Global trends unearthed and analysed point out that the chemical substances sector is more and more being driven by Environmental, Social, and Governance (ESG) issues. It additionally signifies that decarbonisation is often a key rationale behind the investments (and divestments) within the sector, apart from Africa the place investments understandably lagged once more this 12 months.
These are the findings of the latest Chemicals Executive M&A Report for 2022 released by global administration consulting firm Kearney, now in its ninth version.
“The reasoning for this is because there are simply not that many attractive target corporations with suitable ESG credentials available to accumulate for chemicals organizations seeking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner at the agency.
As the least industrialized continent, the place up to 600million folks nonetheless live without electrical energy, Africa’s chemical industry is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical substances sector is a key element of Africa’s economic system. A large complicated trade, with numerous sub-sectors, Africa’s chemical industry is intrinsically interlinked with other sectors – fuels, prescription drugs, plastics, and manufacturing, to name a couple of.
The sector is answerable for key outputs and crucial commodities alongside a quantity of industries’ entire worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for round 25% of manufacturing 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 deals within the international chemical compounds sector have resulted in a powerful investor urge for food for M&A targets with good ESG credentials, permitting Africa’s chemical companies that embrace ESG to place themselves to draw funding.
“Although realistically Africa will nonetheless must harness its abundant hydrocarbon-based vitality reserves to stay economically competitive, there are proven methods to make even fossil-fuel burning facilities cleaner and extra sustainable, resulting in vital reductions in carbon emissions, similar to the utilization of low-carbon gas, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemicals sector thereby has a chance to leap forward of the curve, by constructing sustainability and green design rules into new chemical facility developments from the outset, and by working to decarbonise present choices through technologies like carbon capturing and sequestration (CCS).
Echoing world developments, African National Oil Companies (NOCs) continue to feature prominently within the chemical industry M&A space.
“Chemicals M&A exercise has been relatively quiet in Africa over the past 12 months. Africa’s oil-rich nations’ corresponding to Nigeria, Angola, and more lately Namibia, who’ve historically focussed on the extraction, manufacturing, and provide of crude oil products, at the moment are contemplating the diversification of their product portfolios as a half of their future-proofing efforts. This ought to start to show results in the medium-term,” explains Reddy.
These new alternatives arising are in downstream beneficiation of vitality merchandise additional alongside the worth chain.
“We could due to this fact see a spate of acquisitions of services that produce petrochemicals, ammonia, and fertilisers, for example, by these NOCs over the approaching years. These acquisitions would operate synergistically alongside their present oil and gas-focussed methods,” he says.
There are signs that Africa is determined to take ownership of beneficiation and manufacturing and turn into a web exporter of chemical compounds, well-poised to provide the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemicals sector businesses must navigate the mega-trends of speedy population expansion, climate change, digitisations and decarbonisation. Traditional chemical and power giants, and NOCs, are repositioning themselves to stay related in a greener future. Bizarre hope to see Africa’s emergent chemical compounds sector main the cost towards an environmentally and socially sustainable chemical compounds industry worldwide.”
For more data, go to www.kearney.com
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