Frost & Sullivan report: genset opportunities in East Africa

The East African countries of Kenya, Tanzania and Uganda “present robust opportunities for diesel genset suppliers”, according to a new report from market research company Frost & Sullivan.

The Kenya, Uganda and Tanzania markets earned revenues of $134.7 million, $44.5 million and $145.1 million respectively in 2014. By 2018, however, revenues generated by diesel gensets in these markets are estimated to reach $168.5 million, $65.4 million and $220.1 million, states the report.

Muneera Salie, energy & environmental industry analyst at Frost & Sullivan, said: “In Uganda, widespread power shortages have led to an average of five hours of load shedding per week, forcing companies located here to adopt diesel gensets.

“Businesses want to maintain uninterrupted production, and this presents robust opportunities for diesel genset suppliers.”

Increased demand for gensets

In Tanzania, the government’s policy of institutional reform to attract foreign direct investment has seen an increasing need for diesel gensets.

“One of the major forms of institutional reform, which has occurred is the large-scale drive towards privatisation of state enterprises – thus far, approximately half of the 400 parastatals have been privatised.

“This has resulted in resources being allocated more efficiently and decreased corruption, in turn lowering the costs of doing business and fuelling the demand for diesel gensets,” the Frost & Sullivan explained.

Opportunity for natural gas

East Africa has identified an abundance of natural gas reserves that show potential for a substitute feedstock instead of diesel, which is expensive to run.

A big challenge is the negative perceptions attached to gensets due to the increasing number of suppliers distributing low-quality, cheap diesel gensets which perform poorly and frequently breakdown, said the analysts.

“The insufficient skills of technicians often leads [customers] to select incorrect diesel gensets for given applications. As a result, the equipment does not function properly or fails, breeding mistrust for suppliers,” Frost & Sullivan added.

“Within these circumstances, many customers have quite naturally remained loyal to a brand, which they have used before or which has been in the country for many years. For brands that have not yet established themselves, an effective strategy to build trust and establish strong client relationships is necessary to obtain market share,” Salie explained.

ESI Africa