Kansai Plascon is a company with expansion on its mind. Already the premier paint company in South Africa, Plascon was purchased by Japanese company Kansai in 2012. With a fresh injection of money from Japan, it purchased a 63.25 percent interest in Zimbabwean Astra Industries Limited this July. Africa Outlook takes a closer look at this household name with huge ambitions.
Writer Hannah Eiseman-Reynard
Project manager Tom Cullum
south African paint and coatings company Kansai Plascon's history stretches back to 1889 when a carriage varnish seller expanded into ready-mixed paint – the first to do so in the country. In the years that followed Plascon, as it was known until Japanese company Kansai purchased it in 2012, became South Africa's largest manufacturer of paints, coatings and chemicals, serving both the retail and manufacturing industries. Now it has investment from Japan to go even further.
"Kansai had a clear mandate that once we came into Africa we would use Kansai Plascon in South Africa for our platform for further growth into the rest of the continent," CEO Nauman Malik told CNBC Africa's Power Lunch in an interview earlier this year. The expansion has been rapid with a $5.5 million investment in a 63.25 percent share in Zimbabwean company Astra Industries – the leading paint company in Zimbabwe – just this July.
"We are very happy to say that we have made the first step in that expansion plan a reality," Malik said.
Astra Industries focuses on the coatings industry and the industrial sector – much like Kansai Paint does in South Africa, creating a formidable and joined-up approach to the entire paints and coatings market.
"As in any market you know finding the right partner is critical," Malik continued.
And this is just the first step.
The rest of the continent – East and West Africa – is on the radar and "we will be embarking upon acquisitions, greenfields projects, joint ventures in those territories as well," Malik said.
Kansai Plascon already has a presence in Malawi, Zambia, Botswana and Namibia. Now it's looking at possible expansion into Kenya, Tanzania and Uganda in the East, and Nigeria and Ghana in West Africa.
"Those are big markets," Malik continued. "They're not only big markets in terms of consumer goods but of course with a lot of infrastructure development happening, the demand for coatings would substantially increase going into the future. We are looking into finding the right partners in both territories. Finding the right partner is key going forward. Integration is key. Buying the company is the easy bit, but integrating it and then setting it up for success for further expansion is the key objective for us going into the future."
Kansai Plascon's relationship with Astra goes back to the mid 70s and in many ways, buying a large stake in the firm, was a "logical conclusion". "Astra Industries is a very long established company, very strong management, some very good brands and have been manufacturing some of the Plascon brands for several years," says Ebrahim Mohamed, executive director for African operations.
Of course working in Zimbabwe is seen by some as a risky venture, but the acquisition seemed perfectly timed for Kansai Plascon.
The Investment Branch of the Bank of Zimbabwe was selling its stocks and Kansai Plascon stepped up to the challenge.
Though there were other interested parties Kansai Plascon was able to demonstrate why it should be the preferred bidder – from the historical relationship to the existing licence and technical agreements between the two companies already. Importantly, it was also able to demonstrate a very clear and credible indigenisation programme which would enable management and staff to benefit from the acquisition.
"I think it's on these fronts that we were able to clinch the deal," says Mohamed.
So, with such an ambitious (and proudly stated) expansion goal – what tips might Kansai Plascon offer other companies planning similar expansion? "I think homework is essential," says Mohamed. "Certainly understanding and having a good grasp of the regulatory environment, understanding that one cannot find shortcuts at all. We also have a very strong Plascon brand and it will certainly serve us well going forward."
Starting from South Africa, with Japanese funding, the Kansai Plascon brand is extremely well placed to realise those ambitions.
"In South Africa you really have a little bit of the whole African continent right here in our country," says Mohamed. "We use that expertise for the various segments of our markets to understand the markets much better, to enter those markets with humility rather than an arrogance that we know we are the market leader, and our targets are very, very clearly identified."
Kansai Plascon is the first of a new wave of international business. Africa is at the forefront of Japanese investment and we expect to see a lot more of this fast growing company.