GLO1, Q3 2010• WACS, 2011• ACE, Q2 2012• SAex, Q2, 2013• WASACE, 2014??• BRICS, 2014??• Together with terrestrial networks, this has ledto substantial reductions in the cost ofbandwidth.• 90% decline in wholesale Internet pricesin Kenya.Africa Undersea Cables, 2012
  10. 10. KenyaNigeriaICT: Data CentresStrong uptake of outsourced IT services in both Nigeria andKenya is expected to drive growth in the data centre marketData centremarket size$25 MKey servicesCo-location, Disaster recovery,Web hostingVerticals Oil & gas, manufacturing, ICTMajor marketparticipantsMTN Business, 21st Century,Vodacom Business, ISData centremarket size$11.5 MKey servicesCo-location, Disaster recovery,Web hostingVerticalsBFSIICTGovernmentMajor marketparticipantsKDN, Comtec, SafaricomBusiness, Access Kenya0.0 10.0 20.0 30.0 40.0 50.0 60.0Revenues ($ million)Data Centre MarketCAGR20.3%20170.0 10.0 20.0 30.0 40.0 50.0 60.0Revenues ($ million)Data Centre MarketCAGR18.3%20172012 2012
  11. 11. Agricultural SectorNigeria and Kenya face similar challenges, but they can beovercomeNew SolutionsKey ChallengesShortages of powerLack of in-house IT capabilitiesBudget constraints affecting enterprisesOutsourcing trendMove from CapEx to OpEx modelCommercial (outsourced) data centres areinvesting substantially in back-up power andgenerators.
  12. 12. Agricultural Sector
  13. 13. Agricultural SectorNigeria places renewed emphasis on the agricultural sector`Emphasis is placed on increasing theappropriate use of agrochemicals.Agrochemicals in NigeriaEstimated 2015 Value:$1,038 millionAgrochemicals in KenyaEstimated 2015 Value: $430millionNigeria KenyaAgriculture ($billions)84.5 10.1GDP ($ billions) 272.6 41.8% of GDP 30.9 24.20255075100GDP($billions)Agricultural Contribution to GDP:Nigeria and Kenya, 2012The Nigerian Government’s renewed focus onthe agricultural sector will provide greaterbusiness opportunity than that offered byKenya.
  14. 14. KenyaKey Players: Syngenta, BayerCropScience, MonsatoLooking forward1. Improved agricultural sector growth rate2. Increased competitiveness3. Emphasis on horticultureNigeriaKey players: Notore Chemical IndustriesLtd, Syngenta, BASF, JubailiLooking forward1. Self-sufficient in fertilisers by 20152. Private sector is key3. Commercial agriculture4. Marketing boardsAgricultural SectorFertiliser use is expected to increase in future, howeverNigeria plans on being self-sufficient in the near futureAgrochemical Market (2012) $850 million Agrochemical Market (2012) $380 millionFertilisers 80% Fertilisers 98%Crop Protection Chemicals 20% Crop Protection Chemicals 2%Growth Rates 8% - 10% Growth Rates 4% - 6%`Agrochemical imports are estimated at 80% -90%, however this is expected to decrease in future.Kenya imports almost all of its agrochemicals – this is notexpected to change.
  15. 15. Agricultural SectorNigeria and Kenya face similar challenges, but they can beovercomeNew SolutionsKey ChallengesCounterfeit or tampered agrochemical productsLow purchasing powerPrevalence of smallholder farmersThe logistics of the product reaching the farmerChanging mind-set and tailoring packaging andNPDDrive for commercialisation and thedevelopment of an agro-processing industryGovernment-led inclusion of the private sectorThe role of ICT in Ghana and Uganda
  16. 16. Cement Manufacturing Industry
  17. 17. IPC: Cement IndustrySub-Saharan Africa, which has a sizeable infrastructuredeficit, is considered “the world‟s last cement frontier”`Nigeria Cement Industry Net importer Produced 12.9 millionagainst demand of 17.1million tonnes in 2011 Low cement consumptionper capita of 106kg in2011Kenyan Cement Industry Net exporter Produced 3.7 million tonnesagainst domestic demand of 3.1million tonnes in 2011 Low cement consumption percapita of 79kg in 2011Industry Drivers Critical housing/infrastructure gap in Africa Increased urbanisation in Nigeria and Kenya Growth of the “middle class” segment Nigeria had a 2012 housing deficit of 16 million homes Massive investment by governments intoports, bridges, railways and roadsIndustry Trends Large influx of Asian imports Massive capital spends by cement producers toincrease production capacity Nigeria will be a net exporter by 2014 High retail prices of cement in Nigeria at $220/tonnecompared to Kenya’s $120/tonne0.0 100.0 200.0 300.0 400.0 500.0 600.0KG/capitaPer Capita Cement Consumption, 2011NigeriaKenyaEgyptSouth Africa600kg230kg106kg79kg
  18. 18. IPC: Cement IndustryNigeria and Kenya‟s annual cement demand to grow atCAGR‟s of 17.5% and 10.1%, respectively, between 2011 and2017DangoteCement,68.0%LafargeWAPCO16.0%Unicem,9.0%AshakaCement,4.0%Other,3.0%Market share of key industryparticipants, Nigeria, 2011 East AfricanCommunitypopulation of300 million (Regional)Cementdemand of 8.2million metrictonnes in 2011 New market inthe newlyformed SouthSudanBamburiCement,45.0%EAPCC25.0%ARMCement,11.0%MombasaCement,5.0%NationalCement,5.0%Other,7.0%Market share of key industryparticipants, Kenya, 20110.0 10.0 20.0 30.0 40.0 50.0 60.0Million tonnes/annumCement Demand Growth, NigeriaCAGR17.5%201720110.0 1.0 2.0 3.0 4.0 5.0 6.0Million tonnes/annumCement Demand Growth, KenyaCAGR10.1%201720112004 2011 2012Cement Imports into Nigeria
  19. 19. IPC: Cement IndustryHigh energy costs are the most significant operatingchallenge faced by cement manufacturers in Nigeria andKenyaElectricity shortagesHigh energy costs ( Low Pour Fuel Oil)Government price intervention, Asian imports,poor distribution networkCapital investment constraintsAggressive expansion plans by competitorsSwitching to coal milling plants for firing kilnse.g. by EAPCCStrategic partnerships; IPOIn-house clinker production; migration fromCEM I to CEM II and CEM III; establish plantsinlandRegional economic integrationPrivatisation of electricity sector; pendingPetroleum Industry BillKey Challenges New Solutions
  20. 20. Infrastructure
  21. 21. Infrastructure$604 billion is required annually, over the next five years torehabilitate and improve Africa‟s infrastructure`Infrastructure development is responsible for morethan 50% of Africa’s improved economic performanceIt will take 50 years for most countries in Africa toreach universal access to modern infrastructureIn Nigeria$38.99billionis currently beinginvested ininfrastructuredevelopmentIn Kenya$7.54billionis currently beinginvested ininfrastructuredevelopmentNigeria has the most ambitiousinfrastructure development plan inSub-Saharan Africa01020304050Investment($Billion)Infrastructure Investment$34.00 B$21.05 B$38.99 B
  22. 22. InfrastructureInfrastructure development is driven by increasing globaldemand for mineral resources0 10 20 30 40 50 60 70NigeriaKenyaInvestment ($ Billion)Infrastructure Investment (2010-2015)Required Investment Current InvestmentFunding gap: $27.1 BFunding gap: $12.2 B$19.8 B$66.1 B$19.76 B$7.54 BLargest investment in transportand energy & power sectorsLinkages: Production of cement, bitumen andother building materials; transportation of goodsi.e. pharmaceuticalsKey development drivers:Most significantsupport sectorsfor industrygrowthSerious lack of investment in structuredlow cost housing developmentprogrammes will lead to thedevelopment of mega-slums
  23. 23. InfrastructureLack of skills and expertise continue to be one of the greatestchallenges to infrastructure developmentKey Challenges New SolutionsLack of engineering skills and expertise Partnerships and apprentice programsRemote areas Development of self-sufficient villagesAccess to financeUse of PPP’s
  24. 24. Life Sciences
  25. 25. Life SciencesKenya and Nigeria remain East and West Africa‟s most robustlife sciences marketsPharmaceuticals will be critical in addressingthe disease burden to support continuedand sustainable economic growth.Key Drivers:Underlying infectious disease burdenAfrica’s emerging middle class andchronic medicine demandLocal manufacturing for regionalmarketsInvestment in diagnostic infrastructureStreamlining of regulatory measuresNigerian PharmaceuticalMarket$1.1 billion (2011)CAGR 11.7%Number of Competitors: 140Kenyan PharmaceuticalMarket$414 million (2011)CAGR 13.3%Number of Competitors: 420% 20% 40% 60% 80% 100%NigeriaKenyaAnti Infectives OtherSource: Frost & Sullivan analysisAnti-infective Therapeutic MarketComponent, Kenya & Nigeria, 2011
  26. 26. Kenya• Kenya will become the strategic manufacturing hubfor the African pharmaceutical market• Key Players: GSK, Novartis, Pfizer, AstraZenecaNigeria• Nigeria’s over the counter market will become ahighly lucrative market• Key Players: GSK, Emzor, Fidson, PfizerLife SciencesRise in disposable incomes will benefit Africa‟s over-the-counterand chronic medicine marketsOncologyDiabetesCardioAnalgesics05010015020012.0% 14.0% 16.0% 18.0%% CAGR (2011-2018)Revenue$millionHigh Growth Opportunities, Nigeria, 2011CardioDiabetesOncologyAnalgesics01020304050606.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%% CAGR (2011-2018)Revenue$millionHigh Growth Opportunities, Kenya, 20110% 20% 40% 60% 80% 100%InnovatorGeneric0% 20% 40% 60% 80% 100%0% 20% 40% 60% 80% 100%Local ManufacturerImport0% 20% 40% 60% 80% 100%• Linkages: chemicals and plastics markets (local manufacturing and packaging), ICT(mHealth, reimbursement, payment). Source: Frost & Sullivan analysis
  27. 27. Key Challenges New SolutionsDistributionA broad distribution network is necessary topenetrate African markets.Accessibility and LogisticsAccessibility and logistical challenges havecreated opportunities in mHealth.Price Competition and Affordability Second brand and differential pricingLife SciencesDistribution, accessibility and challenges pertaining to priceremain the primary challenges faced within the African lifesciences marketsSource: Frost & Sullivan analysis
  28. 28. Energy and Environment
  29. 29. Energy and EnvironmentThere are Great Differences Between East and West Africa`Energy, and specifically electricity, is thebackbone of any economyIt is crucial for governments to create anenabling environment through reliable andaffordable electricity supplyKey Country AnalysisNigeria:• Significant undersupply• Poor governance• Limited deregulation• Significant demandKenya:• Steady growth• Increased reliability on diesel• Significant RE opportunity• Improved governance and managementSignificant upsidepotential but morecorruption, red tapeand poorgovernanceSignificantly smallermarket but morestable, transparentand predictable
  30. 30. Energy and EnvironmentThe Nigerian Electricity Industry holds Much Larger LongTerm Potential, but Current Operating Conditions are Tough`Criteria Nigeria KenyaInstalled Capacity +/- 8 700MW (56%) +/- 1 800MWLevel of Deregulation Medium (1 350MW) High (25% non-KENGEN)Demand Growth 10%+ 8%Main Feedstock Thermal (65%), Hydro (35%)Thermal (41%),Hydro (44%)Genset Market Size $950 million $45 millionRelative Electricity Price $0.09 per kWh $0.14 per kWhMain Challenge Market Deregulation Access to FinanceLevel of Opportunity Significant Growing
  31. 31. Energy and EnvironmentDespite the Large Differences these Countries Face the SameChallengesAccess to FinanceMarket DeregulationSupporting InfrastructureOff-taker GrowthReduced government involvement (especially inNigeria)Economic reform to stimulate industrial andespecially manufacturing growthFocus on gas infrastructure (both countries)More rapid introduction of IPP’sKey Challenges New Solutions
  32. 32. ConclusionNigeria and Kenya – Next growth frontiers of West and East1. Africa is the next growth frontier and East & West of Africa are predicted to be the next growthpillars. Despite the low base, the growth experienced by the continent is attractive and it appears tobe more sustainable than in the past2. Challenges exist across the various sectors that we presented. Business models & solutions arerapidly changing to tap into these attractive opportunities. There are many examples of howorganisations that have adapted to this change have had tremendous success.3. The paradigm is shifting from „should we invest in Africa‟ to „managing risk of not being in Africa‟4. What is your emerging market growth strategy ?5. What does it take to penetrate these countries in Africa ?6. Do you have the business model that adapts to the challenges ?Source: Frost & Sullivan analysis.
  33. 33. Next StepsDevelop Your Visionary and Innovative SkillsGrowth Partnership Service Share your growth thought leadership and ideas orjoin our GIL Global CommunityJoin our GIL Community NewsletterKeep abreast of innovative growth opportunities
  34. 34. Your Feedback is Important to UsGrowth Forecasts?Competitive Structure?Emerging Trends?Strategic Recommendations?Other?Please inform us by “Rating” this presentation.What would you like to see from Frost & Sullivan?
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  36. 36. For Additional InformationMani JamesRegional Director for Africa+27 (0)21 680 3208Mani.james@frost.comCornelis van der WaalBusiness Unit Leader for Energy &Environment+27 (0)21 680 3266Cornelis.vanderWaal@frost.comVassilissa KozoulinaSales Director for Africa+27 (0)21 680 3279Vassilissa.Kozoulina@frost.comSamantha JamesCorporate Communications+27 (0)21 680