Shem Oirere, Africa Correspondent05.09.16
Africa’s gross domestic product growth is expected to strengthen to 4.5 percent in 2015 and 5 percent in 2016 after subdued expansion in 2013 (3.5 percent) and 2014 (3.9 percent) according to the African Development Bank.
This growth is driving the expansion of key economic sectors such as manufacturing and construction and also improving the purchasing power of consumers as the region ushers in a new regime of consumerism fueled by increasing disposable incomes and urbanization, key pillars for the development of a strong paints and coatings market.
The conducive investment climate has attracted leading global coatings companies into Africa with a focus on mergers, acquisitions or development of manufacturing plants targeting specific coating segments ranging from industrial, protective, automotive to decorative.
For example, Kansai Paint Co., Ltd., the Japanese chemical company listed in the league of the world’s top paints and coatings manufacturers has announced plans to construct a new automotive paint plant in Morocco’s Tangier city to take advantage of the North African country’s growing economy and increasing demand for quality automotive coatings.
The Osaka-based company, which is also known for its wide range of industrial, protective and decorative coatings, is eager to take advantage of a growing automotive market that has been created mainly by European automakers in Morocco to expand its foothold in Africa, where it made $362.5 million in sales last year, which was an increase of 3.6 percent from the previous year.
Kansai, which said its profits from Africa increased by 21.6 percent in the full year ending March 31, 2015 to $13.2 million, is likely to start production in the new plant near the Mediterranean city of Tangier in the first quarter of 2017 according to top officials quoted by Kyodo News Agency in mid-April.
Although the company is yet to issue an official statement confirming the amount to be invested in the new plant and details of when the project will break ground, Kansai’s choice of Morocco seems to be in response to Morocco’s proximity to Europe where PPG Industries, with which Kansai has established an alliance to serve certain automotive original equipment manufacturers (OEMs), said there is “economic weakness in the years during and following the recession without a substantive recovery since.”
A key partner in the new automotive coatings plant venture will be the European automakers in Morocco led by French firm Renault which nearly four years ago opened North Africa’s largest car plant in Morocco in an area reports described as being “close to Europe which offers tax benefits to manufacturers.”
Kansai also appears to have been attracted by the general good performance of Morocco’s automotive industry which the Harvard School of Business (HBS) said in a report “has had a strong value proposition” because of the country’s “strategic location close to Europe and emerging markets, free trade agreements with large consumer markets, and a stable political environment.”
The industry, HBS said, has also benefitted from the significant government investments to “make the business environment more attractive such as in training centers, special economic zones, infrastructure, and tax incentives for automotive producers.”
The report stated that by 2013 Morocco’s two OEMs of Renault and SOMACA produced 167,000 cars and the automotive industry had “attracted 10 suppliers which could be considered ‘global suppliers’” with the sector earning an estimated $2.5 billion from export revenues.
The HBS report, ‘The Automotive Cluster in Morocco: Competitiveness and Recommendations for Future Growth,’ also said “Morocco has a large number of free trade agreements, which cumulatively gives them access to 55 countries, representing 60 percent of world GDP.”
Kansai, among other top coatings companies eyeing a share of the growing North Africa market, has also been attracted by Morocco’s strong economic growth, up to 4.4 percent last year up from the 2.4 percent according to World Bank estimates.
“The emergence of new growth drivers in higher value-added export industries and the expansion of Moroccan companies in Western Africa are potentially creating the conditions for Morocco to become a hub for trade and investment between Europe and Africa and boost its position in global value chains,” the bank said in a report on Morocco’s economic outlook released early this year.
London-based Information Research Ltd., a global industry consultancy which focuses on paints and coatings market reports and data, estimated that by the end of 2016, Morocco will produce slightly more than 200,000 tons of paint behind Africa market leaders Egypt, South Africa and Algeria. Morocco’s paints market share is approximately 16 percent of Africa’s total production previously estimated at 1 million tons.
Kansai’s good performance in Africa in 2015 raises the prospects of the company’s continuing growth in a continent where key sectors such as building and construction define the trends in paints and coatings consumption.
Apart from Morocco, Kansai is a key player in the markets of South Africa and Zimbabwe, which returned profits for the company in the last financial year.
In 2015, the company said that “although the South African economy was weak, sales continued to increase as a result of sales promotion efforts.” Kansai Paints entered the South African market through the acquisition of Freeworld Coatings under a $300 million deal which saw it take 93.37 percent of the then Johannesburg Stock Exchange listed firm, a move some described as “a hostile takeover.”
“Profits also increased despite the impact of factors including soaring raw material prices and investment in sales promotion,” Kansai said in its full year report for 2015.
The bullish performance by Kansai in Africa was also boosted by its Zimbabwean subsidiary, Astra Industries Ltd., which was consolidated in July 2013, with the company saying the entity “contributed to the consolidated business results” for 2015.
Kansai teamed up with Astra management and staff in 2013 to acquire a 63.25 percent stake in Astra Industries Limited in a $5.5 million deal with the Finance Trust of Zimbabwe Ltd. Kansai’s products are already in many African markets such as Kenya, Mozambique, Seychelles, Mauritius, Malawi, Botswana, Namibia and Zambia among others.
And in Morocco, the coatings markets have attracted other leading global paint makers including BASF which two years ago launched R-M, the premium automotive refinish paint brand.
The company said during the launch the automotive coatings market in Morocco is “dynamic and fast-growing.”
“The country has almost 3 million vehicles in circulation and major automobile manufacturers are investing in new technologies throughout their networks to repair vehicles in the best possible conditions,” BASF said.
“For BASF, the automotive industry is a major sector, and we want to develop complete and innovative solutions for leading car manufacturers.” The company said it anticipates $389 million in combined sales in fiscal 2016 ending next March, about a twofold increase from four years ago.
The move by Kansai to expand in Morocco is expected to add to the growing trend in Africa where coatings companies are taking advantage of the resilience of the region amidst global economic challenges.
This growth is driving the expansion of key economic sectors such as manufacturing and construction and also improving the purchasing power of consumers as the region ushers in a new regime of consumerism fueled by increasing disposable incomes and urbanization, key pillars for the development of a strong paints and coatings market.
The conducive investment climate has attracted leading global coatings companies into Africa with a focus on mergers, acquisitions or development of manufacturing plants targeting specific coating segments ranging from industrial, protective, automotive to decorative.
For example, Kansai Paint Co., Ltd., the Japanese chemical company listed in the league of the world’s top paints and coatings manufacturers has announced plans to construct a new automotive paint plant in Morocco’s Tangier city to take advantage of the North African country’s growing economy and increasing demand for quality automotive coatings.
The Osaka-based company, which is also known for its wide range of industrial, protective and decorative coatings, is eager to take advantage of a growing automotive market that has been created mainly by European automakers in Morocco to expand its foothold in Africa, where it made $362.5 million in sales last year, which was an increase of 3.6 percent from the previous year.
Kansai, which said its profits from Africa increased by 21.6 percent in the full year ending March 31, 2015 to $13.2 million, is likely to start production in the new plant near the Mediterranean city of Tangier in the first quarter of 2017 according to top officials quoted by Kyodo News Agency in mid-April.
Although the company is yet to issue an official statement confirming the amount to be invested in the new plant and details of when the project will break ground, Kansai’s choice of Morocco seems to be in response to Morocco’s proximity to Europe where PPG Industries, with which Kansai has established an alliance to serve certain automotive original equipment manufacturers (OEMs), said there is “economic weakness in the years during and following the recession without a substantive recovery since.”
A key partner in the new automotive coatings plant venture will be the European automakers in Morocco led by French firm Renault which nearly four years ago opened North Africa’s largest car plant in Morocco in an area reports described as being “close to Europe which offers tax benefits to manufacturers.”
Kansai also appears to have been attracted by the general good performance of Morocco’s automotive industry which the Harvard School of Business (HBS) said in a report “has had a strong value proposition” because of the country’s “strategic location close to Europe and emerging markets, free trade agreements with large consumer markets, and a stable political environment.”
The industry, HBS said, has also benefitted from the significant government investments to “make the business environment more attractive such as in training centers, special economic zones, infrastructure, and tax incentives for automotive producers.”
The report stated that by 2013 Morocco’s two OEMs of Renault and SOMACA produced 167,000 cars and the automotive industry had “attracted 10 suppliers which could be considered ‘global suppliers’” with the sector earning an estimated $2.5 billion from export revenues.
The HBS report, ‘The Automotive Cluster in Morocco: Competitiveness and Recommendations for Future Growth,’ also said “Morocco has a large number of free trade agreements, which cumulatively gives them access to 55 countries, representing 60 percent of world GDP.”
Kansai, among other top coatings companies eyeing a share of the growing North Africa market, has also been attracted by Morocco’s strong economic growth, up to 4.4 percent last year up from the 2.4 percent according to World Bank estimates.
“The emergence of new growth drivers in higher value-added export industries and the expansion of Moroccan companies in Western Africa are potentially creating the conditions for Morocco to become a hub for trade and investment between Europe and Africa and boost its position in global value chains,” the bank said in a report on Morocco’s economic outlook released early this year.
London-based Information Research Ltd., a global industry consultancy which focuses on paints and coatings market reports and data, estimated that by the end of 2016, Morocco will produce slightly more than 200,000 tons of paint behind Africa market leaders Egypt, South Africa and Algeria. Morocco’s paints market share is approximately 16 percent of Africa’s total production previously estimated at 1 million tons.
Kansai’s good performance in Africa in 2015 raises the prospects of the company’s continuing growth in a continent where key sectors such as building and construction define the trends in paints and coatings consumption.
Apart from Morocco, Kansai is a key player in the markets of South Africa and Zimbabwe, which returned profits for the company in the last financial year.
In 2015, the company said that “although the South African economy was weak, sales continued to increase as a result of sales promotion efforts.” Kansai Paints entered the South African market through the acquisition of Freeworld Coatings under a $300 million deal which saw it take 93.37 percent of the then Johannesburg Stock Exchange listed firm, a move some described as “a hostile takeover.”
“Profits also increased despite the impact of factors including soaring raw material prices and investment in sales promotion,” Kansai said in its full year report for 2015.
The bullish performance by Kansai in Africa was also boosted by its Zimbabwean subsidiary, Astra Industries Ltd., which was consolidated in July 2013, with the company saying the entity “contributed to the consolidated business results” for 2015.
Kansai teamed up with Astra management and staff in 2013 to acquire a 63.25 percent stake in Astra Industries Limited in a $5.5 million deal with the Finance Trust of Zimbabwe Ltd. Kansai’s products are already in many African markets such as Kenya, Mozambique, Seychelles, Mauritius, Malawi, Botswana, Namibia and Zambia among others.
And in Morocco, the coatings markets have attracted other leading global paint makers including BASF which two years ago launched R-M, the premium automotive refinish paint brand.
The company said during the launch the automotive coatings market in Morocco is “dynamic and fast-growing.”
“The country has almost 3 million vehicles in circulation and major automobile manufacturers are investing in new technologies throughout their networks to repair vehicles in the best possible conditions,” BASF said.
“For BASF, the automotive industry is a major sector, and we want to develop complete and innovative solutions for leading car manufacturers.” The company said it anticipates $389 million in combined sales in fiscal 2016 ending next March, about a twofold increase from four years ago.
The move by Kansai to expand in Morocco is expected to add to the growing trend in Africa where coatings companies are taking advantage of the resilience of the region amidst global economic challenges.
