Global developments unearthed and analysed indicate that the chemical compounds sector is increasingly being driven by Environmental, Social, and Governance (ESG) issues. It also signifies that decarbonisation is usually a key rationale behind the investments (and divestments) in the sector, apart from Africa where investments understandably lagged again this 12 months.
These are the findings of the newest Chemicals Executive M&A Report for 2022 released by world management consulting agency Kearney, now in its ninth version.
“The reasoning for it’s because there are merely not that many enticing goal firms with suitable ESG credentials out there to accumulate for chemicals organizations trying to invest and consolidate on the continent,” explains Prashaen Reddy, Partner on the agency.
As the least industrialized continent, where up to 600million people nonetheless reside without electrical energy, Africa’s chemical industry is emergent, and its markets are immature in comparison to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical compounds sector is a key element of Africa’s financial system. A large advanced industry, with various sub-sectors, Africa’s chemical industry is intrinsically interlinked with different sectors – fuels, prescribed drugs, plastics, and manufacturing, to name a couple of.
The sector is responsible for key outputs and essential commodities alongside several industries’ whole worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 25% of producing 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 substances sector have resulted in a strong investor appetite for M&A targets with good ESG credentials, permitting Africa’s chemical firms that embrace ESG to place themselves to draw funding.
“Although realistically Africa will nonetheless have to harness its plentiful hydrocarbon-based energy reserves to remain economically competitive, there are confirmed strategies to make even fossil-fuel burning facilities cleaner and more sustainable, resulting in significant reductions in carbon emissions, such as using low-carbon gasoline, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical substances sector thereby has a chance to leap ahead 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 by way of technologies like carbon capturing and sequestration (CCS).
Echoing global developments, African National Oil Companies (NOCs) proceed to characteristic prominently in the chemical industry M&A space.
“Chemicals M&A exercise has been relatively quiet in Africa over the previous 12 months. No nonsense -rich nations’ such as Nigeria, Angola, and extra lately Namibia, who have historically focussed on the extraction, production, and supply of crude oil merchandise, are now contemplating the diversification of their product portfolios as part of their future-proofing efforts. This should start to show results in the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of power merchandise further along the value chain.
“We could subsequently see a spate of acquisitions of amenities that produce petrochemicals, ammonia, and fertilisers, for instance, 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 set to take possession of beneficiation and manufacturing and turn into a web exporter of chemical compounds, well-poised to supply 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 population expansion, climate change, digitisations and decarbonisation. Traditional chemical and energy giants, and NOCs, are repositioning themselves to stay related in a greener future. We hope to see Africa’s emergent chemicals sector main the charge towards an environmentally and socially sustainable chemical substances business worldwide.”
For more data, go to www.kearney.com
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