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African Growth Series - „Africa‟s East and West
Growth Frontiers‟
Kenya and Nigeria – Growth Predictions and Opportunities within Key
Industries
Frost & Sullivan Africa
February 2013
© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of
Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
2
Focus Points
1. Occasion for the Analyst Briefing
2. Africa – Current state of the African economy
3. Key sectors to watch out for in 2013
1. Information & Communication Technology
2. Agriculture
3. Cement Manufacturing Industry
4. Infrastructure
5. Healthcare: Life Sciences
6. Energy & Environment
4. Key challenges and growth opportunities
5. Growth predictions for 2013 by sector
`
3
Briefly Discuss Occasion for the Analyst Briefing
• Urgency of the topic
• Africa is emerging as the next growth frontier and the continent that
has shown significant opportunities for organisations wanting to
grow into emerging markets. What are the hot growth countries
amongst the African nations ?
• Newsworthiness of topic
• Nigeria and Kenya remain two of the Africa’s most robust
economies. As the new gateways to emerging markets within their
respective regions, these two counties possess numerous domestic
market opportunities across various industries. Given their
prospects, what are the core opportunities that exist within these
two unique markets?
• How this will affect the participants
• Learn more about Frost & Sullivan’s growth predictions for 2013
about the key sectors in Nigeria and Kenya
4
The BIG global picture – game changers beyond 2020
India:
$4.5
Trillion
China: $8
Trillion
Russia: $7
Trillion
Brazil: $2.7
Trillion
Egypt:
$490
BillionMexico: $1.5
Trillion
Indonesia:
$800
Billion
The
Philippines:
$250 Billion
BRIC Countries
Next Game Changers includes:
Mexico, Argentina, Poland, Egypt, Turkey, Indonesia, Philippines, Vietnam
Turkey: $790
Billion
Vietnam: $175
Billion
Note: The figure denotes GDP at
market prices
Poland:
$650
Billion
South Africa:
$555.5 Billion
Nigeria GDP:
$510.5 billion
Angola
GDP: $201
billion
Algeria GDP:
$310 billion
Other Emerging Countries (Africa)
5
Will Africa Provide Sustainable Growth Opportunities?
Economic growth is up and is
expected to stay up.> 7.0% Growth
5.0% > 7.0% Growth
3.0% > 5.0% Growth
Note: Chart reflects
average, yearly GDP growth
from 2011-2016
South Africa
Egypt
Nigeria
Algeria
Morocco
Angola
Sudan
Kenya
Ghana
NamibiaBotswana
Madagascar
Zimbabwe
MozambiqueZambia
Tanzania
Democratic
Republic of
Congo
EthiopiaSomalia
Cameroon
Gabon
Chad
Libya
Mali
Uganda
Average Expected GDP Growth (Africa), 2011-2016Tunisia
Niger
Mauritania
6
Africa – The
Summary
Energy: $450 billion
Electricity infrastructure, renewable energy, rehabilitation of
existing structures
Water: US$250 billionIncludes
sanitation, water infrastructure and
chemicals, renewable water, and water and wastewater treatment.
Oil & Gas: US$300 billionInfrastructure, extraction
chemicals, and rehabilitation
Agriculture: US$120 billionIncludes fertilizers, crop
protection, animal health, feed
and additive products, and plant biotechnology.
Infrastructure Development:
>US$500 billionTransport infrastructure and
rehabilitation, housing, ICT, building and other
materials, construction and PPE
Manufacturing: $130 billion
Manufacturing, food packaging and fortification.
Summary of Key Opportunities by 2020 across key
application sectors
Information & Communication Technologies - Ishe Zingoni, Industry Analyst
for ICT
Agriculture - Carolyn Krynauw, Research Analyst for CMF
Cement Manufacturing Industry - Yeukayi Kadzere, Research Analyst for
Industrial Automation, Mining & Manufacturing
Infrastructure - Kudzanayi Bangure, Programme Manager for Infrastructure
Healthcare: Life Sciences - Ryan Lobban, Industry Analyst for HC
Energy & Environment - Cornelis van der Waal, Business Unit Leader for
Energy & Environment
Our Presenters Today
ICT: Data Centre Markets
ICT: Data Centres
Major infrastructural developments have increased bandwidth
availability in Africa, leading to the proliferation of data centres
• African countries have benefitted fromunprecedented levels of infrastructureinvestment in the telecommunications sector.
• Major undersea cables have landed onAfrican continent as follows:
• Seacom, July 2009
• TEAMs, Sept 2009
• MainOne, Q2 2010
• EASSy, July 2010
• GLO1, Q3 2010
• WACS, 2011
• ACE, Q2 2012
• SAex, Q2, 2013
• WASACE, 2014??
• BRICS, 2014??
• Together with terrestrial networks, this has ledto substantial reductions in the cost ofbandwidth.
• 90% decline in wholesale Internet pricesin Kenya.
Africa Undersea Cables, 2012
KenyaNigeria
ICT: Data Centres
Strong uptake of outsourced IT services in both Nigeria and
Kenya is expected to drive growth in the data centre market
Data centre
market size$25 M
Key servicesCo-location, Disaster recovery,
Web hosting
Verticals Oil & gas, manufacturing, ICT
Major market
participants
MTN Business, 21st Century,
Vodacom Business, IS
Data centre
market size
$11.5 M
Key servicesCo-location, Disaster recovery,
Web hosting
Verticals
BFSI
ICT
Government
Major market
participants
KDN, Comtec, Safaricom
Business, Access Kenya
0.0 10.0 20.0 30.0 40.0 50.0 60.0Revenues ($ million)
Data Centre Market
CAGR
20.3%2017
0.0 10.0 20.0 30.0 40.0 50.0 60.0Revenues ($ million)
Data Centre Market
CAGR
18.3%2017
2012 2012
Agricultural Sector
Nigeria and Kenya face similar challenges, but they can be
overcome
New SolutionsKey Challenges
Shortages of power
Lack of in-house IT capabilities
Budget constraints affecting enterprises
Outsourcing trend
Move from CapEx to OpEx model
Commercial (outsourced) data centres are investing substantially in back-up power and generators.
Agricultural Sector
Agricultural Sector
Nigeria places renewed emphasis on the agricultural sector
`
Emphasis is placed on increasing the
appropriate use of agrochemicals.
Agrochemicals in Nigeria
Estimated 2015 Value:
$1,038 million
Agrochemicals in Kenya
Estimated 2015 Value: $430
million
Nigeria Kenya
Agriculture ($ billions)
84.5 10.1
GDP ($ billions) 272.6 41.8
% of GDP 30.9 24.2
0255075
100
GD
P (
$ b
illio
ns)
Agricultural Contribution to GDP: Nigeria and Kenya, 2012
The Nigerian Government’s renewed focus on the agricultural sector will provide greater business opportunity than that offered by
Kenya.
Kenya
Key Players: Syngenta, Bayer
CropScience, Monsato
Looking forward
1. Improved agricultural sector growth rate
2. Increased competitiveness
3. Emphasis on horticulture
Nigeria
Key players: Notore Chemical Industries
Ltd, Syngenta, BASF, Jubaili
Looking forward
1. Self-sufficient in fertilisers by 2015
2. Private sector is key
3. Commercial agriculture
4. Marketing boards
Agricultural Sector
Fertiliser use is expected to increase in future, however
Nigeria plans on being self-sufficient in the near future
Agrochemical Market (2012) $850 million Agrochemical Market (2012) $380 million
Fertilisers 80% Fertilisers 98%
Crop Protection Chemicals 20% Crop Protection Chemicals 2%
Growth Rates 8% - 10% Growth Rates 4% - 6% `
Agrochemical imports are estimated at 80% -90%, however this is expected to decrease in future.
Kenya imports almost all of its agrochemicals – this is not expected to change.
Agricultural Sector
Nigeria and Kenya face similar challenges, but they can be
overcome
New SolutionsKey Challenges
Counterfeit or tampered agrochemical products
Low purchasing power
Prevalence of smallholder farmers
The logistics of the product reaching the farmer
Changing mind-set and tailoring packaging and NPD
Drive for commercialisation and the development of an agro-processing industry
Government-led inclusion of the private sector
The role of ICT in Ghana and Uganda
Cement Manufacturing Industry
IPC: Cement Industry
Sub-Saharan Africa, which has a sizeable infrastructure
deficit, is considered “the world‟s last cement frontier”
`
Nigeria Cement Industry
Net importer
Produced 12.9 million
against demand of 17.1
million tonnes in 2011
Low cement consumption
per capita of 106kg in
2011
Kenyan Cement Industry
Net exporter
Produced 3.7 million tonnes
against domestic demand of 3.1
million tonnes in 2011
Low cement consumption per
capita of 79kg in 2011
Industry Drivers
Critical housing/infrastructure gap in Africa
Increased urbanisation in Nigeria and Kenya
Growth of the “middle class” segment
Nigeria had a 2012 housing deficit of 16 million homes
Massive investment by governments into
ports, bridges, railways and roads
Industry Trends
Large influx of Asian imports
Massive capital spends by cement producers to
increase production capacity
Nigeria will be a net exporter by 2014
High retail prices of cement in Nigeria at $220/tonne
compared to Kenya’s $120/tonne
0.0 100.0 200.0 300.0 400.0 500.0 600.0KG/capita
Per Capita Cement Consumption, 2011
Nigeri
aKenya
Egypt
South Africa
600kg
230kg
106kg79kg
IPC: Cement Industry
Nigeria and Kenya‟s annual cement demand to grow at
CAGR‟s of 17.5% and 10.1%, respectively, between 2011 and
2017
Dangote Cement,
68.0%
Lafarge WAPCO16.0%
Unicem,9.0%
Ashaka Cement,
4.0%
Other,3.0%
Market share of key industry participants, Nigeria, 2011
East African
Community
population of
300 million
(Regional)
Cement
demand of 8.2
million metric
tonnes in 2011
New market in
the newly
formed South
Sudan
Bamburi Cement,
45.0%EAPCC25.0%
ARM Cement,
11.0%
Mombasa Cement,
5.0%
National Cement,
5.0%
Other,7.0%
Market share of key industry participants, Kenya, 2011
0.0 10.0 20.0 30.0 40.0 50.0 60.0Million tonnes/annum
Cement Demand Growth, Nigeria
CAGR17.5%2017
2011
0.0 1.0 2.0 3.0 4.0 5.0 6.0Million tonnes/annum
Cement Demand Growth, Kenya
CAGR10.1
%
2017
2011
2004 2011 2012
Cement Imports into Nigeria
IPC: Cement Industry
High energy costs are the most significant operating
challenge faced by cement manufacturers in Nigeria and
Kenya
Electricity shortages
High energy costs ( Low Pour Fuel Oil)
Government price intervention, Asian imports, poor distribution network
Capital investment constraints
Aggressive expansion plans by competitors
Switching to coal milling plants for firing kilns e.g. by EAPCC
Strategic partnerships; IPO
In-house clinker production; migration from CEM I to CEM II and CEM III; establish plants inland
Regional economic integration
Privatisation of electricity sector; pending Petroleum Industry Bill
Key Challenges New Solutions
Infrastructure
Infrastructure
$604 billion is required annually, over the next five years to
rehabilitate and improve Africa‟s infrastructure
`Infrastructure development is responsible for more
than 50% of Africa’s improved economic performance
It will take 50 years for most countries in Africa to
reach universal access to modern infrastructure
In Nigeria
$38.99
billionis currently being
invested in
infrastructure
development
In Kenya
$7.54
billionis currently being
invested in
infrastructure
development
Nigeria has the most ambitious
infrastructure development plan in
Sub-Saharan Africa
0
10
20
30
40
50
Inve
stm
ent
($ B
illio
n)
Infrastructure Investment
$34.00 B
$21.05 B
$38.99 B
Infrastructure
Infrastructure development is driven by increasing global
demand for mineral resources
0 10 20 30 40 50 60 70
Nigeria
Kenya
Investment ($ Billion)
Infrastructure Investment (2010-2015)
Required Investment Current Investment
Funding gap: $27.1 B
Funding gap: $12.2 B
$19.8 B
$66.1 B
$19.76 B
$7.54 B
Largest investment in transport
and energy & power sectors
Linkages: Production of cement, bitumen and
other building materials; transportation of goods
i.e. pharmaceuticals
Key development drivers:
Most significant
support sectors
for industry
growth
Serious lack of investment in structured
low cost housing development
programmes will lead to the
development of mega-slums
Infrastructure
Lack of skills and expertise continue to be one of the greatest
challenges to infrastructure development
Key Challenges New Solutions
Lack of engineering skills and expertise Partnerships and apprentice programs
Remote areas Development of self-sufficient villages
Access to financeUse of PPP’s
Life Sciences
Life Sciences
Kenya and Nigeria remain East and West Africa‟s most robust
life sciences markets
Pharmaceuticals will be critical in addressingthe disease burden to support continuedand sustainable economic growth.
Key Drivers:
Underlying infectious disease burden
Africa’s emerging middle class andchronic medicine demand
Local manufacturing for regionalmarkets
Investment in diagnostic infrastructure
Streamlining of regulatory measures
Nigerian Pharmaceutical
Market
$1.1 billion (2011)
CAGR 11.7%
Number of Competitors: 140
Kenyan Pharmaceutical
Market
$414 million (2011)
CAGR 13.3%
Number of Competitors: 42
0% 20% 40% 60% 80% 100%
Nigeria
Kenya
Anti Infectives OtherSource: Frost & Sullivan analysis
Anti-infective Therapeutic Market
Component, Kenya & Nigeria, 2011
Kenya
• Kenya will become the strategic manufacturing hub
for the African pharmaceutical market
• Key Players: GSK, Novartis, Pfizer, AstraZeneca
Nigeria
• Nigeria’s over the counter market will become a
highly lucrative market
• Key Players: GSK, Emzor, Fidson, Pfizer
Life Sciences
Rise in disposable incomes will benefit Africa‟s over-the-counter
and chronic medicine markets
Oncology
Diabetes
CardioAnalgesics
0
50
100
150
200
12.0% 14.0% 16.0% 18.0%
% CAGR (2011-2018)
Reve
nu
e $
mil
lio
n
High Growth Opportunities, Nigeria, 2011
Cardio
Diabetes
Oncology
Analgesics
0
10
20
30
40
50
60
6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
% CAGR (2011-2018)
Reve
nu
e $
mil
lio
n
High Growth Opportunities, Kenya, 2011
0% 20% 40% 60% 80% 100%
Innovator
Generic0% 20% 40% 60% 80% 100%
0% 20% 40% 60% 80% 100%
Local Manufacturer
Import
0% 20% 40% 60% 80% 100%
• Linkages: chemicals and plastics markets (local manufacturing and packaging), ICT
(mHealth, reimbursement, payment). Source: Frost & Sullivan analysis
Key Challenges New Solutions
DistributionA broad distribution network is necessary to penetrate African markets.
Accessibility and LogisticsAccessibility and logistical challenges have created opportunities in mHealth.
Price Competition and Affordability Second brand and differential pricing
Life Sciences
Distribution, accessibility and challenges pertaining to price
remain the primary challenges faced within the African life
sciences markets
Source: Frost & Sullivan analysis
Energy and Environment
Energy and Environment
There are Great Differences Between East and West Africa
`
Energy, and specifically electricity, is thebackbone of any economy
It is crucial for governments to create anenabling environment through reliable andaffordable electricity supply
Key Country Analysis
Nigeria:
• Significant undersupply
• Poor governance
• Limited deregulation
• Significant demand
Kenya:
• Steady growth
• Increased reliability on diesel
• Significant RE opportunity
• Improved governance and management
Significant upside
potential but more
corruption, red tape
and poor
governance
Significantly smaller
market but more
stable, transparent
and predictable
Energy and Environment
The Nigerian Electricity Industry holds Much Larger Long
Term Potential, but Current Operating Conditions are Tough
`
Criteria Nigeria Kenya
Installed Capacity +/- 8 700MW (56%) +/- 1 800MW
Level of Deregulation Medium (1 350MW) High (25% non-KENGEN)
Demand Growth 10%+ 8%
Main Feedstock Thermal (65%), Hydro (35%)Thermal (41%),
Hydro (44%)
Genset Market Size $950 million $45 million
Relative Electricity Price $0.09 per kWh $0.14 per kWh
Main Challenge Market Deregulation Access to Finance
Level of Opportunity Significant Growing
Energy and Environment
Despite the Large Differences these Countries Face the Same
Challenges
Access to Finance
Market Deregulation
Supporting Infrastructure
Off-taker Growth
Reduced government involvement (especially in Nigeria)
Economic reform to stimulate industrial and especially manufacturing growth
Focus on gas infrastructure (both countries)
More rapid introduction of IPP’s
Key Challenges New Solutions
Conclusion
Nigeria and Kenya – Next growth frontiers of West and East
1. Africa is the next growth frontier and East & West of Africa are predicted to be the next growth
pillars. Despite the low base, the growth experienced by the continent is attractive and it appears to
be more sustainable than in the past
2. Challenges exist across the various sectors that we presented. Business models & solutions are
rapidly changing to tap into these attractive opportunities. There are many examples of how
organisations that have adapted to this change have had tremendous success.
3. The paradigm is shifting from „should we invest in Africa‟ to „managing risk of not being in Africa‟
4. What is your emerging market growth strategy ?
5. What does it take to penetrate these countries in Africa ?
6. Do you have the business model that adapts to the challenges ?
Source: Frost & Sullivan analysis.
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