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Wire, cable and tube: 3 reasons why you should invest in Africa - and more

Published: - 19/11/2019 Author: Vood, Sales Dep.
Wire, cable and tube: 3 reasons why you should invest in Africa - and more

From 11 to 13 November major international players from the wire, cable and tube industry gathered in Johannesburg, South Africa, for the inaugural Africa Wire, Cable and Tube Conference 2019. Organized by CRU, together with the help of The Southern African-German Chamber of Commerce and Industry (AHK), the event hosted over 100 delegates, more than 20 exhibitors, and a 2-day schedule packed with presentations and panel discussions. The conference provided networking opportunities for all attendees wishing to explore new market possibilities, as well as an overview of the African wire and cable sector. was present as an official media partner with an on-site table top and witnessed a roaring success.

Trends in the wire and cable industries across Africa
The overarching theme is that Africa is a continent facing numerous challenges at present, but rife with opportunities.
A major highlight goes to Michael Finch, head of the CRU, and his speech Exploration of how global mega trends in the wire, cable industries are being evidenced across Africa, which provided a complete picture of the regional insulated metal wire and cable market. As stressed by Finch in his presentation, before tackling the current African situation, it is important to identify the driving segment of the global market, and determine its health state.
According to CRU’s research, energy cables account for 75% share, while communication cables account for only 7% and winding wire for a more respectful 18%. Construction sector was also the largest contributor worldwide for wire and cable demand growth in 2018 (38%). Almost equal in size, utility and industrial sector account for 26% and 25% share of the market respectively, with transport being the slowest sector.

With definitions of the driving forces out of the way, the focus shifted to global trends and volumes, and their implications to the insulated metallic wire and cable demand. It does not come as much of a surprise that 2019 has been a weak year. The global economic slowdown has of course weighed heavily on the wire and cable demand and the cable market is at its lowest since the 2008 crisis. However, the situation does not look too depressing.

Why demand fell this year? The major culprits are China, Germany and India

China in particular has slowed down significantly in 2019, this is partly due to electricity grid investment target being unrealistic, and also because of the turmoil regarding the automotive sector. The prolonged US-China trade war certainly didn't help in that regard either. In Europe, more specifically in Germany, the cable demand is worsening due to contractions in end use sectors, coupled with external uncertainties. In India, the automotive sector is in free falling, auto sales dropped notably and construction sector also looks fairly weak.

How big is the African market? What are the risks and rewards?
Standing to CRU’s research, Africa’s insulated wire and cable consumption in 2018 was of $6.8 bn (3.9% of world consumption), which pales in comparison to China ($52 bn). However, figures appears to be positive for the next five years (2020-2024), whereas the Chinese market, as mentioned above, struggles to recover.

Biggest opportunities lie especially in investments in transmission and distribution lines (eg. in South Africa and Nigeria), renewable developments (eg. in Morocco and Kenya) and residential construction (eg. Nigeria). Therefore, despite growth prospect being lackluster in the short term, Africa shows huge potential in the mid-term, both on the demand and production sides, with Egypt and Morocco being its bright spots. Moreover, the wire and cable industries are also poised to benefit from continued investments in electrification.

Still several challenges to overcome
This is not to say that Africa does not have its own share of problems; emerging from the panel discussions there are many issues currently being addressed, most notably:

- lack of electricity and infrastructure;
- dumping of smuggled products and power cable theft (because of copper wire);
- low demand for cables at the moment;
- corruption and manipulation of document.

Governments of many African countries are already making determined efforts to deal with these difficulties.

Culture as a relevant factor
As some of the speakers have highlighted, when looking at foreign markets for investments, people tend to focus on data, figures and openings. One thing that it is often overlooked though is culture. Companies really looking forward to invest in Africa, should first and foremost try to deepen their understanding of its culture and tradition. Out of the box thinking is indeed required, as well as some form of adaptation, as western business models won’t necessarily fit. Africa is not just a mineral deposit filled up with resources to exploit, but a land of new opportunities to explore.

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