The coatings and adhesives market in East Africa has a significant potential despite the recent global economic downturn and the challenges and restraints faced by the countries in this region. Investors who capitalize on the developing East African economy will benefit from a market that is driven by minimal competition and limitations when compared to the more developed global markets of Asia, North America and Europe, according to Frost & Sullivan. Stable macroeconomic policies in Kenya are encouraging investment into the economy.
New analysis from Frost & Sullivan, "A Strategic Analysis of the Coatings and Adhesives Market in East Africa," finds that the automotive coatings market earned revenues of $19.6 million in 2009 and estimates this to reach $27.0 million by 2016. The East African adhesives market revenues were $15.6 million in 2009 and are expected to reach $21.7 million by 2016.
"Heightened industrial and economic development in East Africa is driving the coatings and adhesives market," said Frost & Sullivan chemicals, materials and food research analyst, Kholofelo Maele. "Additionally, the recently implemented East African Common Market Protocol encourages cross-border trade and industrial expansion within the East African region along with tax benefits for the market participants."
The East African community is creating opportunities for local resource development by providing incentives for regional growth and local development. This is likely to result in an enhanced regional prominence.
However, escalating electricity costs, taxes and the cost of raw material imports discourage local production. Furthermore, the limited distribution network and transport facilities restrict transportation of products out of city centres or across borders.
"Large multinationals find it difficult to establish themselves in East Africa as the transport and logistics infrastructures are significantly less developed than those in Europe and North America," said Maele.
The Kenyan Government has initiated programs such as the European Development Fund (EDF) Road Infrastructure Programme to improve and develop local infrastructure.
"Privatized distribution networks, as well as local production plants will minimize the extent of distribution that is required," said Maele. "Innovative strategies to overcome distribution challenges will be one of the key factors for participants to successfully penetrate the East African market."