Shem Oirere, Africa Correspondent09.07.20
The raging COVID-19 pandemic has disrupted supply chains across economies in Africa and the automotive industry is one of the key sectors that has been jolted by factory closures, disruption of supply chains and suppressed demand especially for passenger vehicles.
A decline in vehicle production and importation, especially of used cars, threatens to reduce volumes of both the automotive OEM and refinish coatings especially in leading automotive markets such as Morocco, Nigeria, South Africa, Algeria, Ethiopia and Kenya.
Faced with reduced production capacities and market access restrictions because of COVID-19, some of the automakers and paint manufacturers did diversify into other business activities such as the production of ventilators, intensifying medical device coatings for ventilators and making of sanitizers to ease the burden of the epidemic that has infected 1.2 million people in Africa and killed nearly 28,000 others by Aug. 23, 2020.
According to the International Labour Organization (ILO), “since the global pandemic began in China, the impact of COVID-19 on the automotive industry was first felt in Asia but has since become severe in all parts of the world.”
Though small compared to the rest of the global market, the African automotive markets have largely been supportive of the growth of the continent’s refinish coatings market because of the high importation of second-hand vehicles. It is estimated that 80 percent of all vehicle sales in Ethiopia and Nigeria are used vehicle imports.
In South Africa, where the automotive industry supports 110,000 jobs, the outbreak of COVID-19 led to “strict government-led social and economic shutdowns, most original equipment manufacturers are shuttering their manufacturing plants” according to market analyst Deloitte that says the same of the European and North American markets.
Furthermore, Morocco’s car manufacturing has been disrupted with exports estimated to have declined 33 percent in the first six months of 2020 largely because of factory shutdowns and weak demand for vehicles in the European Union as COVID-19 eroded previously achieved economic gains.
Both South Africa and Morocco, where the automotive industry is a major contributor to economic growth, factory closures under COVID-19 restrictions saw a high number of vehicles removed from production lines leading to “negative multiplier effects on the economy through backward and forward linkages” according to the ILO.
In Ghana, London-based Flitch Solutions says the country’s nascent vehicle production industry “will face considerable delays in 2020 due to supply chain disruptions in major automotive production hubs across the globe, leading to delays in the shipments of critical automotive components to carry out vehicle assembly operations.”
During the first half of 2020, paint manufacturers and automakers in the African market have variously reported mixed performance but overall remain optimistic in the long-term growth of the African coatings market as well as global recovery of paint production and supply.
For example, AkzoNobel, which has a global reach including Africa, said its “revenue was 13 percent lower and 11 percent lower in constant currencies” in the first half of 2020.
“Volumes were 12 percent lower, mainly due to the impact of COVID-19 on end-market demand,” the company added.
Elsewhere, Kansai Paint Co., Ltd., another leading player in Africa’s coatings market, says projections of its 2020 full-year performance of automotive coatings in the continent is likely to decline to JPY0.4 billion ($3.8 million) down from the JPY0.6 billion ($5.7 million) for 2019.
“Lockdown in the first half of the year and prolonged recession in South Africa and border closure in the first half in East Africa will bring down net sales in Africa this year,” Kansai predicted in its 2020 first half-year results.
The company predicts low sales volumes in 2020 compared to 2019. Retailers and end-user consumers of paints in South Africa with the country’s national industry lobby South Africa Paint Manufacturers Association saying the closure of hardware shops and restriction of product supply reduced anticipated consumption as most home-based and commercial renovation projects were hindered by the disruption of the supply chain.
For the automotive manufacturers and some paint making companies, innovation came in handy during the first six months of 2020 as they ventured into alternative income-generating activities such as the manufacture of ventilators, medical device coatings and hand sanitizers.
For example, East Africa’s leading paint maker, Crown Paints, the depressed business period under COVID-19 was an opportunity to manufacture hand sanitizers to meet the huge demand as governments in the region moved to avert the spread of the coronavirus.
“The alcohol-based sanitizer, which has been approved by the government standards agency, Kenya Bureau of Standards, will be able to address the high demand for the commodity particularly during this period the world is grappling with the COVID-19 pandemic,” said Rakesh Rao, CEO Crown Paints.
“Crown hand sanitizer contains ethanol as the active ingredient and has a broad spectrum of activity against viable bacteria, fungi, enveloped viruses, non-enveloped viruses, gram-positive bacteria and gram-negative bacteria,” said Rao.
Leading global supplier of liquid and powder coatings Axalta Coating Systems, which operates in South Africa as Axalta Coating Systems South Africa (Pty) Ltd, announced in late April it had “increased the supply of its Voltatex electrical insulating resins to ensure its medical device customers are well equipped to rapidly-produce life-saving equipment, such as ventilator motors and N95 facemasks, which are in high demand by hospitals globally during the coronavirus pandemic.”
According to Dave Heflin, Axalta’s VP, Global Industrial Liquid Coatings, the company’s “Voltatex products are on the front lines in the fight against COVID-19.”
“Our medical device customers are relying on the benefits that our Voltatex products provide as they aggressively increase the production of the equipment and supplies that will help save lives around the world,” said Heflin.
However, even for the automotive manufacturers, it is not all doom under COVID-19 as the pandemic presents new opportunities to intensify local sourcing and reduce dependence on markets such as China.
“There is no doubt that the impact of COVID-19 will speed up efforts to transform the cost and generate cash, resulting in unnecessary expenditure being eliminated,” said Dave Coffey, African Association of Automotive Manufacturers CEO at a recent media briefing.
And according to Flitch Solutions Group Inc., “countries in North Africa, specifically Morocco and Egypt, will benefit from the restructuring efforts of OEMs post-COVID-19 as they will seek to reduce their dependence on Chinese manufacturing and shorten their supply chains through on-shoring or nearshoring some of their component manufacturing.”
The post-COVID-19 situation for Africa’s automotive coatings market would depend on the effects of implementing the stimulus economic measures recently announced by some countries in the continent, such as South Africa.
A decline in vehicle production and importation, especially of used cars, threatens to reduce volumes of both the automotive OEM and refinish coatings especially in leading automotive markets such as Morocco, Nigeria, South Africa, Algeria, Ethiopia and Kenya.
Faced with reduced production capacities and market access restrictions because of COVID-19, some of the automakers and paint manufacturers did diversify into other business activities such as the production of ventilators, intensifying medical device coatings for ventilators and making of sanitizers to ease the burden of the epidemic that has infected 1.2 million people in Africa and killed nearly 28,000 others by Aug. 23, 2020.
According to the International Labour Organization (ILO), “since the global pandemic began in China, the impact of COVID-19 on the automotive industry was first felt in Asia but has since become severe in all parts of the world.”
Though small compared to the rest of the global market, the African automotive markets have largely been supportive of the growth of the continent’s refinish coatings market because of the high importation of second-hand vehicles. It is estimated that 80 percent of all vehicle sales in Ethiopia and Nigeria are used vehicle imports.
In South Africa, where the automotive industry supports 110,000 jobs, the outbreak of COVID-19 led to “strict government-led social and economic shutdowns, most original equipment manufacturers are shuttering their manufacturing plants” according to market analyst Deloitte that says the same of the European and North American markets.
Furthermore, Morocco’s car manufacturing has been disrupted with exports estimated to have declined 33 percent in the first six months of 2020 largely because of factory shutdowns and weak demand for vehicles in the European Union as COVID-19 eroded previously achieved economic gains.
Both South Africa and Morocco, where the automotive industry is a major contributor to economic growth, factory closures under COVID-19 restrictions saw a high number of vehicles removed from production lines leading to “negative multiplier effects on the economy through backward and forward linkages” according to the ILO.
In Ghana, London-based Flitch Solutions says the country’s nascent vehicle production industry “will face considerable delays in 2020 due to supply chain disruptions in major automotive production hubs across the globe, leading to delays in the shipments of critical automotive components to carry out vehicle assembly operations.”
During the first half of 2020, paint manufacturers and automakers in the African market have variously reported mixed performance but overall remain optimistic in the long-term growth of the African coatings market as well as global recovery of paint production and supply.
For example, AkzoNobel, which has a global reach including Africa, said its “revenue was 13 percent lower and 11 percent lower in constant currencies” in the first half of 2020.
“Volumes were 12 percent lower, mainly due to the impact of COVID-19 on end-market demand,” the company added.
Elsewhere, Kansai Paint Co., Ltd., another leading player in Africa’s coatings market, says projections of its 2020 full-year performance of automotive coatings in the continent is likely to decline to JPY0.4 billion ($3.8 million) down from the JPY0.6 billion ($5.7 million) for 2019.
“Lockdown in the first half of the year and prolonged recession in South Africa and border closure in the first half in East Africa will bring down net sales in Africa this year,” Kansai predicted in its 2020 first half-year results.
The company predicts low sales volumes in 2020 compared to 2019. Retailers and end-user consumers of paints in South Africa with the country’s national industry lobby South Africa Paint Manufacturers Association saying the closure of hardware shops and restriction of product supply reduced anticipated consumption as most home-based and commercial renovation projects were hindered by the disruption of the supply chain.
For the automotive manufacturers and some paint making companies, innovation came in handy during the first six months of 2020 as they ventured into alternative income-generating activities such as the manufacture of ventilators, medical device coatings and hand sanitizers.
For example, East Africa’s leading paint maker, Crown Paints, the depressed business period under COVID-19 was an opportunity to manufacture hand sanitizers to meet the huge demand as governments in the region moved to avert the spread of the coronavirus.
“The alcohol-based sanitizer, which has been approved by the government standards agency, Kenya Bureau of Standards, will be able to address the high demand for the commodity particularly during this period the world is grappling with the COVID-19 pandemic,” said Rakesh Rao, CEO Crown Paints.
“Crown hand sanitizer contains ethanol as the active ingredient and has a broad spectrum of activity against viable bacteria, fungi, enveloped viruses, non-enveloped viruses, gram-positive bacteria and gram-negative bacteria,” said Rao.
Leading global supplier of liquid and powder coatings Axalta Coating Systems, which operates in South Africa as Axalta Coating Systems South Africa (Pty) Ltd, announced in late April it had “increased the supply of its Voltatex electrical insulating resins to ensure its medical device customers are well equipped to rapidly-produce life-saving equipment, such as ventilator motors and N95 facemasks, which are in high demand by hospitals globally during the coronavirus pandemic.”
According to Dave Heflin, Axalta’s VP, Global Industrial Liquid Coatings, the company’s “Voltatex products are on the front lines in the fight against COVID-19.”
“Our medical device customers are relying on the benefits that our Voltatex products provide as they aggressively increase the production of the equipment and supplies that will help save lives around the world,” said Heflin.
However, even for the automotive manufacturers, it is not all doom under COVID-19 as the pandemic presents new opportunities to intensify local sourcing and reduce dependence on markets such as China.
“There is no doubt that the impact of COVID-19 will speed up efforts to transform the cost and generate cash, resulting in unnecessary expenditure being eliminated,” said Dave Coffey, African Association of Automotive Manufacturers CEO at a recent media briefing.
And according to Flitch Solutions Group Inc., “countries in North Africa, specifically Morocco and Egypt, will benefit from the restructuring efforts of OEMs post-COVID-19 as they will seek to reduce their dependence on Chinese manufacturing and shorten their supply chains through on-shoring or nearshoring some of their component manufacturing.”
The post-COVID-19 situation for Africa’s automotive coatings market would depend on the effects of implementing the stimulus economic measures recently announced by some countries in the continent, such as South Africa.