Global tendencies unearthed and analysed indicate that the chemical compounds sector is increasingly being driven by Environmental, Social, and Governance (ESG) concerns. It additionally signifies that decarbonisation is usually a key rationale behind the investments (and divestments) within the sector, aside from Africa the place investments understandably lagged again this yr.
These are the findings of the latest Chemicals Executive M&A Report for 2022 launched by international administration consulting agency Kearney, now in its ninth version.
“The reasoning for this is because there are simply not that many attractive target firms with appropriate ESG credentials available to acquire for chemical substances organizations seeking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner at the agency.
As the least industrialized continent, the place as much as 600million folks still live without electricity, Africa’s chemical industry is emergent, and its markets are immature in comparison to its Asian, European, and Middle Eastern counterparts.
Nevertheless, Secrets is a key component of Africa’s economy. 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 call a couple of.
The sector is liable for key outputs and essential commodities alongside a number of industries’ whole worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for round 25% of producing 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 chemicals 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 must harness its abundant hydrocarbon-based power reserves to remain economically aggressive, there are confirmed methods to make even fossil-fuel burning amenities cleaner and extra sustainable, leading to significant reductions in carbon emissions, such as the use of low-carbon gasoline, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemicals sector thereby has a possibility 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 offerings through applied sciences like carbon capturing and sequestration (CCS).
Echoing world trends, African National Oil Companies (NOCs) proceed to characteristic prominently in the chemical business M&A area.
“Chemicals M&A activity has been comparatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ similar to Nigeria, Angola, and extra recently Namibia, who’ve traditionally focussed on the extraction, production, and provide of crude oil products, at the moment are considering the diversification of their product portfolios as part of their future-proofing efforts. This ought to begin to present leads to the medium-term,” explains Reddy.
These new alternatives arising are in downstream beneficiation of vitality products additional along the worth chain.
“We might subsequently see a spate of acquisitions of facilities that produce petrochemicals, ammonia, and fertilisers, for instance, by these NOCs over the coming years. These acquisitions would function synergistically alongside their present oil and gas-focussed methods,” he says.
There are signs that Africa is set to take possession of beneficiation and manufacturing and turn into a web exporter of chemical compounds, well-poised to produce the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical substances sector companies must navigate the mega-trends of rapid population growth, local weather change, digitisations and decarbonisation. Traditional chemical and energy giants, and NOCs, are repositioning themselves to remain related in a greener future. We hope to see Africa’s emergent chemicals sector leading the charge in the course of an environmentally and socially sustainable chemical substances trade worldwide.”
For more information, go to www.kearney.com
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