a th productioncot evinces © reolNoLocice senics © Nes co. BAINT PRODUCTION cor Centre forthe Development of Industry IACPIEEC Lomé Convention)THE CDI GUIDES Over its fiftoon years in operation, the Centre far the Development of Industry (COI) has acquired extensive technical and canmercial know-how in ‘he creation, development and rehebiitation of srrall_and_mediumsized industries in the ACP counties (Arica, Caribbean and Pacific), perticularly ‘trough the establishment of lasting partnerships with companies in the European Union. In publishing this collection of "PRACTICAL GUIDES", the COI is mocting a ctbarly expressed need by ACP promoters and companies in tho EU wishing to lay the foundations for industisl co-operation. The purpese of these guides is to tenable them to adaot to the technical, commercial, finarcial, edministretive and fegel environment of the diferent countries. Designed to ease thelr task by ‘loving detailed information - in simple practical terms - on a specific aspect (Of field of ther activities, those guides afe intended above all to be affective {ols which managers can use on a day-to-day basi To propare the guides, the CDI calls upon the services of consultants researchers and businessmen in both the ACP countvies and the European Union ~ with extensive oxperiance. in the field concsmed, in the practical problems actualy encauntered by entrepreneurs and in the solutions to be ‘2pplied. Whenever citeumstances allow, the CDI cooperates with partners {consultancy bureay, research body. specialised institution, etc.) to ensure thet ‘the guides are as widely circulated as possible. ALREADY PUBLISHED “TECHNOLOGIES” SERIES ‘Vane 2. Phosphon e producer “CONTRACTS AND PARTNERSHIPS” SERIES JSINESS SERIES Nay no be sold by peso or araistons ote than the CD. ice 20 ECU. Rapaducton ‘hthoned with ination ofthe soees, excep! or comma pupa. &Centre for the Development of Industry Created under the Lomé Convention, the Centre for the Development of Industry is 8n original and effective intervention organisation. I aims to provide Concrete support in the creation, development, rehabilitation or privatisation of ‘mall and medium-sized industries in ACP countries (A‘rica, Caribbean and Pacific). To tis end, it promotes the establishment of lasting co-operation and partnarshine hatwaen ACP promoters and companies of the Europesn Union. ‘These industal pernerships can take various forms: joint venture, menegement contract, marketing egreement, licence, franchise, wensfer of technology, Subcontracting, ste. The CDI offers “mode-to-moasuro™ assistenco formulas ‘adapted to the specific needs of each individusl case and provides assistod ‘companies with long-term follow-up services ‘Tha CDI has correspondents end local antennae in most ACP and EU ‘countries. It doals directly with entreproncurs, without necessarily requesting the agreement of the ACP national authorities concemed CDI assistance and services offered free of charge (non-exhaustive list) Project definition and study stage + Search for EU or ACP partners * Contibution towards travel expenses to flow direct contacts between potential partners * Feasibility studies and ‘market surveys for products or actities, and studies of the potentials offored by promising sectors » Diagnostic studies for rehabilitation, diversification, privatisation or expansion of existing ACP companies. 1, Properatory stage + Assistance in financial engineering and presenting the project to financing institutions + Advice on the choice of technologies and equipment, expertise in ‘second-hand equipment » Assistance in ngotiting partnership agreements or the purchase of industrial equipment. 1M, Startup and development stage ‘Technical and management assistance + Staff training * Marketing and export ‘sistance + Search for information of en industrial nature. (CDI - Coven ron re Devecomuenr oF noustRY ‘venus Harrmana Debroux 52 B- 1160 Greate Belgium Tel 7322679 18 11 Fax : 6322675 26 03/679 1821 Telex : 61427 ealThis guide has been prepared by: Dr Sam D. Ibekwe. r S. Ibekwve, @ British citizen of Nigerian origin, is @ Doctor of Chemistry {rom the University of Manchester, United Kingdom. He has held positions in technical services, research and development departments and marketing departments for Africa of large European chemical ‘groups. As Director of the consultancy fm Pace Chem & Consultant, he is also Involved as corauitat and project leader in the eld of olastomers, resins, plastics, costings, paints and polyurethanes. He has also been In charge of ‘setting Up joint Yontures between European and Nigerian companies. He owns several patents in the field of catalytic chemistry and is the author of 2 major work on polymer alloys. He has been an associate condultant with the COI since 1992, Pace Che & Consutran Sea. (PCEC! fs Van Eyck 51 B-1050 Gruxeles Tal: +32 2 640 99.95 Fax: +522 616 94.29|. SELECTED EC PAINT EQUIPMENT MANUFACTURERS .. |. LIST OF ABBREVIATIONS USED. . APPENDIX. Guide to Paint Manufacture in ACP Countries ‘TABLE OF CONTENTS EXECUTIVE SUMMARY. INTRODUCTION PAINT TECHNOLOGY [KNOWING THE LOCAL MARKET. ASSISTANCE FROM COI. SELECTED CASE STUDIES OF CDI INTERVENTION... PARTNERSHIP. AGREEMENTS MODEL FEASIBILITY STUDY, [SELECTED EC PAINT COMPANIES & TECHNOLOGIES worer won 29Guide to Paint Manufacture in ACP Countries EXECUTIVE SUMMARY ‘This study sets down the key eloments in putting together paint ih the Afvican, Carribean and Pacific (ACP) countries, in Partnership vith European Community (EC) paint manufacturers. 1t examines the pitfalls that sometines hamper the successful transfer of technology to ACP countries, and sets out guidelines for Ko? entreprescurs wishing to go into paint manufacture, end for EC ‘Companies considering setting up operations in these counries. ‘The role of the Centre for the Development of Industry (CDN), Brussels, ag a principal instrument for bringing together ACP entrepreneurs and Ee ‘companies 15 llustrated by case studies oF ODI Intervention and assistance in several ACP paint projects. RC paint companies interested in Investment in ACP countries, whether in warketing or in manufacturing, can call on the resources of CDT to find suitable partners. For the ACP entrepreneur, obtaining new equipment or technology, heed no longer be a hit or mist operation, thanks to the data base on EC paint manafacture at the dispasal of Cl. ‘The current recession In Europe and the difficulties in the paint industry in particular, have cast dark shadows over the investment ‘Strategy of many EC paint manufacturers. They are less willing. to invest wutsice the BC, and even the new markets Of Fastern Europe hold no’ attraction, ‘German companies are deeply involved in the former Hast Germany. Nevertheless, we have talked to many companies and institutions and Cecreised ovr professional judgement in listing a number of companies ‘whom we ‘believe could be persuaded under the right conditions, to, Invest in ACP countries. Page -Guide to Paint Manufacture in ACP Countries EXECUTIVE SUMMARY(cont'd) ‘These conditions include : x, Political stability typified by AKZO's investment in Mauritius with V.A. Polymers Ltd in Mauritius. = Management capabilities as Ulustrated by Zaire-SIGMA where the parent company installed a Belgian Managing Director. BC companies most kely to wish to invest in ACP countries fall into ‘three’ main categories: Companies from EC countries with favoured historical relations with ‘heir former colonies, for example ICI Paints in Nigeria. Multinationals investing In selected third world countries in a global investment policy, for example La Signeurie(ELF) in Francophone. Africa. Small. family-owned companies looking for extra sales from overseas ‘markets, for example KALON PLC of the UK, trading in West Africa. ‘To assist the reader in locating quickly areas of particular interest in this guide, It has been divided into primary sectors as follows ‘PAINT TECHNOLOGY ‘This section describes what paints are and how they are made. It is Intended to inform the ACP entrepreneur of the nature and level of ‘technology required in palnt manufacture. It would also assist an entrepreneur in assessing his financial and technical capability for ‘engaging in such technology. [KNOWING THE LOCAL MARKET ‘The importance of market research in establishing the size and nature of the local paint market is described in this section. The ACP ‘entrepreneur is able by this method to quantify his local market needs, ‘and at the sane tine identify from the raw materials Ist, what can be sourced locally. Page - 4Guide to Paint Manufacture in ACP Countries EXECUTIVE SUMMARY(comt'd) ‘in addition to knowing his local market, the ACP entrepreneur will Shave looked at the political and fiscal incentives in his country for foreign investors. For EC paint companies, this section of the guide is a useful indicator ‘ot what ‘to expect from the ACP partner. ASSISTANCE FROM CDI ‘The CDI has over the past decade assisted a number of paint Companies in ACP countries, especially in the following areas: = technical training of ACP personne! = diagnostic visits to ACP paint factories = rehabilitation and start-up programmes = sourcing of technology and machinery = assistance with contracts 12 CD] INTERVENTION ACP entrepreneurs wishing to start new projects in paints or looking for assistance from EC companies for existing projects can, by readin Case studies of CDI intervention, know where to look for help. when they require it. Case studies discussed are from palnt projects in Zaire and Mocambique. For EC companies not familiar with ACP countries, this sector of the Bulde is intended to familiarise them with the CDi, an organ of the ReP-RC Lome Convention, and how it can help them. Page - 5Guide to Paint Manufacture in ACP Countries EXECUTIVE SUMMARY(cont'd) PARTNERSHIP AGREEMENTS, ‘The different forms of agreement that can be made between ACP MODEL FEASIBILTY STUDY Inputs from both the ACP entrepreneur and the EC partner to assess the viability of paint projects are listed. Properly structured, a good feasibility report is the first real test of the viability of a project. Jadging from CDI reports on earlier inventories, many ACP entrepreneurs were given either faulty market intelligence or none at all, before embarking on projects whieh are now In trouble. Given the very different operational environments of ACP companies ‘compared with thelr potential EC partners, a reliable feasibility report {S'an important instrument in persuading. an EC partner of the ‘suitability of an ACP client or country for foreign investment mmanufacture. paint ‘SELECTED EC PAINT COMPANIES & TECHNOLOGIES, Working from a data bank on paint and paint equipment manufacturers from elght principal palnt-mating countries of the European community, 200" palnt and equipment manufacturers were examined, and from these, 29 paint ‘companies and 8 equipment manufacturers have been selected ‘and listed. Companies have been listed by country and technology. giving an ACP ‘entrepreneur a quick guide to companies who by technology. product type, language or cultural affiliation, are best suited to work with them. Page - 6Guide to Paint Manufacture in ACP Countries 2. INTRODUCTION ‘The Centre for the Development of Industry, Brussels, CDI, has published a series of studies on technologies available within European. Community countries, EC, which meet the needs of member states of the ‘fran, Carribean, and cific , ACP, ofthe’ ACP“ Jone, Convention ‘countries. ‘These studies are specially meant to give entrepreneurs In ACP countries, a wider understanding of the technologies available. In EC ‘countries, and thereby Improving. thelr choice in technology, machinery, ‘and know-how from a wide spectrum of industries. By contacting EC manufacturing companies In the preparation of these guides, the CDI is able at the same time to draw the attention of EC Companies to business opportunities In ACP countries. ‘This particular study, Gude to Paint Manufacture in ACP Countries, has’ as objective, the bringing together of the industrial capabilities of ‘the EC countries with the enthusiasm of ACP entreprensurs desirous of going Into the paint manufacturing Business in thelr countries. In preparing this guide, we have looked at recent Cbl-assisted paint. Projects in a number of ACP countries to find out: ~ how these projects have performed, = what can be learnt from those experience ‘As a sequel to above, we have interrogated paint manufacturers In the Fe, “om how heat tn tranater their know-how, to establish viable paint projects in ACP countries, Page - 7Guide to Paint Manufacture in ACP Countries INTRODUCTION (cont'd) coverage The CDI has over the past decade, given assistance 10 8 number of AGP entrepreneurs In the paint Industry. In preparing this guide, the CDI bas as objective, to widen the choice of potential EC ‘partners by looking at the whole spectrum of paint ‘manufacturers within the EC. Pace Chem & Consultants, screened nearly 300 companies within the EC. From these, a number of companies which either by thelr technology. experiance in third world countries, or by their global strategy. would ‘appear to be suitable partners for ACP companies, have been selected. Bight EC countries were targeted, and paint and paint equipment manufacturers in the following countries were contacted: ~ Belgium = France = Germany ~ Italy = Netherlands: = Spain ~ Portugal ~ United Kingdom Particular attention was paid to the manufacture of paints and coatings. Ancillary interests such as resins, adhesives, sealants, and printing’ ink manufacture, have not been included Method ‘This report {s compiled from @ data base search on nearly 200 paint and equipment manvfacturers in elght EC countries. "From these, 30 paint companies and 12 equipment suppliers were selected after being contacted directly by telephone, letters and by fax. Page - &Guide to Paint Manufacture In ACP Countries 3. PAINT TECHNOLOGY Definition of Paint ‘A Paint is a suspension or emulsion of one or more pigments, extenders. ‘and additives, blended with a resin and often a solvent, whlch when ‘Spplied to an appropriate substrate, forms a film presenting, both Aecorative and protective properties. An emulsion is a ailky fluld formed by the suspension of very finely ivided particles in water, oil or other forms of resinous liquid. ‘The resin in a paint Is the binder or adhesive which keeps the Colours, additives and other ingredients together, to give a protective Surface when the paint dries Paint manufacture in thus a complex process which aims at converting fa wide range of raw materials into a range of finished goods that meet the sophisticated needs of customers. Making up the final suspension of emulsion from predetermined Ingredients is in itself a simple Operation, but the establishment of formulation ratios, and the choice of appropriate pigments, binders, additives ete Is @ complex business, many of them the results from other specialised branches of the ‘chemical industry. ‘Types of Paint ‘Two types of pairt are generally recognised in the market: = water-based paints (60% of market) = solvent-based paints (40% of market) Water-based paints, as the name implies, are emulsions of paint ingredients dissolved mostly In water as the major solvent. In ‘consequence, there is no escape of organic and hence ecologically hharmful fumes into the atmosphere. “The trend in Europe {8 towards water-based paints for environmental reasons. Page - 9Guide to Paint Manufacture in ACP Countries PAINT TECHNOLOGY (cont'd) Solvent-based paints contain proportionally higher quantities of organic solvents such as aromatles, ketones ete for dissolving the different types of binders such as vinylics, polyurethanes ete to give tough and high gloss finishes. Solvents add to the cost of paint manufacture and In‘recent years, their orcape into the atmosphare when 4 solvent-baned paint dries, is regarded at environmentally harmful and increasingly ‘hacceptabie. Cassification of Paints by End-use Paints tend to be classified into two broad groups in the market place by virtue of thelr end use applications. These are: ~ Decorative = Industrial DECORATIVE PAINTS are mostly household paints used for indoor and ‘exterior wall purposes. They are based on various types of binders, ‘essentially synthetic polymers such as styrene acrylles, pure acrylics, Versatate blends, acetates and pressure polymers. These binders give Good flim coverage in various types of paints including high gloss’ and ‘enamels, Decorative paints are particularly sultable for ACP countries ‘here the most significant end-use area Is interior and exterior wall Coating of houses, INDUSTRIAL PAINTS are used as cover In high performance end uses such asi ~ automotive ~ aviation applications ~ corrosion protection = marine paints = metal and coll protection Page - 10Guide to Paint Manufacture in ACP Countries PAINT TECHNOLOGY (cont'd) In order to mest the very high performance standards required, Industrial paints are composed of high performance synthetic polymers Such as specialty serylies, abrasion resistant polyurethane resins, lead- based paints, UV-cured polymer, epoxies and others as binders. ‘The principal constituent resins are the products of highly specialised ‘Chenleal processes, and are on average, very expensive. Licences for Ganufacture of high performance resins are ‘ifficult and expensive to Shlain and multinationals are usually the leading producers of resins for industrial paints, Consumption of industrial paints is directly related to the degree of {ndustrlaligation of a country. For most ACP countries, automotive car manufacture, a Important market for industrial palnts, ts Walled or fon existent. “There is need for anticorrosion and marine paints in ACP Countries for construction and shipping, but these are on the whole too small to justity local maufacture of such paints. Chemical Raw Materials Most of the raw materials used In paint manufacture are chemicals, and mnost of these are currently not available in ACP countries. Raw materials used in a typical palnt manufacturing operation can be classified as follows: Pigments .. 2% aaaitives a7 Binders (resins & emulsions) 14 chemicals Solvents... its. Extenders.. others TOTAL, Page - 1Guide to Paint Manufacture tn ACP Countries PAINT TECHNOLOGY (cont*d) PIGMENTS, Pigments form a large proportion of stored items because of the variety of colours and types needed to make a comrehensive range of modern surface ceatings. Titanlum dioxide is the major base for white paints, and majorly of paints are white. “To obtain non-white paints pigments are used. Mineral-based inorganic pigments such as iron oxide, ground to a micconised opacity are added, fiving stability to the total mixture. Greater variation in colours can be obtained by using organic dyes such as toluldene red dye, etc. ADDITIVES {A wide varlety of products are grouped under the name additives. ‘They include anti-UV agents to Stop paints deterorlating with light, biocides to keep away moss and Insects ete. BINDERS. Binders are often synthetic adhesive polymers such as acrylics, styrenic acrylics, polyurethanes ete, and are the essential elements In holding together’ the different Ingredients of an emulsion to form a film. ‘They vary {rom water-soluble resins such as acrylics, to solvent- soluble alkyd resins. ‘CHEMICALS, Stabilizing agents such as silicone surfactants and thickeners are ‘added to alter viscosity, and stablize the emulsions resulting from paint manufacture SOLVENTS A number of chemical solvents, mastly toluene and ketones are used in Paints to dissolve components which are not soluble in water, ons Vegetable olls such as castor oil are stil used in a number of paint Formulations, especially alkya-based resin paints. Page - 12Guide to Paint Manufacture in ACP Countries PAINT TECHNOLOGY (cont'd) BXTENDERS. Extenders can be anything ftom lime, chalk, sulphates, to carbonates, depending on the type of paint. Packaging {In addition to chemical raw materials, packaging materials are important elements In paint storage and marketing. The common container sizes used in the paint industry range trom 200 litre drums to 20, 10, 4, and 1 litre, and then sub-litre sizes of $00. 250. and 100 mis,” The 30 and 10 litre sizes are referred to as "drums" fo pails", and from 4 litres down as “tins” or “cans”. Plastic Containers are also used, particularly for latex paints. Metallic Containers need to have their interiors coated Labelling Successful marketing of palnts depends to some extent on presentation. Cans used for holding paints can thus be lithographed with moltiprint colours, oF pasted with printed paper material Local Sourcing of Raw Materials ACP countries can source a number of the ingredients mentioned above. Extenders and oll could be sourced locally. “Titanium dioxide is avalable in some ACP countries, but the quality would have to be ‘carefully analysed to make sure it is suitable for paint manufacture, It'should ‘be possible to make adequate containers and labels locally. Soureing of packaging and labelling materials locally can help in Keeping costs down and Improving profitability. Page - 13Guide to Paint Manufacture in ACP Countries PAINT TECHNOLOGY (contd) Paint manufacture ‘The key operation in paint making is the dispersion of fine pigment articules into « liquid polymer binding medium, using hign speed mbers or dissolvers which wet the pigments. Making paint thus consists of following carefully, a series of systematic procedures which have been broken down here into sequential ‘Sperational Steps as Follows: 1, Raw materials approval and storage. 2, Welghing and transfer of appropriate raw materials into the mil 3. Grinding operation, ending by a sample check using Hegman gauge reader. 4. Further aill rotation in order to stabilize the dispersion ‘5. End of milling. The ball charge Is retained when the mill is drained through a course grating. The dispersion is pumped {nto the mixing tank 6 Incorporation of other additives by mixing to a uniferm state, 7. Tinting fs carried out at this stage if required. 8. Samples are taken for colour evaluation and analysis of other Fheological properties of flim. 9. Final cheek for viscosity, density etc Is carried out. Eventual Addition ef solvents, and’or driers If nevessary to moet viscosity ‘and drying specifications. 10, Material is strained and filtered for filing into cans, AL Product is gravimetrically or volumetrically filled into cans and labelled. 12, Storage in warehouse. Page - 14Guide to Paint Manufacture In ACP Countries PAINT TECHNOLOGY (cont'd) Selection Criteria for Recommended Technologies ‘The principal requirement in chosing any process for manufacturing @ product Js that it must be appropriate for making the desired product, In the case of ACP countries, other parameters particular to these Countries need to be considered. These include: = Near total absence of an industrial cultural base. = Lack of secondary supporting Industries. = Shortage or absence of local raw materials. = Shortage of technically trained and managerial personnel. = Relatively weak purchasing power. Suitable technologies for ACP countries should be able to address these Gifriculties as well as run profitable operations within the capacity and Comprehension of those appointed locally to man them. Suitable sign post to focus on are summarised as follows: Desirable ACP Plant/Technology Structures = Small to medium size paint plants (500 to 2000 tonnes/yr) = Relatively unsophisticated machinery and technology. = Popular products are essentially decorative paints for interior and exterior wall cover. The preferred colour Is white, although there fsa market for colours. = Few ACP countries have a large enough automotive or ship Industry to justify significant production of industrial paints. = Synthetic latex, vinyl and high gloss paints are popular. = Products on sale should be relatively cheap with a fair proportion packaged in small cans for the small local painter = Local staffing should be around 20 personnel vage - 15Guide to Paint Manufacture in ACP Countetes PAINT TECHNOLOGY (cont ") For ACP countries, the primary requirement is to achleve this technology in partnership with BC companies at affordable prices For this reason, the following paint technologies may be best sulied to ACP mrarkets: = simple mechanical dispersing equipments, usually ball and pebble ‘lls, roll mills, sand and bead or ‘pearl mili, More sophisticated Glspersers such as attritors, microflow mills etc. exist, but the less Sophisticated mills are more sulted to the environment of ACP countries, as well as costing less. = Storage tanks (preferably made in ACP countries) = Laboratory equipments such as viscosineters, colorimeters, reflectometers, colour matching cards etc. which enable the local mnanvfacturer to assure quality control, are absolutely necessary. = supply of ready made resin systems for local blending at the Initial Stages should be the target. Local resins manufacture can be started when adequate technical background and market are assured. Page - 18Guide to Paint Manufacture In ACP Countries PAINT TECHNOLOGY (cont "d) Paint Equipments Equipment manufacturers in the BC supply a wide range of machinery to the paint industry. ‘These can be classified into two main groups: = pRopucTiON = PACKAGING Typical equipments for paint manufacture include: = agitator mits - — dispersers = Aispensing manchines ~ mikxers ~ laboratory support equipment For ACP projects, the equipments described in this report are hecessery, “The only options are to buy models that are not too Sophisticated, and sufficient to meet the 500 tonnes to 2000 tonnes/ye Bali production tartet, working mininum of two shirts of € bours per day. Pictorial examples of above equipments with descriptions, trom two of Europe's major. paint equipment manufacturers, NETZSCH of Germany. fand. SUSSMEVER of Belgium, are to be found In the Appendix of this, report. vage - 17Guide to Paint Manufacture in ACP Countries ACP entrepreneurs wishing to Invest in paint manufacture in their ‘countries heed to carryout detailed market investigation of ‘consumption patterns within thelr territory and neighbouring markets. Such studies can usually be done by local marketing consultarts, and should have as their objective, to establish clearly to the entrepencur ‘and his external partner, the viability’ of such # project. In principle, they give the local entrepreneur the first indication of Whether there is a market for his products, and what the competion is Ukely to be. From Such a study, the entrepreuner should get at least the following data: = the size of the market ~ potential client Uist by volume and product type = product range by type and end use ~ presentation and packaging of competion products ~ suppliers to the local market, and technology used = location of manufacturing site and depots ~ local cost and price structure = local fiscal and other incentives ~ growth projections In addition to above, the market research should be able to indicate the real corsumptive capacity of the local population. This can be. assessed on a litres/capita/yr basis as a function of the Gross Development Product (GDP) of the country. Existing market studies based on consumptive needs are often very misleading. The real guide to future developments in the paint Midusity of a country is bosed on thelr purchasing power. Pant Capacities for such markets can only be based on realistic consumptive capacity, and not on perceived need. Page - 18Guide to Paint Manufacture in ACP Countries 5. ASSISTANCE FROM CDI ‘The CDI in Brussels has assisted ACP entrepreneurs and EC companies {n paint projects over the past decade. The assistance has been in areas as Varied a8 = Technical training of ACP personnel in Europe - Dlagnostic visits to ACP facories ~ Rehabilitation and start-up programmes of paint factories + Technology and machinery sourcing, + Assistance with contract agreements, ‘The CDI is thus an important bridge between EC companies vllling to ‘wansfer manufacturing technology to these countries, and the local AGP entrepreneurs wishing Wo go into paint manufacture. ‘Two case studies of CDI intervention in Mozambique and Zaire are described In the following reports: Page - 19Guide to Paint Manufacture in ACP Countries 6. SELECTED CASE STUDIES OF CDI INTERVENTION 1, Zaire Sigma Coatings spr G2 Av Col, Lukasa’y Bp 700 Kinshasa, ‘aire. Background ‘Zalre-Sigma Coatings was incoporated in Kinshasa in May 1985 as joint-venture between Sigma Coatings of Belgium, and three Zairoise nationals ( Messrs B. Saolona, K. Ndokl and 8, Mumbowga).. Equity capital = USS 135,000 Shareholding: Sigma Coatings. Belgium = = 60% Zairoise nationals 2 for Toray, = 100% The paint market in Zaire in 1985 was estimated at about 6.000 tonnes/yr of which 66% was vingl-based, a further 17% of glycerine based paints, and the remalning 17% were in industrial paints. The partners in Zaire-Sigma proposed putting up a plant of a total capacity of 900 tonnes/yr on 2 5.000 mZ space. Half of the production was to be in vinyls, the rest in acrylics, enamel, Industrial and other types of paints. Raw material import of resins, fliers, and pigments for the 900 tonnes/yr plant was estimated at USS 600,000, Total production was targetted for sale in Zaire. Sigma Coatings, Helgium carried out a detailed study of the Zairoise paint market in May’ 1905, identifying competition, costs ete, Zaire Sigma was inaugurated on March 17, 1966 Current annual production {s 1,500 tonnes/ye, with a wider diversity of products. Stat number 19, with one expartriate general manager. CDI intervened with a injection of ECU 16,009 into a training and Start-up programme In late 1085. Page - 20Guide to Paint Manufacture in ACP Countries SELECTED CASE STUDIES(cont‘d) Appraisal ‘Zaire-Signa is a real joint-venture project between entrepreneurs from ‘an ACP country, Zaire, and an EC company, Sigma Coatings, Belgium. Sigma Coatings not only took up a 60% equity in the new company. but fatried out the initial market Investigation themselves, to establish the size and nature of the market. ‘To ensure a relatively trouble-free beginning, Sigma Coatings contributed an experienced expartriate manager from their company to run the company and train Staff for a future local management. Current evidence is that Zalre-Sigma continues to do relatively well. Gespite the desperate state of the Zairean economy. Most of the credit Tor this success is due to the Commitment of Sigma Coatings of Belgium, to make @ success of thelr investment in thelr former colony. Page - 21Guide to Paint Manufacture in ACP Countries SELECTED CASE STUDIES(cont'd) ‘Tintas CIN Mozambique sari Maputo Mozambique Background Tintas CIN Mozambfque sari was Incorporated n Maputo in 1973 as a Joint-venture between Corporacao Industrial do Norte S.A. of Maia, Portugal. Equity capital = ECU 10,000 ‘Shareholding: CIN S.Acf Portugal = snge Portugese national = 2am Mozambiquan nationals = leat Toran = 10008 ‘The company started production in 1974 with an Installed capacity of 600 tonnes/yr, Years of civil unrest wrecked the economy and the ‘company, so that by 1990, Tintas CIN Mozambique, the only significant paint producer In the whole country, was making only 61 tonnes/yr of paints. Visits by experts sent by the Portugese partner in 1990, showed the heed to rehabilitate the Mozambiquan plant with an investment of ECU 50,000, to be pafd entirely by the Portugese. The plant was to be modernised, and brought up to a capacity of 1000 tonnes/yr, with projected sales of up to ECU 1.Salllion. Corporacao Industrial do Norte, as part of its rehabilitation programme, ‘ould bring ina disperser and colourants, to make water-based Gecorative emulsions for house wall paints In Mozambique. ‘The project was to provide about 30. jobs localy. Page - 22Guide to Paint Manufacture in ACP Countries SELECTED CASE STUDIES(cont'd) ‘CDI intervened with an injection of ECU 8,800 for a diagnostic visit to Maputo, installation of new machinery, and staff training locally. ‘Appraisal ‘The senior partner in this long established joint-venture company is ‘Corporacao Industrial do Norto of Mais, an inportant paint ‘manufacturer In Portugal. The Maputo company was established in ‘their former colony as the most important paint producer in the ‘country, backed vith thele technology and know-how. ‘The Portugese management left as civil strife commenced, and with no fresh Input in resources, skill or know-how, Tintas CIN Mozambique fell ‘apart, as thelr sales of 61 tonnes (10% of Installed capacity), indicates. ‘Corporacao do Norto sent their own experts to examine thelr Maputo plant, and draw up a progrenme of rehabilitation. This programme has begun to be implemented, ‘The commitment of the EC partner to rescue thelr Investment has been absolutely crucial in any success in this case. Page - 23Guide to Paint Manufacture in ACP Countries 7. PARTNERSHIP AGREEMENTS ‘Three baste types of partnership agreements are possible between an EC paint producer and an ACP entrepreneur. ‘These are: - SALES AGENCY = FRANCHISE JOINT-VENTURE Sales Agency {A sales agency is typically a commercial arrangement whereby the Agent agrees to import fully. constituted products which the agent erkets iocaly in their original packaging and trade mark. Technical Support for the agent is not necessarily included in this arrangement. ‘The importer can opt to be @ comnision agent, whereby he recelves an ‘greed. commission on sales usually 3 to S% or as a distributor, in whieh case he Imports goods with his own money and resales at local prices for hs own profit. Pranchise ‘A Franchise ig similar to a sales agency agreement, except that the product supplier agrees to give technical end managerial support to fig agent in return for an agreed licence fee, The fee is often in the form of a downpayment plus a royalty usually based on a percentage Gf sales. The agent can do sone linited technical manipulations locally provided the supplier is satisfied that the resulting product does not Tower the quality and image of the product. Franchises require careful study before signing them. Sone paint mmenufacturers for instance, prefer a sliding scale of royaliy depending fn sales realised; others charge royalty on size of raw materials Purchased from them by their agent. A typical example of this would Be'an agreenent whereby the llcenove accepts to purchase from the Suppliers an agreed amount of raw materials at market prices. For purchases of Faw materials above a certain value, no royalty is Bharged. For purchases below this figure, the licensee is obliged to pay a fee on a sliding scale. Page - 24Guide to Paint Manufacture in ACP Countries PARTNERSHIP AGREEMENTS (cont‘d) ‘As long as sales hold up, this is a good agreement, making the ACP Gntrepreneur “work” the lence. “However, if the market turns sour {for whatever reason, the licsnsee is left with paying ever increasing royalties on decreasing sales value. solnt-Venture [A Joint venture agreement {S one in which an ACP entrepreneur and ‘is EC partner jointly own the company by subscribing In cash or Kind, to the equity capital of the new company. Because local manufacture is involved, a loence fee for transfer of technology is Usually charged by the par:ner supplying the technology. This 1s called a royalty, and can vary from an afinual fixed fee, or a pereentage of sales or both ‘Technical partners in joint ventures will usually contribute personnel, Gither in technology of tamagement to ensure good running of the entreprise. Company laws on foreign ovnership in joint-ventures in ACP countries have changed considerably in recent years. In the inmediate post- independence era, many ACP countries insisted on minority participation of foreign companies in joint-venture companies. This led {oa period of considerable impoverishment in industry and lack of fechnology transfer to many third world countries. The political and economic tlimate has changed considerably, and many ACP countries hnow have export zones In thelr countries, allowing majority to 100% equity holding In Joint ventures in ACP countries. Page - 25Guide to Paint Manufacture in ACP Countries MODEL FEASIBILITY STUDY Feasibilty studies allow a prospective proprietor of a project to look {nto the future: on whether their project idea is sound: how it will be financed, and finally whether it would be profitable. For a maufacturing project, the following basic outlines need to be Clarified, and cost/revenue estimated over a five year period, at the Teast. L = BACKGROUND (to the praject) = MARKET SIZE (including future projections) = PLANT cAPaciTY PLANT Location ‘THCUNICAL PARTNERS = RAW MATERIAL SOURCING ~ MANPOWER REQUIREMENTS = PROJECT COSTING (and & building (i) machinery & equipment (i) raw materials (i) utilities () salaries & running expenses ()—royatties Page - 26Guide to Paint Manufacture in ACP Countries MODEL FEASIBILITY STUDY (cont'd) 9. ~ PROJECT FINANCING ()——equtty capital (1) oan capital (medium & long term) 10. = FINANCIAL ANALYSIS, () capital investment pian (iy cost analysis, (it) sales analysis Gv) working capital analysis (w) forecast cash flow analysis (profit & lass account (vil) calculation of return on capital (ROC) ratio hidden costs requiring particular attention when starting up new plant projects include: 1, PLANT Location availabilty of land for plant and storage ‘avallability of facilities’ (water, electricity, roads) ‘vallability of good loeal labour or facities such as housing and schools if labour has to be brought fo, 2, PROJECT COSTING (LOCAL COSTS) cost of locally avatlable raw materials ‘cost of factory construction labour costs ‘transportation costs cost of ulllities (water, heat, electricity) Page - 27Guide to Paint Manufacture in ACP Countries MODEL FEASIBILITY STUDY (cont'd) 3. FISCAL INCENTIVES = tax incentives ("tax holidays" for new projects) = customs duties allowance on imported chemicals 4, SIZE OF AVAILABLE LOCAL FINANCE = equity capital avatlable © Ioan capital and for how long from the banks = east of borrowing money 5. LOCAL ENVIRONMENTAL LAWS ON POLLUTION ~ would solvent-based paints be acceptable, and for how long. ~ ‘that level of cleanliness ete 1s acceptable, taking into {ccount costs of cleaning up the environment. Data of the type sbove from an ACP entrepreneur can be fed into Financial models of an EC partner, and from this the appropriate size, type, and eventually the cost of a plant to meet the local market Fequirements can be determined." By adding the cost of imported fmachinery, raw materials and know-how against projected, sales, 3 Fealistic cash flow module acceptable to both parties can be worked out fand profitability analysed. There Is good reason to belleve that lack Of pre-project financial analysis has in part been responsible for the failure of industrial projects In third world countries, Page - 28Guide to Paint Manufacture in ACP Countries 9. SELECTED EC PAINT COMPANIES & TECHNOLOGIES be wold pn nds ted by mao means eee ee eee ‘The top ranked twelve, companies In descending order of sales in 1861 are as follows: > or (Ux) ‘SHERWIN-WILLIAMS (US) PPG (US) BASF (6) ‘AKZO (NL) NIPPON (J) CASCO-NOBEL. (SWE) COURTAULDS (UK) KANSAL (JP) DU Post (Us) VALSPAR (US) SIGMA (B) In this report we have selected EC paint companies listed in thesaages that follow as potential partners for ACP entrepreneurs, becanse:af flther their response to our enquiries or because market intelligence Sources indicate that ertalrf of these companies are already oferating in ACP countries. Page - 29Guide to Paint Manufacture in ACP Countries SBLECTED EC PAINT COMPANIES & TECHNOLOGIES (cont'd) company Product Range ACP Experience Dae eyes ye ve nc NA Belgium ‘casco-NOBEL soe ee (Nobel Industries, Sweden) 147 Groot-Bljgeardenstaat -1601 Ruisbrosk Tels #322 971 18 11 MARTIN MATHYS sa/wv soe ee Kolenbergstraat 23, BeaG4s Zelem-Halen Tele +82 1340.15 11 SIGMA COATINGS cee apes 20t Tweemontstraat -2100 Deurne Tel: +32 3-325 19 60 ‘TRINETAL PAINT NV/SA cease (Nobel Industries, Sweden) 1 Emmanuellaan +1890 Mechelen ‘Tels #32 2 251 29 91 fee ance Ccelliose Lobo sone . rue Henri Motssan F-69310 Pierre Benlte Tels +33 78°50 50 31 LA SIGNEURIE(ELF) Sass eietaes 20 rue Gallien! F-99001 Bobigny ‘Tels +33 14942 45 45, Page - 30Guide to Paint Manufacture in ACP Countries SELECTED EC PAINT COMPANIES & TECHNOLOGIES (contd) Company Product Range ACP. Experience porio y NM France(cont’a) PEINTURES JIVAL soe . True Bugene Henal F-p4g05 Vitry_sur Seine Tels #33 145 73 09 27 RECA S.A oe 21, de Quilla Fearlg0 Auterive ‘Tels +23 61 50 55 50 ‘SOFRAP * : 20 Tue de Miromesnil F-75008 Paris Tel: +33 142 66 20 42 ZOLPAN S.A. eect * YT qual Joseph Gillet F-69816 Lyon ‘Tel: +33 78 29 70 60 Germany BASF _LACKE UND FARBE eee Postrach 30 02 49 7000 Stuttgart ‘Tel: +49 711 89 57 00 HERDERTS GmbH(HOECUST AG) * + of * Hauptverwaltung Christbuseh 25 Postfach 20-02 44 -8600 Wuppertal 2 i e49 202 829 0 Page - 31Guide to Paint Manufacture in ACP Countries SRLBCTED RO PAINT COMPANIES & THCHNOLOGIES (cont'd) Company Product Range ACP Experience pogo yy ie Italy AMONN JF. SpA ceo . Via Siemens 2 1-$9100 Bolzano ‘Tel: +39 471 90 45 45 COVEMA VERNICI SpA cies . Strada della Barra 5 110040 Druento (Torino) Tels 699 11 964 40 44 SANDTEX ITALIANA SpA eaaeeaas . Via Torino 34 1-34123 Trieste Tel: #39 40.30.15 09 SETTER Spa + or te ‘Via castellana 201 1-31023 Resana ‘Tel: +39 423 49 43.41 ‘SVETIL DI R. VALENTINO eee teeadl Via Dante 32 ¥-37031 Mlasi(Verona) ‘Tels +3945 789 42-22 Netherlands AKZO COATINGS BY ees Postbus 3 NL-2170 BA Sassenhein ‘Tels o31 1711 82619) SIKA BLY. foe Zonnentaan 56 NL-3606 CC Maarssen Tek +31 90 410 120 Page - 32Guide to Paint Manufacture in ACP Countries SWLECTED KC PAINT COMPANIES & TECHNOLOGIES(coutd} company Product Range ACP Experience yoN Ns Portugal CIN CORPORACAO INDUSTRIAL = * = # ## DO NORTO S.A, Est Nacional 13kn-G-Apart 8 Peaa7t Mala, ‘Tels +951 2 948 1313, TINTAS DYRUP Sa. * e 8 te + (DYRUP, Denmark) Rua Cidade de Goa 26-Apart 8 =2685 Sacaven Tel: +351 1 941 6 21 Spain BARNICES VALENTINE S.4. ences ne Provenza, S/N 1BS-08100 Moncada T,Rebxac Barcelona ae Tel: +34 3 575 32 00 HISPANAMER PINTURAS 5.8. ee es . ‘Avda Menendez Pelayo 3 45-0100 Santa Cruz de Rezana Cantabria. 2 ‘Tel +34 42 S800 28 Page - 33Guide to Paint Manufacture in ACP Countries SELECTED EC PAINT COMPANIES & TECHNOLOGTES(cont'd) Company Product Range ACP Experience ie Teed e a vee United Kingdom ‘CARRS PAINTS LD oe t leestminster works ‘Albechurch Road, West Heath Birmingham B31 3°6 Tel +44 21 475 5251 COURTAULDS coaTINGS LTD + # #t (international Paints PLC) Stoneygate Lane, Felling-on-tyne, Gateshead ‘Tyne & Wear NE1O OY ‘Tel (London HQ) ‘aa 71 612 1000 CRODA PAINTS LTD sore ‘ 153 New Bedford Road Luton, Beds LU3 1LF ‘Tels 644 982 480 680 CROWN BERGER LTD eee (Casco Nobel, Sweden) Crowa House, Hollins Road Darwen, Lancs BB3 08 Tels sda 254 704 951 MACPHERSON PLC eee (Kemtra OY, Finland) adelitte, Bury Lancashire. ‘Tels +44 61 764 6030 KALON GROUPS PLC soe ee Huddersfield Road Birstall, Batley West Yorks WRIT 9xA Tels + 44 924 477 201 Page - 34Guide to Paint Manufacture in ACP Countries 10, SELECTED RC PAINT EQUIPMENT MANUFACTURERS ‘The EC has a number of world-renowned equipment manufacturers for the paint industry. For ACP companies, the main interest 1s obtaining ‘vigble but not too sophisticated machinery for plant sizes of 500 onnes/yr to 2000 ionnes/yr capacity. The compantes listed below can Supply & whole rarge of equipments to be found in paint manufacture, quality control, and packaging. Company, Product Range ACP Bxperfones, we oy ee, Belgium DE_VREE NW. . . ‘Toekomstiaan 10 B-2170 Merksem ‘Tel: + 92°3 645 78 90 G. FERRARI SPRL iecaeeacae . Rue du Chimiste 17-21 B-1070 Bruxelles Tel: +32 2 521 13 57 DLO CHEMICALS 5. . . . Chaussee de Tubioe 214 B-1420 Braine-Ualleud ‘Tels 032 2384 40 14 SOCOMER NV. soe ee Meuwbrugstraat 72 1B-1890 Machelen ‘Tel: +32.2 254 46 11 ‘SUSSMEYER SPRL . aaa Rue de Birmingham 222 B-l070 Bruxelles Tel: +32 2521 29 07 Page - 35Guide to Paint Manufacture in: ACP Countries SELECTED HC PAINT EQUIPMENT MANUFACTURERS (cont'd) Company Product Range Germany PENDRAULIK Gmbit . . . Postfach 100354 Philipp-Rels Strasse 35, -3257 Springe ‘Fels 049 S041 40 GL NITZSCH Foinmahitechnte . 8 Gebrader-Neteschst-asse 19 Postfach 1460 -b672 Selb ‘Tels +49 9287 797 0 italy MOLTENE spa. . . . Via alla Chiesa 45, 20030 Senago az: +39 299 89 990 Page ~ 96Guide to Paint Manufacture in ACP Countries 11, LIST OF ABBREVIATIONS USED ACP - African, Carribean, Pacific. (Countries linked to EC by Lome Convention) cor = Centre for the Development of Industry EC - —Buropean Community PAINTS AND EQUIPMENT COMPANIES Dd ~ — desarative, : 1 = industriat M = machinery for paint production N+ mo NA - not available 0 other packaging machinery yo+ yes © = exports paints to ACP Countries 1 = imports paints for the home market. (Goes not itselr manufacture paints) Page - 37Guide to Paint Manufacture in ACP Countries: 12. APPENDIX Page - 38Guide to Paint Manufacture in ACP Countries ‘APPENDIX INVESTMENT ANALYSIS. ‘The following is an estimate of the total Investment required to set up @ paint manufacturing factory with annual capacity of 1,000 tonnes/yr- ‘The data used here are based on an actual paint project. The costs Tiwever are telalive depending on the ACD country. FIXED CAPITAL, INVESTMENT (1,000 TONWES vie PLANT) 17EM ‘ToraL cost ToraL_cosr ecuy oy Factory complex(3,000m2) Covered (1.50002) 100,000 120,000 Equipment + machinery 170,000 204,000 TOTAL eu 270,000 uss _324,000 DIRECT _OPERATING COSTS (ANNUAL) Utities(water,ete) 50,000 60,000, ‘Transport 50,000 60,000 Commercial services 175,000 90,000 (travel, telcom etc) oral, 175,01 uss_210,000 Page - 39Guide to Paint Manufacture in ACP Countries BAW MATERIALS COSTING fll Items on the raw materials list except packaging would need to be imported, The costing here is for a Tull year of operation of a 1000 tonnes/ye paint blending plant, running at optimum capacity, le 80 to 50% of installed capacity. RAW MATERIALS VOLUME ) eu uss Resins 1,500 + solvents Charges 2,000 Pigments "500 Packaging (metal + plastics) TOTAL HCUS4m USS 40m ‘To reduce running cost, stock levels of raw materials need never exceed I month's requirements or ECU 283,000 (US$ 340,000) ‘SALARIES /VR Salaries 15 start Tora, ou 250,000 -Uss_00,000 To maintain a positive cash flow, a 3 months reserve of staff salaiy at any" one time oF BCU 62,500 (US$ 75,000), would be aequate. Based on above analysis, the total Investnient is estinated to be about ECU 790,000 or US$ 848,000. ‘SALES Sales income from a 1000 tonnes/yr paint plant work:ng at optimum production capacity Is estimated at ECU 2,000,000 or USS 2,400,000. Page - 40sussmeyerMELANGEURS unités de laboratoire DISeERSATOR esi te ob pone {Epi ou soe. Pree sarge adie pen Bi ‘epeaurte 15.0.6 ney reas ap. ‘eters 7008 Sone sarge Shreve Lepucetexe depaoauraviees arco seniamestepaonee —_(UFaNSauing ise DL Mita soccira sRovEve-psPencaA Sno éxécutions spécidles indrgeseiaa os aes Sooner Habre gaseidstieanet ‘porate 00 Irom aeenac Te we ‘redusgo hau vecoate eau Bowe tere ode aguas vezette can. trond Sento twtane tpt ‘Blcndo deena Ce gant vate “Ee consomme une puscanco mi ‘Ringe nde poor Su demand av ud ates dea micas eins teecantgais oie rdtatol Sonemmcanet ; ‘ideeDISPERSEURS exemples de néaisations Pr rea sor Nios wocesaeescy, itarpmasor EsSorces See. = wtDISPERSION DE PIGMENTS GRANULES ET DE CARBONE EN PERLES INSTALLATION TYPE «PPO» 7? 4 Riemann s| 5 Erectus Nome 5 Pome, 8 Vere agvoes 1 Reser 8 kno pos eer6 19 amesvoee 1 Vane ts 12 Dapeseur 48 Getaectnoe 14 Sip rs Les pigments graniés ofrentdoux vantages detail: stockage et manipulation ast, fbsence de polhtion par poussbres, {Uinstaltion «PPD. 8 6 consue pour la préspersion de tls pigmonts. Basée sure Dineipe dune recreulation acsleree ay ravers c'un ou plusieurs sytémes «ator ator, Este unite se caractrse par une etfcait ot une apidt€ de prévispeson patoulerement Slovée, Cite unté peut dre avantageuserent compte dun broyeur du type «Super» pourla sdspersion tale.videnge: FRESSEPHO Four lavinge par extrusion de produits haut ico Lemachine el prewve pour execute hyeraulquerien deux Grain. ieanaguost covesktouteur ours \dsoge sar exision fitration CColamic vivant est patonent apt pour los pointes eneres, ven eos produ laude etvaquelc = Des ive = Neteyage aise ate de permet Unetangemsntrapice dere = Acsembagetacte, Fes egies on hauteur nettoyege PANCLEAN Lenotojage de eves ayant sev as {atone peitures ones ou 3 tre prods de indus cimigue ‘st pas ue chose fc, Cote a: Chine ererenauiomatste geine {out itarvenon mangete le pe ‘et un netoyage apes peu cot texmolinex’ 575 KE Federal German and Foreign Patents KE-S Na] ToC t9production is an industrial activity offering interesting CeCe Mee CT Ue CM eu en ony ‘companies are prepared to provide. There are also substa import substitution benefits, since domestic demand is guar. Ere eras MONE Carre eo ‘technologies available according to their technical and financi resources. Furthermore, individual case studies will familiarise potential European partners with the specific conditions pre- vailing in ACP countries and with the most appropriate solutions Te The guide also provides an outline feasibility study on a paint PaO am Cau oe rs facturers of paints or specialized production equipment who have an established reputation for their know-how and can offer their services or team up with ACP operators to form an ue ae