Global trends unearthed and analysed indicate that the chemical substances sector is increasingly being pushed by Environmental, Social, and Governance (ESG) issues. It also indicates that decarbonisation is often a key rationale behind the investments (and divestments) in the sector, aside 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 international administration consulting firm Kearney, now in its ninth edition.
“The reasoning for it is because there are merely not that many attractive goal companies with appropriate ESG credentials out there to amass for chemicals organizations looking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner at the firm.
As the least industrialized continent, where up to 600million folks nonetheless reside with out electrical energy, Africa’s chemical business is emergent, and its markets are immature in comparability to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical compounds sector is a key component of Africa’s financial system. A giant advanced business, with diverse sub-sectors, Africa’s chemical business is intrinsically interlinked with other sectors – fuels, prescribed drugs, plastics, and manufacturing, to name a few.
The sector is liable for key outputs and essential commodities alongside several industries’ complete worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for round 25% of manufacturing gross 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 offers within the world chemical compounds sector have resulted in a strong investor appetite for M&A targets with good ESG credentials, allowing Africa’s chemical firms that embrace ESG to position themselves to attract funding.
“Although realistically Africa will nonetheless need to harness its abundant hydrocarbon-based power reserves to remain economically aggressive, there are proven methods to make even fossil-fuel burning facilities cleaner and extra sustainable, resulting in vital reductions in carbon emissions, such as the use of low-carbon fuel, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical substances 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 choices by way of applied sciences like carbon capturing and sequestration (CCS).
Echoing international developments, African National Oil Companies (NOCs) continue to feature prominently within the chemical business M&A house.
“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 more just lately Namibia, who’ve traditionally focussed on the extraction, manufacturing, and supply of crude oil merchandise, at the second are contemplating the diversification of their product portfolios as a half of their future-proofing efforts. This ought to begin to show ends in the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of vitality merchandise further along 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 strategies,” he says.
There are indicators that Africa is set to take possession of beneficiation and manufacturing and turn into a web exporter of chemical substances, well-poised to provide 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 speedy inhabitants growth, local weather change, digitisations and decarbonisation. Hidden and power 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 course of an environmentally and socially sustainable chemical compounds business worldwide.”
For extra information, visit www.kearney.com
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