A number of what Frost & Sullivan calls megatrends are shaping the future of Africa and have ramifications for the lubricants market. The consultancys Anthony Lawrence outlined these trends at the 2nd ICIS African Base Oils & Lubricants Conference in Cape Town in November.
He emphasized that $810 billion in spending is needed over the next five years to upgrade, rehabilitate and expand Africas infrastructure, and current spending on infrastructure development in sub-Saharan Africa amounts to $403 billion.
One trend is the expansion of the continents power generation grid. Lawrence noted that of 55 countries in Africa, 30 experience regular power outages. Also, 56 percent of investment in sub-Saharan Africa is on transport infrastructure, and 50 percent of infrastructure development has been responsible for more than half of Africas improved economic performance.
This development bodes well for the future growth of lubricant consumption because the infrastructure improvements will rely on equipment that consumes a great deal of lubricants. Also, improved infrastructure should spur economic expansion that will rely on more and improved lubricants.
Lawrence went on to describe current and future prospects in two of the largest African lubricants markets: South Africa and Nigeria.
The Nigerian finished lubricant market is expected to grow to 805,300 metric tons per year by 2022 from 582,000 mt today. Between 2011 and 2012, there were signs of a slight shift in the market toward industrial applications, probably driven by increased manufacturing.
The engine oils segment is forecast to grow at 11.1 percent per year. The proportion of multigrade engine oils is expected to reverse relative to monograde engine oils by 2022, Lawrence said, and consumption of synthetic engine oils is set to grow.
Six tier one suppliers hold just over 70 percent of the lubricants market in Nigeria. Total Nigeria Plc is the market leader, followed by Conoil Plc.
In South Africa, the market for all finished lubricants was 357,500 metric tons. The consultantcy looks for growth in the industrial lubricants market, in particular, to just over 151,000 metric tons by 2018.
Hydraulic fluids, gear oils and greases make up 80 percent of the volume of industrial lubricants consumed in South Africa. Frost & Sullivan foresees potential opportunity in food grade lubricants because the food and beverage industry is expected to expand.
Lawrence concluded by saying, Africas fundamentals are changing. GDP growth and foreign direct investment are up, while the ratio of foreign debt to GDP and the number of civil wars is down. To take advantage of this long-awaited growth cycle, early entry is vital to ensure competitive positioning.