21 August 2007
The South African building paints market earned revenues of US$630-million (about R4.4-billion) in 2006, with future revenue set to grow as construction activity increases and expendable household income rises, a report by global growth consulting firm Frost & Sullivan has found.
The report, which was released last week, adds that South Africa is a suitable base for expansion into Southern Africa, with earnings in the industry by 2013 estimated at $947-million (about R6.6-billion).
Frost & Sullivan expects growth of 6 to 10% in the building paints market between 2007 and 2010, and states that heightened customer awareness about products will lead to intense competition.
“The 2010 World Cup coupled with rising economic growth and a general increase in building maintenance has led to surging demand for building paints,” Frost & Sullivan research analyst Cornelis van der Waal notes.
“In addition, fierce local competition is keeping prices stable, making paint more affordable for end users. As a result, paint manufacturers now have an exceptional opportunity to boost market share and revenues.”
This enhanced demand will however taper off over the long-term and market entrants will have to move swiftly to capitalise on existing opportunities.
The company states that manufacturers who want to launch operations in South Africa will have to consider increased price competitiveness, improved production processes and compliance with local and national health and safety standards.
Meanwhile, existing manufacturers “will have to creatively solve issues centred on health and safety as well as ensure black economic empowerment compliance in a market where the government is a major end user,” the report states.
The report points out that at present, many paint companies are unable to expand at the rate of current demand primarily due to legislative changes, growing customer awareness about health hazards as well as a reduction in skills in the local market.
In addition, competition is intensifying with the entry of small participants into a market that has been long dominated by a few big players, while manufacturers also have to take an environmental stand.
“South African customers, though not as aware as their European counterparts, are increasingly conscious that lead in paint is dangerous,” states Van der Waal.
“In addition, there has been increased demand for low VOC (volatile organic compounds) paints, particularly in the expanding DIY (do-it-yourself) category.”
Frost & Sullivan expects this trend to continue and manufacturers with “older technology” will have to invest in newer production methods in order to maintain and expand market share.
SouthAfrica.info reporter
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