Global trends unearthed and analysed indicate that the chemical substances sector is more and more being driven 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, except for Africa the place investments understandably lagged once more this year.
These are the findings of the latest Chemicals Executive M&A Report for 2022 launched by international management consulting agency Kearney, now in its ninth edition.
“The reasoning for this is because there are simply not that many attractive target firms with suitable ESG credentials obtainable to accumulate for chemicals organizations looking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner at the firm.
As the least industrialized continent, the place up to 600million folks nonetheless reside without electrical energy, Africa’s chemical business is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemicals sector is a key component of Africa’s economy. A large advanced industry, with diverse sub-sectors, Africa’s chemical business is intrinsically interlinked with other sectors – fuels, pharmaceuticals, plastics, and manufacturing, to name a number of.
The sector is responsible for key outputs and essential commodities along several industries’ whole 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 more and more being the dominant rationales behind M&A deals within the world chemical compounds sector have resulted in a strong investor appetite 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 have to harness its ample hydrocarbon-based energy reserves to remain economically aggressive, there are confirmed strategies to make even fossil-fuel burning facilities cleaner and more sustainable, resulting in significant reductions in carbon emissions, similar to using low-carbon fuel, 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 building sustainability and green design rules into new chemical facility developments from the outset, and by working to decarbonise current choices through applied sciences like carbon capturing and sequestration (CCS).
Echoing world developments, African National Oil Companies (NOCs) continue to characteristic prominently in the chemical industry M&A house.
“Chemicals M&A activity has been comparatively quiet in Africa over the past 12 months. Africa’s oil-rich nations’ such as Nigeria, Angola, and more recently Namibia, who have traditionally focussed on the extraction, manufacturing, and provide of crude oil products, are now considering the diversification of their product portfolios as part of their future-proofing efforts. This should begin to show results in the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of energy merchandise additional along the value chain.
“ เกรดวัดแรงดัน could due to this fact see a spate of acquisitions of amenities that produce petrochemicals, ammonia, and fertilisers, for example, by these NOCs over the coming years. These acquisitions would function synergistically alongside their current oil and gas-focussed methods,” he says.
There are indicators that Africa is set 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 companies must navigate the mega-trends of fast inhabitants growth, local weather change, digitisations and decarbonisation. Traditional chemical and vitality giants, and NOCs, are repositioning themselves to stay related in a greener future. We hope to see Africa’s emergent chemicals sector leading the charge in path of an environmentally and socially sustainable chemical substances industry worldwide.”
For extra info, visit www.kearney.com