Global tendencies unearthed and analysed point out that the chemical compounds sector is more and more being pushed by Environmental, Social, and Governance (ESG) issues. It also indicates that decarbonisation is usually a key rationale behind the investments (and divestments) within the sector, apart from Africa the place investments understandably lagged once more this yr.
These are the findings of the most recent Chemicals Executive M&A Report for 2022 released by world administration consulting firm Kearney, now in its ninth version.
“The reasoning for it’s because there are merely not that many engaging goal corporations with suitable ESG credentials obtainable to amass for chemical substances organizations trying to invest and consolidate on the continent,” explains Prashaen Reddy, Partner on the firm.
As the least industrialized continent, where as a lot as 600million folks nonetheless stay without electricity, Africa’s chemical trade is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical compounds sector is a key element of Africa’s economic system. A massive advanced trade, with numerous sub-sectors, Africa’s chemical business is intrinsically interlinked with other sectors – fuels, pharmaceuticals, plastics, and manufacturing, to call a couple of.
The sector is liable for key outputs and crucial commodities along several industries’ whole worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 25% of manufacturing gross sales. (Chemical and Allied Industries’ Association: https://home.kpmg/za/en/home/industries/chemicals.html)
ESG and decarbonisation increasingly being the dominant rationales behind M&A offers within the global chemical substances sector have resulted in a powerful investor urge for food for M&A targets with good ESG credentials, permitting Africa’s chemical corporations that embrace ESG to position themselves to draw funding.
“Although realistically Africa will nonetheless need to harness its ample hydrocarbon-based vitality reserves to stay economically aggressive, there are proven strategies to make even fossil-fuel burning facilities cleaner and more sustainable, leading to significant reductions in carbon emissions, similar to the usage of low-carbon gas, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical compounds sector thereby has a possibility to leap ahead of the curve, by building sustainability and green design rules into new chemical facility developments from the outset, and by working to decarbonise current offerings via applied sciences like carbon capturing and sequestration (CCS).
Echoing international tendencies, African National Oil Companies (NOCs) continue to feature prominently in the chemical industry M&A space.
Roadmap &A activity has been comparatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ such as Nigeria, Angola, and extra lately Namibia, who have traditionally focussed on the extraction, production, and provide of crude oil merchandise, at the second are contemplating the diversification of their product portfolios as a part of their future-proofing efforts. This should begin to present results in the medium-term,” explains Reddy.
These new alternatives arising are in downstream beneficiation of power products further alongside the value chain.
“We might due to this fact see a spate of acquisitions of facilities that produce petrochemicals, ammonia, and fertilisers, for example, by these NOCs over the coming years. These acquisitions would operate synergistically alongside their current oil and gas-focussed methods,” he says.
There are indicators that Africa is determined to take ownership of beneficiation and manufacturing and become a net exporter of chemical compounds, well-poised to supply the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical substances sector companies should navigate the mega-trends of fast inhabitants expansion, local weather change, digitisations and decarbonisation. Traditional chemical and power giants, and NOCs, are repositioning themselves to remain related in a greener future. We hope to see Africa’s emergent chemical substances sector leading the charge towards an environmentally and socially sustainable chemicals business worldwide.”
For extra data, visit www.kearney.com
Share