Future of Chemicals Companies inFuture of Chemicals Companies inSouth AfricaSouth Africa

Should chemicals companies in Africa diversify to strengthen their base Should chemicals companies in Africa diversify to strengthen their base and minimise risk?and minimise risk?

Dr. Brian Balmer, Industry Principal

Avril Harvey, Senior Industry AnalystAvril Harvey, Senior Industry Analyst

Margot Kuhn, Research Analyst

Chemicals, Materials & Food

30 October 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.

Today’s Presenters

Follow me on:

Dr. Brian Balmer,

Industry Principal,

Frost & Sullivan

Follow me on:

Avril Harvey,

Senior Industry

Analyst,

Frost & Sullivan

Follow me on:

Margot Kuhn,

Research Analyst,

Frost & Sullivan

2

• 13 years' research experience at Frost & Sullivan.

• Company expert in Performance Materials.

• Advises clients on geographic expansion as a growth strategy.

• 13 years of research and development and technology commercialization expertise.

• Market Research, growth consulting, market insights and strategic analysis of opportunities.

- Focus on Petrochemicals, Bioethanol and Water treatment industry sectors

• Experience base covering broad range of sectors, leveraging long-standing working relationships with leading industry participants’ Senior Executives:

- Construction industry and materials.

- Chemicals industry.

- Commercial due diligence.

- Public sector.

Focus Points

22

2.32.3

11

Opportunities in AfricaOpportunities in Africa

Construction and InfrastructureConstruction and Infrastructure

Chemicals, Materials and Food - Global ContextChemicals, Materials and Food - Global Context

2.12.1 Mega TrendsMega Trends

2.22.2 Drivers and RestraintsDrivers and Restraints

3

2.32.3

2.42.4

2.52.5

MiningMining

AgrochemicalsAgrochemicals

33 Chemical Companies in Africa – Case StudiesChemical Companies in Africa – Case Studies

Chemicals, Materials and Food – Global ContextChemicals, Materials and Food – Global Context

Our Chemicals Market ApproachFocus on end-markets and mega trends

Functionality and performance

Health and wellness

Construction

& Utilities

Food Drugs &

Cosmetics

Transportation

5

Globalisation Low carbon economy

& UtilitiesTransportation

Source: Frost & Sullivan analysis

IntroductionWhy Africa?

"Ghanaian president John Mahama launched Hope City, a $10 billion high-tech hub aiming to foster technological growth and attract major players in the global ICT industry to the West African country."

March 2013

"High Level Negotiations with South Sudan

to Join the East African Community."

October 2013

6

"A huge water source has been discovered in the arid Turkana region of northern Kenya which could supply the country for 70 years, the government says."

September 2013

October 2013

"In 2012, operators in Mozambique have announced as much as 100 Tcf of natural gas discoveries. This will position Mozambique as a major player in the sector."

January 2013

IntroductionAfrica in a Global Context

6%

8%

10%

12%

14%

16%

Africa's Share of the World

7

0%

2%

4%

Population GDP Chemical industry

Chemicals market demand

Source: Frost & Sullivan analysis

The Chemical IndustryHistoric growth rates

4%

5%

6%

7%

8%

9%

10%

Historic growth (2005-2012)

8

0%

1%

2%

3%

4%

Africa World N America W Europe

The medina, Marrakesh, Morocco

Source: Frost & Sullivan analysis

The Chemical IndustryForecast future growth

4%

6%

8%

10%

12%

Forecast growth (2012-2020)

9

0%

2%

4%

Africa World N America W Europe

Source: Frost & Sullivan analysis

Plans for Hope City, Ghana

Opportunities in AfricaOpportunities in Africa

Impact of Mega Trends on South Africa’s Chemicals Industry

Increasing Urbanisation

Visionary

Health & SafetySustainable Development

11

Infrastructure Development

Innovation

&

Market

VanguardPublic / Private

Sector Investment to Drive Industry Development

Rebuilding War Torn Countries

Impact of Mega Trends on South Africa’s Chemicals Industry

Mega Trend Degree of Impact Impact Timing

IncreasingUrbanization

Present

Mega Trend Impact on the Chemicals Market,South Africa, 2012

2

68

10

4

Severity

12

SustainableDevelopment

Present

InfrastructureDevelopment

Present

Severity

2

68

10

4

Severity

2

68

10

4

Severity

Drivers and Restraints

Chemicals Market: Key Market Drivers and Restraints, South Africa, 2013–2017

Production facilities are

small

Strikes in the mining and

manufacturing industries

Exchange rate fluctuations

13

Food, water, and electricity

scarcity

Increase in Manufacturing

Activity

Increase in Demand for

Infrastructure

fluctuations

Where are the growth opportunities?

Kenya• Infrastructure• Residential

Morocco• Infrastructure (road, rail, airport,

port, water, telecommunications)• Residential

Ethiopia• Infrastructure• Commercial

Nigeria• Infrastructure (road,

rail, airport)• Residential

Construction and Infrastructure ChemicalsWhere are the growth opportunities?

14

High Medium

Zambia• Residential• Commercial• Tourism

Mozambique• Infrastructure (road, rail

and airport)• Tourism

South Africa• Residential• Infrastructure

Angola• Infrastructure (road,

rail, port and airport)• Residential

Botswana• Commercial• Infrastructure

• Residential

Tanzania• Infrastructure

Cameroon• Infrastructure

• Residential• Commercial

South Africa $239 million

Angola $12 million

Botswana$6 million

Namibia$4 million

Mark

et G

row

th R

ate

(C

AG

R)

(%)

Construction and Infrastructure ChemicalsWhere are the growth opportunities?

Total Adhesives Market: Country Attractiveness, 2013

15

Mark

et G

row

th R

ate

(C

AG

R)

(%)

Barriers to Entry HighLow

Kenya

Admixtures

Waterproofing

Flooring

Sealants & Grouts

Repair and Rehabilitation

36.6%

7.3%

26.2%

12.5%

17.4%

Percentage of Revenue Breakdown 2013

Share of global

Mineral Resources Distribution , sub Saharan Africa, 2013

C

Country Mineral Growth / Decline

South Africa

Namibia

U

U

Mining ChemicalsWhere are the growth opportunities?

16

C

Source: Frost & Sullivan.

Resourceglobal

resources, %

Platinum 88

Gold 40

Copper 5

Uranium 20

Diamonds 60

CopperPlatinum Gold C Diamonds

C

UraniumU

U

U

Zambia

DRC

Malawi

C

C

U

Increased exploratory activities

and discoveries

Demand for energy and industrial

applications

New technology and uptake by the

industry

Increasing need for safety in mines

Extended mine lifespans

Mining Chemicals Market, Drivers and Restraints, sub Saharan Africa, 2013

Mining Chemicals Revenues ($ million), sub Saharan Africa, 2013 and 2016

CAGR = 4.0%

Mining ChemicalsWhere are the growth opportunities?

17

Environmental concerns

Disruptive technologies

such as alternatives to

blasting

Power and water

shortages

Disruptions and low

productivity

Crop Protection

Fertilizers

US$5 billion (increase fertilizer use from 9kg per hectare to 15kg)

KENYA

Agricultural sector ($ billion)

8.04

Agrichemicals market ($ million)

111.6

GHANA

Key Agricultural Markets, sub Saharan Africa, 2013 Future Growth, 2013

Agriculture ChemicalsWhere are the growth opportunities?

18

Crop Protection> US$2 billion (projected value of the market in sub-Saharan

Africa by 2020)

Countries with sizeable agrichemcals usage

African countries under-utilising agrichemicals

`̀

SOUTH AFRICA

Agricultural sector (primary) ($ billion)

12.06

Agrichemicals market ($ million)

675.5

GHANA

Agricultural sector ($ billion)

11.33

Agrichemicals market ($ million)

125.5

NIGERIA

Agricultural sector ($ billion)

96.04

Agrichemicals market ($ million)

225.3

Growth in the markets for

fertilizers and crop protection

chemicals are expected in the

Total Fertiliser Market: Volume Forecast, sub-Saharan Africa, 2013 and 2016CAGR = 5.7%

Volu

me (

metr

ic tonnes)

Agriculture ChemicalsWhere are the growth opportunities?

19

chemicals are expected in the

Agricultural sector along with

increased local and foreign

investment

Volu

me (

metr

ic tonnes)

Poll Question

In which African region are you planning to invest?

a) Southern Africa

b) West Africa

20

c) East Africa

d) I’m not planning to invest in Africa

Chemical Companies in South Africa – Case Study

Distribution Channel Distribution Channel

New Product Development New Product Development

Mergers & Acquisitions Mergers & Acquisitions

New Product LaunchNew Product Launch

Consulting Offering Through 10 Growth

Processes

Business Case Development

Implementation

The Business Case

Generation Of Viable Implementation Options

Detailed Benefits Statement

Design/Development

Planning

The Growth ProcessesEnsuring Sustainable Profitable Growth in Africa

22

Distribution Channel Distribution Channel OptimisationOptimisation

Vertical ExpansionVertical Expansion

Customer Strategy Customer Strategy

Competitive Strategy Competitive Strategy

Geographic ExpansionGeographic Expansion

Strategic PartneringStrategic Partnering

Technology StrategyTechnology Strategy

Statement

Risk Reports

Impact Analysis

Feasibility Analysis Roll-out

Handover

Sustainable Profitable GrowthStakeholder Alignment

Prioritisation

AECI Speciality Chemicals Revenue by Market Sector, 2012

Home Country

Footprint

AECI Ltd

Divisions

Explosives

Specialty Chemicals

Specialty Fibres

Property

Case Study 1 - AECIGeographic Expansion

23

Chryso Headquarters

a.b.e. Construction Chemicals (Pty) Ltd

Regional Offices

Other Distributors

Case Study 2 - ChrysoMergers and Acquisitions

24

Northern Cape

Western Cape

Eastern Cape

North West Province

Free State Kwazulu-Natal

Mpumalanga

Limpopo

a.b.e Home Country

a.b.e Footprint

How do I grow successfully in Africa?

Risk / Challenge Identification

Identify Key Opportunities

Identify Market Opportunities

25

Distribution / Supply Chain / Partners

Customer Preferences

Devise Growth Strategy

Next Steps

Develop Your Visionary and Innovative SkillsGrowth Partnership Service Share your growth thought leadership and ideas or

join our GIL Global Community

26

Join our GIL Community NewsletterKeep abreast of innovative growth opportunities

Phone: 1-877-GOFROST (463-7678)EMEA: +44 (0) 20 7343 8383 Email: myfrost@frost.com

Your Feedback is Important to Us

Growth Forecasts?

Competitive Structure?

What would you like to see from Frost & Sullivan?

27

Emerging Trends?

Strategic Recommendations?

Other?

Please inform us by “Rating” this presentation.

Follow Frost & Sullivan on Facebook, LinkedIn, SlideShare, and Twitter

http://www.facebook.com/FrostandSullivan

http://www.linkedin.com/companies/4506

28

http://twitter.com/frost_sullivan

http://www.linkedin.com/companies/4506

http://www.slideshare.net/FrostandSullivan

For Additional Information

Samantha James

Corporate Communications

Africa

+27 21 680-3574

Samantha.James@frost.com

Brian Balmer

Industry Principle

Chemicals, Materials & Food

+44 1865 398634

Brian.Balmer@frost.com

Mani James

Regional DirectorAvril Harvey

Senior Industry Analyst

29

Regional Director

Growth Partnership Services

+27 21 680-3208

Mani.James@frost.com

Vassilissa Kozoulina

Account Manager

Chemicals, Materials and Food

+27 21 680-3279

Vassalissa.Kozoulina@frost.com

Senior Industry Analyst

Chemicals, Materials & Food

+27 21 680-3283

Avril.Harvey@frost.com

Margot Kühn

Research Analyst

Chemicals, Materials & Food

+27 21 680-3568

Margot.Kuhn@frost.com