Source: Lubes Africa

The energy sector is expected to grow fast in the region, particularly in Uganda and Kenya, where crude has been discovered, Lube Africa said. Mining activities are strong in Tanzania, with new projects planned for Kenya. Smoothing trade in the region, the East Africa Community Customs integration is in progress.

More regulations are coming to the region, including a review of lubricants standards.

The region currently is home to five large, modern lubricant blending plants, plus six additional smaller plants. Currently, Total, Shell and Libya Oil each have a blending plant in Kenya, and Oryx Addax has two in Tanzania. Two new blending plants are planned for Kenya, one for Uganda, and another for Tanzania, according to Lube Africa, creating opportunities for base oil and additive suppliers.

Many international lubricant brands are present in East Africa. Lube distributors enable new players to enter the region, help established companies diversify, and serve as a source of specialized lubricants and greases from outside the region.

Lubes Africa described nine lubricant market segments in East Africa:

Industrial consumers include steel, cement, plastic, sugar and general manufacturing. These lube buyers are quality sensitive, and trade primarily on unsecured credit; tendering is widely used. OEM approvals for lubes are an advantage in this market, and technical support is necessary.

Large transport fleets look for quality, price and the level of technical support. They demand reliability and frequently insist on just-in-time delivery. Fuel supply can be a key determinant in selecting a lube supplier. The fleets generally trade on credit, secured or unsecured.

Distributors have a wide customer base, and may stock one brand or multiple brands. Shell and Libya Oil have exclusive distributors in East Africa. Distributors are price sensitive, and push for very low prices, at the same time requiring significant marketing support. Minimum credit terms are generally 30 days from statement, and credit may be fully or partly secured.

Resellers and spare tire shops stock popular lube brands and low-grade cheap products. Their primary business is spare tires, which have higher margins, not lubricants. Generally serviced by distributors, these shops only buy fast moving products, and are usually in close contact with the mechanics who are their customers.

Oil companies wanting to diversify into lubricants owing to shrinking fuel margins are another market segment. Examples include Hass Petroleum, Nock, Gulf Energy, Galana and Hashi Energy. These companies may have lubes toll blended for them. They are looking for price, production efficiency and level of credit.

OEM garages, notably Ryce Motors, GM, Simba Colt, Toyota and DT Dobie, often have long-term contracts with their lube suppliers which act as an entry barrier to this segment. They often have strong relationships with multinational lube companies, and demand equipment and technical support including training and oil analysis. Chinese and Indian companies, including Faw Trucks and Tata Trucks, are entering the region, and these firms seem less strongly tied to Total, Shell and the other international brands.

Fuel suppliers have an edge in supplying lubes to the road construction segment, which is currently booming. Road builders generally want standard grade lubes, but they pay only after receiving their payments from the government.

With power plants, OEM approvals are critical. Supply is by tender, and these buyers demand a full package including technical support.

Finally, governments, including civil agencies, military forces, port authorities, etc., consume significant volumes of lubes. Supply is through tender, and competition is fierce. But, Lube Africa cautioned, corruption is rife.