The East African lubricants market was evaluated to be $2.8 billion in 2018 and is progressing at a CAGR of 3.15% during the forecast period of 2019-2025. The trend of ‘factory automation’ has elevated the application of machineries in industrial setting and alleviated industrial processes from the dependency of human intervention. The arrival of smart computers and technology have established automation as an indispensable constituent in gaining a competitive advantage in the modern indigenous and global manufacturing environment. As Industry 4.0 based on IoT has emerged as a novel trend in most of the developed countries, Industry 3.0 focusing on automation is being leveraged by developing economies including East African countries such as Kenya, Ethiopia, and Rwanda. Due to extensive application of machineries in key industries of East Africa, that includes mining, agriculture, automotive and renewable energy, the market for lubricant is gaining strong demand. Lubricants are the most fundamental maintenance-commodity applied in all forms of equipment for efficient operation. To promote the application of technology in industries the East Africa Chamber of Commerce Industry and Agriculture, is supporting industrial exhibitions and events on industrial products, technologies, machinery and related services. One example of such event is INDUSMACH AFRICA 2019, to be held in Kenya. Moreover, the presence of Siemens AG, the foremost industrial manufacturing company globally, in countries such as Sudan, Uganda, Kenya, Ethiopia and Tanzania, strongly indicates industrial automation in East Africa. Hence, this trend of ‘industrial automation’ mandating machineries is a major disruptive force in East African Lubricants Market.
Tanzania exported gold worth $1.5 billion in 2017 to India and South Africa; Kenya entered the league of Africa oil exporters:
Modern mining sector is leveraging machineries for efficient production and induce higher profit margins. Gold is chief item exported out of East African country, and hence there is a constant demand of lubricants from the regional mining equipment market. Oil-based lubricants majorly employed by mining sector includes diesel engine oils, hydraulic oils, gear circulating oils, and axle lubricants. According to the Observatory of Economic Complexity, nations including Ethiopia, Uganda and Tanzania export gold to economies such as India, Switzerland, South Africa, U.S and UAE. Export value of gold exported by Tanzania in 2017 was $1.55B, followed by Uganda $416 million and Ethiopia $242 million. The East African countries are abundantly endowed with a variety of mineral resources that is further enhancing mining operations as well as oil extraction in the region. For example in 2019, Kibo Energy PLC, an energy company was granted seven Mining Rights for its Mbeya Coal to Power Project (MCPP) in Tanzania. This will enhance commercial mining activity in the region, hence the uptake of mining equipment and automotive, eventually adding impetus to East African lubricants market demand. Another breakthrough for lubricants market of this region was delivered by the entry of Kenya in the league of Africa oil exporters. The Kenyan government has also signed an agreement with Tullow Oil and Africa Oil Corp to developed crude oil processing facility and start full-scale oil production by 2022. Industrial lubricants finds extensive scope of application in oil processing machine components, pipelines, and valves and fittings. Such lubricants assist in extending the service life of machineries and reduce oil changes, further enabling extended maintenance intervals and decrease equipment failures and unscheduled shutdowns.
Kenya sets target of getting entirely powered by green energy by 2020:
East Africa has a surplus of natural resources including the Great Rift Valley that is a promising source of geothermal power. High proximity to the equator provides abundant solar irradiation levels, along with strong wind speeds. Since, less than 25% of population in East Africa have access to electricity that is the lowest electrification rate in the world, the region with promising resources is progressing in its renewable energy sector. East African countries such as Tanzania, Kenya and Uganda are also part of Promoting Implementation of the Paris Agreement (PIPA) project that is further supporting the region to attain Nationally Determined Contributions (NDCs), country’s efforts set out in Paris Agreement to reduce national greenhouse gas (GHG) emissions. German International Climate Initiative is also funding Kenya’s efforts to implement its NDC. According to the World Economic Forum, Kenya has set the target to be powered entirely by green energy by 2020. The present market is also promising as 70% of the nation’s installed electricity capacity is derived from renewable energy sources, which is three times higher the global average. Kenya has also invested in to the forte of geothermal power generation, and it holds the 9th spot globally or its geothermal power generating capacity (700 megawatts). Consequently, East African countries are adopting clean energy technology with Kenya, Ethiopia, and Rwanda largely investing in solar, wind, hydro and geothermal power projects in the past few years. Lubricants such as gear box oil, grease, mobil are applied in gearboxes, yaw bearings, and hydraulic systems of power generating apparatuses installed in wind turbines, gas turbines and hydroelectric sector. Hence, the flourishing renewable energy sector is a major East African lubricants market growth driver, since turbines and gear machines require frequent lubrication to withstand extreme temperature and corrosion conditions. Concurrently, the East African lubricants market is likely to gain huge demand with the construction of Kenya’s Turkana Wind Farm and Rwanda’s two hydropower plants: Ruzizi III and Rusumo. It is also to be noted that majority of the FDI in Kenya are going into renewable projects and the country is escalating upwards in rank in the World Bank’s ‘Ease of Doing Business Index’, as stated by The U.S. Department of Commerce’s International Trade Administration.
E-commerce contributed 6% of all purchases in Kenya in 2017 (UNCTAD); 35% of Kenya’s GDP is from its agriculture
With further analysis of industrial growth in various countries of East Africa, Kenya is reckoned to be the most lucrative marketplace for lubricants. As discussed earlier, its development in the field of renewable energy, mining and oil export are considerable factors for its industrial growth. Consequently, Kenya had a share of 32% in East Africa lubricants market demand. Apart from the mentioned industries, Kenya is also progressing rapidly in automotive, agriculture and e-commerce sector that will eventually add up to the demand for lubricants in East Africa.
According to Global System for Mobile Communications, out of 710 million new mobile subscribers by 2025, 165 million are estimated to be hailing from Sub-Saharan Africa region. It is second largest region in this context, whereas APAC leads with an estimation of 359 million. Increasing penetration of mobile phones in the region has augmented the share of e-commerce in total sales. As stated by the United Nations Conference on Trade and Development, in 2017 e-commerce had a share of 6% of all purchases in Kenya and in the same year the country’s GDP grew by 4.9% (World Bank). As the e-commerce is solely dependent on transportation and logistics, this growth has positively influenced the automotive sector in Kenya. Industriall Global Union states that global companies such as Isuzu, Nissan, Scania, Tata, Toyota, and Volkswagen expanding assembly lines in Kenya. Eventually, the East African lubricants market players are leveraging this growth as the demand for automotive lubricants such as motor oil, gear oil, transmission fluid and, wheel bearing and chasis grease has witnessed a spurge. East African countries such as Ethiopia and Kenya are some of the leading importing countries of used vehicles in this region. Besides, India Environment Portal highlights among the total vehicles imported into Kenya in the year 2016, more than 96% are pre-owned. This signifies the high dependency on lubricants for boosting the efficiency of these vehicles. Also, these are the factors responsible for transportation sector to be the fastest growing application vertical in East African lubricants market. The growth rate in the form of CAGR is estimated to 3.50% and is forecast to sustain up to 2025.
The modern agriculture sector is heavily reliant on machineries to match up to the quantities and qualities of demand. The application of machineries has open up the agriculture sector as an end-user vertical of lubricants. The U.S. Department of Commerce’s International Trade Administration stated that agriculture is the mainstay of Kenya’s economy and fundamental to its development policy. It accounts for more than 35% of nation’s GDP and 70% of the population earn at least part of their income from agriculture. Alike other sectors such as manufacturing and mining, agricultural sector is also leveraging automation, hence increasing its uptake of agricultural machineries. As the sector has direct influence on the nations’ GDP, a lot of emphasis is given to implement machineries and technologies to enhance production. For example in 2019, International Trade Show on Agriculture Machinery, AGROTECNO was held in Kenya. Similarly as other sectors, machineries engaged for agriculture such as tractors, trailer sprayers, and irrigation equipment, are avid employers of lubricants.
East African Lubricants Market Key Players:
Some of the key players operating in the market are Royal Dutch Shell Plc, ExxonMobil Corporation, SINOPEC, Idemitsu Kosan Co Ltd, Lukoil, BP PLC, TOTAL SA, Chevron Corporation, Petrochina Company Ltd, and Fuchs Petrolub AG.
Several types of lubricants such as anti-wear additives, corrosion inhibitors, friction modifiers, transmission fluids, and industrial engine oils are primarily used in mining, manufacturing, agriculture, automotive, renewable energy and oil industry of East African region. The growing aviation sector of Kenya is also increasing the demand for lubricants in East Africa. For instance, due to modernization and expansion projects funded by the World Bank, passenger capacity of Jomo Kenyatta International Airport increased from 2.5 million to 7.5 million. Tracing opportunities in this sector, some of the East African market players are manufacturing liquid lubricants for aircraft engines. For instance, the Royal Dutch Shell Plc, an innovative market player delivers various lubricants and oils, commercial fuels, and associated products and services to aviation sector.
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A. Middle East and North Africa Lubricants Market
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