The African chemical industry is characterised by the presence of a number of international chemical distribution companies. This is due to the lack of a well-developed manufacturing sector in many African countries.
Severe limitations in manufacturing bases and unskilled local labour means that, in most cases, these chemical distributors supply the finished chemical rather than chemical raw materials. However, recent research from Frost & Sullivan indicates that for new market entrants, the best route to market is through partnerships with existing local distributors as they have an established customer base and working knowledge of the local market.
New analysis from Frost & Sullivan (chemicals.frost.com), Analysis of Major Chemical Distributors in the African Manufacturing and Mining Markets, analyses the operations of major chemical distributors supplying to the mining and manufacturing sectors in Kenya, Egypt, South Africa and Nigeria. Each of these countries is dependent on the import of chemicals to varying degrees.
"For multinational chemical companies wishing to distribute chemicals into Africa, the optimal option is to partner with local companies in the targeted market," remarked Frost & Sullivan's Chemicals Materials & Food Research Analyst Dilshaad Booley. "Local partnerships enable quick entrance into the targeted sector and country as much of the groundwork would have already been accomplished. Thus, foreign distributors do not have to incur the cost in terms of time, effort and resources of trying to establish themselves in the market."
Local distributors already have a customer base and know the markets in which they operate, as well as who their competitors are. They also have installed networks for themselves such as transport and warehouses for storage. In addition, they have the paper work in place for importing, should the multinational wish to export their product to the region.
Currently, a key challenge for distributors is the lack of significant capital to purchase large quantities of chemicals. This is primarily the result of end users themselves not having the capital to purchase large amounts of chemicals, and opting instead to buy on a need basis.
The biggest restraint to local manufacturing, however, is price. Imported finished goods can be purchased at a lower cost than local equivalents, due to rising production costs and poor infrastructure.
"Increased government involvement in the manufacturing and mining sectors to assist local manufacturers in purchasing chemicals is essential to overcoming the challenges of high product prices and manufacturing costs," advised Booley. "Reducing raw material or chemical import trade tariffs, while hiking tariffs on finished goods, will boost the local manufacturing sector in Africa, thereby spurring demand for chemicals."
If you are interested in more information on this research, please send an email to Samantha James, Corporate Communications, at samantha.james[.]frost.com, with your full name, company name, job title, telephone number, company email address, company website, city, state and country.
Analysis of Major Chemical Distributors in the African Manufacturing and Mining Markets is part of the Chemicals & Materials Growth Partnership Services programme. Frost & Sullivan's related research services include: South African and Moroccan Phosphate Chemical Reagents Market, Egyptian Chemicals Market, and Opportunities in the Ghana and Tanzania Waste Water Treatment Chemicals Market in the Mining Sector. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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Analysis of Major Chemical Distributors in the African Manufacturing and Mining Markets / M8B0-39