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Africa is far from being considered a unitary market. It comprises of 55 states, which tend to share similar market dynamics but equally differ significantly in how business is conducted. To address such disparities, which often frustrate trade, African countries have been coalescing around regional trading blocks such as Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), Southern African Development Community (SADC) and Economic Community of West African States (ECOWAS). Of course, the citizens of Africa await with bated breath the expected benefits of The African Continental Free Trade Area (AfCFTA), which was unveiled in 2021. AfCFTA, a brainchild of the African Union (AU), is expected to form the world’s largest free trade area connecting over 1.1 billion people across the African continent boosting intra-African trade once import duties and non-tariff barriers are eliminated.

As history has shown in other regions, a continent on a development path will encounter several challenges along the way. Africa’s lubricant market is not unique and is, therefore, beset by several challenges that have to be overcome or managed. These challenges are similar across Africa. There are the adverse effects of political instabilities in some countries and regions, unstable demand for lubricants with high variability being evidenced across regions, logistical challenges exacerbated by over-reliance on a poor road transport network, counterfeits and sub-standard lubricants and, lastly, the skill and technology gap.

The complexity of doing business notwithstanding, Africa still presents an attractive market for lubricants. Various sources have placed the continent’s annual demand at two million tons with South Africa, Nigeria and Egypt being the leading markets. This market is characterized by an ever-growing enlightened market concerning quality and performance with the best communication platform, where we have the mobile phone industry with a penetration of over 65%. Many countries in Africa are experiencing tremendous growth in various sectors such as energy, transport and industries with a revamped focus by the individual governments toward economic growth. To address the quality and counterfeit challenges, and safeguard not only the customers but also the suppliers, there is marked interventions by standards and regulatory bodies in many African countries. The regulation and enforcement of base oils, additives and lubricants standards are gaining more focus than before.

Evolvement and entry into the African market: Typical trends
A typical generic trend observed for lubricant business evolvement and entry into the Africa market can be in any of the following stages as shown in Figure 1: incorporation, diversification, distributorship, own brand and acquisitions and/or joint ventures. Most companies start with a fuel’s outfit and later diversify to lubricants and liquefied petroleum gas to increase profitability. To immediately penetrate the lubes market, some players opt to seek a partner to distribute their lubricants either locally or importing. Other players, typically the indigenous African oil companies, enter the lubes market by launching their brand of lubricants, which is either manufactured locally or imported. Lastly, acquisition or joint ventures are other ways that companies can enter into the African lubricants market.


Figure 1. Africa lubes market entry and evolvement.

Several models and partnerships have been and can be employed in Africa for a successful lubricants business.

Local presence. Some companies opt to become fully incorporated in the African market to be able to address and participate fully in the marketing activities in Africa. Full incorporation enables a company to blend the lubricants or import as it deems possible locally. Local blending offers tax benefits in many countries where the taxes charged on finished products are higher compared to that of raw materials (base oils and additives). Moreover, local blending offers additional advantages to a company as flexibility can be built in to adapt to the market. Such a company also enjoys the advantage of real-time market knowledge and speedy reaction to any changes in that market.

However, many companies lack the appetite for incorporating in Africa due to various strategic reasons, and hence, may opt for several other options such as distributorships or agencies. Three variants exist. A company may appoint a lubricants company to distribute and market their lubes. Secondly, one can appoint a consumer end-user to use, distribute and market its products. The third variant can involve the appointment of a company in a complementary sector such as filters.

Joint Ventures (JVs). JVs offer numerous benefits such as cost and responsibilities sharing, complementing skills and core competencies, gaining new insights and expertise and access to relationships and networks. In the lubricants sector, JVs offer a significant advantage in technology exchange where Africa clients become more enlightened on the new technologies and trends. Furthermore, JVs can take various strategies when considering marketing strategies. One of the approaches is licensee. According to the business dictionary, a licensee is a person or business that holds an approved license to conduct an activity, such as operating a business. Increased growth of this business model has been experienced in Africa and still offers significant penetration capabilities for companies interested in the African lubes market. One can acquire licensee rights for the full range of lubricants. A company also can acquire licensee rights for a line of products.

Toll blending. Toll blending agreements are where one’s lubricants are produced and packaged by a different company. Such models are widespread, especially considering the economies of scale and lube blending plant capital investment requirements.

Once a company has settled on the model to launch its business in Africa, there is a need to create demand, visibility and most importantly offer technical support.

Demand creation is the process of increasing the demand for a product or service using marketing techniques, which ensures the customer understands why they need a new product or service. Some of the practical tools that are employed include certification of products and OEM approvals. ISO certification, for instance, gives confidence to the customers in terms of quality and performance. OEM recommendations and approvals, on the other hand, give comfort to customers that they are using the right product for the type of machinery in question.

For customers to interact with a company, they need to know and understand the company’s business and products. This can be attained by either product visibility marketing or brand visibility marketing. In product visibility marketing, an organization highlights product features, benefits, quality and other product specific ideas, while in brand visibility marketing, the organization aims at enhancing the company’s positive reputation or standing in the market to improve customer relationships.

Use of tools like Proof of Performance (POP) stories achieved in Africa can be shared recognizing the African perspective. The use of POPs works with the confidence that people trust what other people say—they trust and offer referrals. Similarly, social media platforms provide a high visibility medium. With a significant mobile phone penetration of more than half a billion subscribers, use of such platforms to reach the target market is an effective means.

Provision of technical support and services go hand in hand with the establishment of a successful lubricants business in Africa. This includes offering technical training to partners or distributors to not only enhance after-sales service but also improve the market preferences from the customer’s perspective. Customer training similarly sheds light on new technology and market aspects and also builds loyalty. Technical services also may be in the format of offering advice to industrial customers on modern maintenance methods, such as lubricants condition monitoring. In a recent survey carried out by the author, 100 companies were interviewed; most of the respondents (70%) indicated they employ lubrication condition monitoring and 46% temperature monitoring as illustrated in Figure 2. This undoubtedly offers an avenue which oil companies can employ not only as a service proposition but also to transfer technical knowledge to many customers and players that would directly or indirectly counter and address ill vices such as counterfeits and substandard lubricants in the market.


Figure 2. Typical application of condition monitoring techniques.¹

In conclusion, the African lubricants market retains the significant potential for business offering a reachable market. One notable aspect most business strategies are concurring with is, “Africa is the next frontier.” The continent is witnessing considerable progress in economic growth. Coupled to this are the new political promises, which are offering enhanced eco-political goodwill in most of the countries on the continent. With this in mind, we underline the proposition that for marked market penetration and growth, various partnerships and models need to be considered.

This article first appeared in Lubezine Magazine, the free quarterly magazine that focuses on Africa’s lubrication needs. Adapted, with permission, from Lubezine. For more information on Lubezine, visit www.lubezine.com.

REFERENCE
1. Wakiru, J. M., Pintelon, L., Muchiri, P. and Chemweno, P. (2021), “A comparative analysis of maintenance strategies and data application in asset performance management for both developed and developing countries,” Int. J. Qual. Reliab. Manag., doi:10.1108/IJQRM-02-2020-0035.