Discovering Africa Nigeria & Kenya
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About the Durban Chemicals Cluster
The Durban Chemicals Cluster (DCC) is a Public-Private Partnership between the eThekwini Municipality and local chemicals firms that focuses on developing the competitiveness of the chemicals manufacturing industry in KwaZulu-Natal. This not-for-profit organisation is an industry driven initiative, drawing on the leadership and expertise of individuals from a broad range of member firms. Membership represents approximately 28% of chemicals B&M Analysts is a verified Level 2 B-BBEE manufacturing activity in KwaZulu-Natal contributor under the Codes of Good Prac- (KZN). tice for Broad-Based Black Economic Empowerment (B-BBEE). The cluster was established in December For more information on B&M Analysts 2008 with the primary purpose of developing the competitiveness of the local chemplease visit www.bmanalysts.com. icals manufacturing industry. The overarching objective of the DCC is to increase Over the past 15 years, B&M Analysts has developed methodologies and skill sets that allow it to play a unique role in relation to supporting the competitiveness of value chains and the growth of industrial sectors. These services are tailored to support the industrial development goals of government organisations, private sector organisations and public-private partnerships (PPP).
the sales and value addition of the local chemicals manufacturing sector by 53% in real terms between 2011 and 2020. Five strategic focus areas have been identified as being core to attaining the growth aspirations of the KZN chemical industry and successive ‘business plans’ of the DCC are therefore developed to support progress in each of these five areas. • Investment and Growth through market linkages, innovation and investment • Compliance through regulatory representation and best practice • Value Chain Competitiveness through operational competitiveness • Skills Development • Transformation For more information on the Durban Chemicals Cluster please visit www. durbanchemicalscluster.org.za
Contents Discovering Africa Part 1: Nigeria Part Two: Kenya, The Gateway to East Africa Investing in East Africa Investment and Growth Value Chain Competitiveness Compliance Transformation Skills Development
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Discovering Africa Part 1: Nigeria Africa has become a real interest point for the manufacturing and retailer members across various industries as they look for investment and growth opportunities into African countries. The DCC hosted a morning workshop which focused solely on Nigeria. Nigeria is the most populated African country with one of the fastest growing economies on the continent. This growing country is the second most attractive African investment country, and thus there is great opportunity for industry investment in this country. The guest speakers, Michele Arde (B&M Analysts), Jan van Zyl (Novare) and Mncane Mthunzi (Massmart), allowed member firms to explore the raw facts of the country, as well as learn from others experiences. Jan Van Zyl is currently the head of property development at Novare and resides in Lagos, Nigeria. Jan began his career in 1999 and has worked extensively throughout Africa. Jan was recruited by Shoprite in 2010 as the companyâ€™s business development manager for Nigeria and Ghana. He was responsible for supporting the growth
of the group from three to ten business outlets by working closely with existing and new developers, and acted as project manager for all Shoprite related property projects. Jan joined Novare in February 2013 as head of property development. Jan shared his experiences with doing business in Nigeria through exploring the current situation in Nigeria, potential pitfalls and mitigation measures to avoid these pitfalls. Jan also shared information on distributors, business setup and an overview on regulations. Mncane Mthunzi (Africa food and retail supplier executive at Massmart Group) is the former CEO of the Consumer Goods Council of South Africa, an industry association for the retailers, manufacturers and service providers. He has been the managing director of the Black Management Forum for three years, and has worked for Microsoft in a sales executive role. Mncaneâ€™s career has spanned a number of industries including; retail, transport, industrial products, telecommunications, broadcasting information technologies and the govern-
ment. Mncaneâ€™s experience in Nigeria is extensive as he establishes the Massmart retail outlets in Nigeria. Mncane shared the steps taken and challenges faced while setting up businesses in the country.
NIGERIA FAST FACTS Population (millions): 168.4
Capital : Abuja
GDP: US$448 Billion (3rd in Africa)
Business Language: English
GDP Growth (2012 - 2017 % Ave): 6,9% per annum
Currency: Nigeria Naira (NGN) Managed Float: $1: 164 NGN
GDP per capita: US$ 1,631 (18th in Africa)
Doing Business Nigeria
Nigeria’s economy is on track to overtake South Africa as the largest economy in Africa, as Nigeria had a GDP growth of 6.1% in 2013 versus South Africa’s 1.9% growth. Jan highlighted that the economy is expanding and is the gateway to West Africa. The structure of Nigeria’s GDP consists of; agriculture (32%), industry (39%), manufacturing (3%) and services (26%). Nigeria’s services sector has mushroomed in recent years but is not effectively captured by current GDP statistics. Nigeria is Africa’s largest telecoms market with 121.8 million active mobile lines. Furthermore, Nigeria has 54 million internet subscribers as at September 2013, compared with South Africa’s 11 million users. Jan also highlighted that the population in each major city is significant, and allows for investment to be initiated just in one city as the market is present. Mncane also stated that as Nigeria is the most populous African country it provides a growing market in the retail sector, which is also expanding due to a growing middle class. There is an increased demand for first world goods
and services amongst the population as Nigerians embrace technology and strive to improve themselves. Both guest speakers shared their business experience in the country, and expressed that it is very expensive to do business in Nigeria and it is difficult as the laws and procedures are very vague. The operating environment of Nigeria remains difficult as there are many problematic factors to doing business in Nigeria. The four top factors are 1) access to funding, 2) corruption, 3) inadequate supply of infrastructure and 4) policy instability. Infrastructure supply, specifically electricity is a major concern for operating in the country. Nigeria currently experiences an average of 196 hours per month of electricity outages. This is one of the worst power shortages in Africa. However, on a positive note, Nigeria is doubling its power outage capacity from 3 000MW to 6 000MW over the next three years. From a business stance, it was suggested that finding a reputable lawyer when setting up a business in Nigeria will overcome many barriers. Investment in Nigeria is for the long-run, and companies will need to remain realistic and not be blinded by the potential that is within this country. Jan and
any legal battles. Mncane further stressed the importance of doing research on Nigeria, especially 4. Timing. through asking people or companies that 5. Valuation, this will take time but firms have been successful. should allow for adequate time for this. Companies will need to understand who Petrochemical Industry the key roleplayers are in their industry, and engage with them when setting up Nigeria has Africaâ€™s largest oil output probusiness. ducing two million barrels a day. Nigeriaâ€™s abundant reserves of natural gas and oil alDoing business in Nigeria has risks, with lows for continual flow of forex and investmany potential pitfalls for investors. Mitment which boosts the economy. Nigeria igating this risk can be achieved through should have a well-developed petrochemimergers and acquisitions. cal sector because of this abundance of oil, natural gas and refining capacity that can Firms will need to consider the following; provide feedstock, however this remains small because of infrastructural problems 1. Structure an agreement that will and political challenges. phase in active control to the business, many are locally owned when doing business in the oil and gas industry. 2. Choose the right partner, partnering with the wrong person or entity may result in significant challenges in the future.
3. Adhere to local partnership requirements, both guest speakers em-
phasized that legal fees are substantial and that all firms should always avoid going to court, thus it is safe to adhere to partnership requirements to avoid
Key Points: With urea capacity set to exceed 5mntpa by 2018, Nigeria should become a major exporter of fertiliser, as well as ensuring self-sufficiency in the long-run. Nigeria should come to dominate supply of fertiliser in the growing sub-Saharan African market. The Nigerian polymers market will be largely fulfilled by imports with domestic capacities remaining small and operating well below capacity where consumption is concerned. Construction growth should help stimulate demand for PVC and plastic piping while agribusiness is also set to grow following a slump in 2013, leading to higher demand for fertiliser and packaging. On the downside, industrial growth in Nigeria will remain disappointing, thereby limiting opportunities for increased consumption of intermediate goods. As such, Nigeriaâ€™s principal market growth areas will be in finished products.
Part Two: Kenya, The Gateway
The DCC hosted the second Africa Series workshop with a focus on Kenya as the gateway to East Africa. The session provided member firms with an expert from Kenya who presented an overview on the investment profile of Kenya, businessmen who have conducted business in Kenya shared the challenges and opportunities that they have encountered in doing business in East Africa, as well as a logistics expert who explored logistics in East Africa. The guest speakers included Margaret Waithaka (Export Processing Zones Authority, Kenya), Patrizia Meo-Colombo (Bidvest Panalpina Logistics), Peter Hurst (Added Asset) Winston Pitse (Massmart).
The East African Community (EAC) consists of Kenya, Uganda, Tanzania, Rwanda and Burundi. The EAC has established trade agreements that benefit all member countries. Kenya is also a member of COMESA (Common Market for Eastern and Southern Africa) which is a free trade area and allows companies who have signed up to this agreement to be more competitive. The EAC as a whole provides opportunities for companies as it is one of the fastest growing regions in the world at 6.1% compared to South Africaâ€™s growth of 5%.
EAC FAST FACTS
Population 146 Million
Combined GDP : US$103.7
Average Inflation: 6.9%
The figure reflects the composition of Kenya’s GDP, showing that Kenya currently Kenya Vision 2030 still relies on agriculture but has a growing manufacturing sector. Kenya identified seven key sectors with potential to deliver 10% economic growth Margaret Waithaka, is presently general per annum for their 2013 vision: manager of business development at Export Processing Zones Authority in Kenya. • Tourism She has over 30 years varied work experience in the public sector, the private sector and with international agencies acquired in Kenya, South Africa, the United Kingdom and Canada. She has an MBA in Marketing and International Business from St. Mary’s University in Halifax NS Canada and B.Sc. (Honours) in Chemical Engineering from the University of Leeds, UK. Margaret shared with the audience about the Kenyan as well as the East African investment environment. She explored the chemicals industry and the opportunities for chemical companies in East Africa, Kenya’s Vision 2030 and Value Proposition for South African Investors.
• • • • • •
Agriculture Wholesale and retail trade Manufacturing IT enabled services Financial services Oil, gas and mineral resources
Value Proposition for South African Investors:
East Africa Logistic Highlights
Mombasa, Kenya, is the second largest 1. Improved competitiveness as a result port in sub-Saharan African after Durban in of lower operating costs terms of tonnage and containers handled. • Labour costs • Industrial part property rentals The average growth rate of the port is • Utilities 11.6% which reflects the fast growth of East Africa. Patrizia Meo-Colombo is the 2. Preferential access to markets key account manager at Bidvest Panal• EAC pina Logistics for Chemicals Vertical and • US Commercial Management. She has 20 • COMESA years logistics industry experience. Patriz• EU ia presented on the logistics in East Africa including the lead times for both sea and 3. High quality human resource land transport. • 87% literacy rate • English speaking Sea transport to Kenya occurs weekly with • University enrolment : 324 000 stu- lead times of 44 days (Cape Town) to eight dents in 2013 days (Durban). Road transport lead times • High level of indigenous innovation average between 15 – 20 days to Momand technology adoption basa and Nairobi, due to delays at the port companies might prefer road transport. 4. Strong economic and infrastructure fun- Patrizia emphasized that transport costs damentals are 63% higher in Africa than in developed • Consistent GDP growth countries. • Growing middle class • Pro-private sector policies She shared that the African Development • Investment in infrastructure projects Bank stated that, “Transport costs repre• Strong financial sector sent between 30% and 50% of total ex-
port value in Africa”. Logistics forms an integral part of doing business in Africa and Kenya is the gateway to East Africa as the port of Mombasa allows companies to establish a base.
There are many factors relating to doing business in Kenya. Peter Hurst from Added-Asset, shared his experience in East Africa as well as the nuts and bolts of establishing business in the East African Region. For over 17 years Peter has delivered trade and investment development strategies for government organisations in the UK and SA and for individual clients wanting to develop their international interests and competitive position. Having done business in over 27 African countries, Peter’s company currently works for the Netherlands ministry of Foreign Affairs, the South African Small Enterprise Development Agency, the South African Oil and Gas Alliance and a number of private clients and other public enterprises. Peter highlighted the strengths and challenges in Kenya as well as East Africa. With regard to doing business in Kenya, travel, accommodation and useful tips when travelling to East Africa were highlighted. Peter also provided attendees with snap-
shots of each country in the EAC, which explored the opportunities in each country and reflected the benefit of doing business in East Africa as there is free movement of goods and services within the region. • • • • • •
Familiar commercial law Ease of money transfer Part of East African regional block Free market economy Nairobi – a regional economic hub Port of Mombasa serving most nearby countries • English spoken widely • Educated workforce
• Competition from China/India • Unreliable power supply • Infrastructure limitations Winston Pitse, Massmart, wrapped up the day by sharing his experience in Kenya. Winston is Massmart’s Africa Development executive, overseeing the growth strategy of Massmart’s food retail business into the sub-continent. Prior to his current role, he was the business intelligence executive. He joined Massmart in 2006 as executive
assistant to the chief executive officer. Winston started off his career as an engineer with Transnet and holds a Bsc in Civil Engineering from the University of Cape Town. Winston shared his experience of doing business with the Kenyan business community and shared the following learning points: • Agreements are not final unless in writing • Don’t allow lawyers to drive the conversation, they should be used to draft the agreement • When looking for an acquisition, speak to as many players as possible • Always know when to walk away and say “No”
The Way Forward
Kenya is fast becoming an economic hub. Investment in the country provides the opportunity for industry to explore the rest of East Africa. The workshop on Kenya allowed firms a brief snapshot of the region. It was recommended by all guest speakers, that if a company is interested in establishing business in East Africa they should commit to extensive market research and correct partnership with institutions, individuals and organisations within Kenya.
MCEP Firm-Level Application Assistance - Capital Investment
There remains an ongoing focus on supporting DCC member firms in relation to the Manufacturing Competitiveness Enhancement Programme (MCEP). MCEP is a Department of Trade and Industry (dti) incentive programme the objective of which is to promote enterprise competitiveness and job retention within the manufacturing industry. The grant amount that the DCC member firms can apply for is dependent on the total assets of the firm and their manufacturing value added (MVA). The DCC is assisting member firms to benefit from the capital investment portion of the programme, which falls under production incentive. The primary objective of this particular incentive is to support the investment in capital equipment upgrading and expansions within the manufacturing sector that will support not only the retention of existing jobs but also lead to the creation of new jobs. The support being offered through the DCC relates to (a) ensuring that firms are aware of the incentive programme, how it operates, what can be covered, and the value that they can obtain, (b) assisting firms with completing and submitting an application and the necessary supporting documentation, and (c) following up and engaging with the Department of Trade and Industry to ensure that applications are processed and that all necessary queries and concerns are addressed. In addition to assisting firms with individual applications, the cluster is also currently submitting a cluster MCEP application. A workshop was held on 04 March 2014 that included all the information on this application, and the benefits that firms can derive from joining. After meeting with individual firms to confirm participation in the MCEP cluster application, eight firms are committed to the MCEP cluster project.
Business Retention and Expansion (BRE) Cluster Support Desk
The DCC has established and implemented a Cluster Support Desk as a central contacting system to assist member firms with a range of queries. The DCC Business Retention and Expansion (BRE) Cluster Support Desk initiative was initiated in the start of 2011 and since then has been extensively utilised by cluster members. The support desk has provided an integrated system of support to many member firms. The aim of the support desk is to assist member firms with technical related problems that they are experiencing. The DCC has in turn liaised with the relevant departments within the eThekwini municipality to assist the aforementioned cluster members with their queries. Firms are requested to contact the DCC to assist them with any technical problems that they are experiencing, with these issues to be addressed through the Cluster Support Desk.
The DCC hosted an Investment and Growth Programme Quarterly Session on 10 April 2014 at B&M Analysts in Gillitts. The session hosted Russell Curtis (Durban Investment Promotion Agency) who presented the planned investment projects for eThekwini, which includes the planned projects that are included in the cityâ€™s IDP. Following this, Dave Watts (Chair of the Durban Port Committee) provided attendees with updates on Durban harbour and logistics developments within the port.
Value Chain C Firm-Level Benchmarking and Manufacturing Support Firm-level benchmarks have been conducted at eight member firms with each firm receiving individual reports and presentations. These presentations feature recommendations for the DCC manufacturing intervention which provides firms with individual consultancy support. Manufacturing intervention support provides firms with consultancy support that is based on the recommendations of the firm-level benchmarking reports and consists of various interventions such as 5S Implementation, Value Stream Mapping,
Electricity Efficiency, Waste Management and Inventory Control. Five firms have completed their consulting support offered by the cluster. This support has added great value to each company individually and this success will be shared at the second quarterly techncal steering committee (TSC) meeting in June 2014. Three member firms are currently undergoing the manufacturing intervention support to increase growth in their business. One member firm has continued with the manufacturing support using their own funding for the consulting as they have received great value from the support.
Competitiveness World Class Manufacturing Best Practise Workshop Total Productive Maintenance Workshop (29 May 2014) The DCC hosted a Total Productive Maintenance Workshop (TPM) at B&M Analysts on 29 May 2014. The workshop was facilitated by Dr. Németh Balázs, managing director and shareholder of Kvalikon Management Consulting & Systems Development Ltd. Dr. Nemeth Balázs has a PhD in Economics in the field of total quality management and an MSc in Mechanical Engineering. He is involved in the organisation of the Lean Forum Conference and Lean
Best Practice Forum in Hungary. TPM is a key operational activity of WCM and the intention of this workshop is to provide a practical understanding of this tool.
Logistics (29 May 2014)
The DCC together with CSIR and their partners, Imperial logistics and Stellenbosch University launched the 10th State of Logistics™ Survey for South Africa in Durban on 29 May 2014 at the Durban Country Club. The State of Logistics™ Survey is an annual, independent study presenting directed research and recommendations on South Africa’s logistics sector.
International Study Tour
in the chemical manufacturing environment. The DCC are undertaking research of 4. Where possible obtain international benchmarking information for our chemical firms in India which will necessichemical benchmarking database. tate two facilitators visiting India in June. The purpose of this is to: 1. Understand global best practices in a These lessons will culminate in a research report that will be provided to cluster memchemical manufacturing environment. 2. Identify and understand the key driv- bers in July 2014. ers of growth in the chemical industry in India and how these can be applied in South Africa (as both are developing countries). 3. (Understand any lessons for clustering
COMPLIANCE DCC Compliance and Value Chain Competitiveness Programmeâ€™s Technical Steering Committee (TSC) (17 June 2014)
The DCC Compliance and Value Chain Competitiveness Programmeâ€™s Technical Steering Committee (TSC) will be hosting a Quarterly Meeting on 17 June 2014. The meeting will commence with a presentation on the update of the General Environmental Legal Register by Conrad Geldenhuys (Protocor) as well as a presentation on the update of the Safety and
Health Legal Register by Helen Ferendinos (Protocor). The workshop will conclude with presentations by DCC firms who participated in the Firm-Level Benchmarking and Manufacturing Support Programme. These member firms have already derived valuable benefits from this programme, such as 5S Implementation, Value Stream Mapping and Energy Efficiency Assessments. The feedback session will therefore provide other member firms with insight into the success of the programme.
planned environmental and
related compliance policy yet to be adopted
DCC facilitators are researching policy, specifically focusing on KZN, that is planned and that will impact on member firms. This policy has not yet been adopted and thus research will assist member firms with planning.
Gauteng Health and Study Tour (22-23 May 2014)
The DCC hosted a study tour in the Gauteng region. The objective of health and safety
policy is to prevent accidents and environmental incidents through proactive control. The tour took place in Gauteng on 22 â€“ 23 May 2014 and entailed visits to three firms (BMW, Nampak Glass and Nampak Tubes). This tour allowed attendees to reflect on their approach to health and safety over the two day period.
Air Emission Licence Sub-Committee A committee meeting was held on 16 April 2014 where member firms discussed the application process for Air Emission Licences and highlighted the challenges they are facing. These challenges will be presented to the Health Unit at eThekwini Municipality. The next meeting is scheduled for 09 June 2014 and will include feedback from the municipality on application processes and they will also be available for any queries by firms.
Transformation B-BBEE Information Session The cluster will host Robin Woolley (Transcend) on 06 June 2014 to lead a session that will highlight the changes to the revised B-BBEE Codes, looking specifically at Skills Development and the implications of these changes on businesses. Skills Development is one of the three priority elements, thereby all firms who qualify under the generic threshold will have to comply. Under the new codes, Skills Development has increased its weighting, indicating the significance and need for skills development in South Africa as seen by government. The workshop will unpack the two sub elements, namely skills and training and learnerships as well as the allocated bonus points for skills development spend on learning programmes for black employees.
New Organising Framework
The cluster hosted a session which explored a guideline to complete WSPs accurately. Kedibone Moroane, the research and skills planning manager for CHIETA assisted DCC members to understand these new job profiles which will make completing WSPs easier and more accurate.
Skills Development Management Development Programme (MDP)
The DCC together with a key institution will develop the DCC Management Development Programme (MDP). Various business schools from the tertiary institutions presented proposals to the Exco on 23 April 2014, UKZN presented to the Executive Committee on 21 May 2014. The committee will then select the institution most suited to facilitate the customised MDP.
Graduate Development Programme (GDP)
The DCC is working on a customised Graduate Development Programme (GDP) that will focus on the development of graduates within firms. A GDP brainstorming session was held at B&M Analysts on 16 April 2014. Member firms discussed the proposed modules that will be included in the programme.
DCC Skills Development and Transformation Programme’s Technical Steering Committee (TSC) (18 June 2014)
The DCC Skills Development and Transformation Programme’s Technical Steering Committee (TSC) will be hosting a quarterly workshop on 18 June 2014. The TSC meeting will be followed by a session by Careways. Careways is South Africa’s leading provider of Employee Wellness Programmes. Their employee wellness programmes have been carefully designed to be outcomes based. They continue to provide innovative and comprehensive wellness solutions for the direct benefit of firms. The workshop will explore key methods and ideas utilised to assist leaders and management with psycho-social support to employees in need of emotional balance as well as provide insight into possible sustainable and successful wellness programmes that firms can implement.
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