Global tendencies unearthed and analysed indicate that the chemical substances sector is increasingly being driven by Environmental, Social, and Governance (ESG) concerns. It additionally signifies that decarbonisation is commonly a key rationale behind the investments (and divestments) in the sector, apart from Africa the place investments understandably lagged once more this yr.
These are the findings of the newest Chemicals Executive M&A Report for 2022 launched by world administration consulting agency Kearney, now in its ninth version.
“The reasoning for this is because there are merely not that many engaging target corporations with suitable ESG credentials available to acquire for chemical compounds organizations trying 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 stay without electricity, Africa’s chemical industry is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical compounds sector is a key element of Africa’s financial system. A giant advanced industry, with various sub-sectors, Africa’s chemical business is intrinsically interlinked with different sectors – fuels, prescribed drugs, plastics, and manufacturing, to call a few.
The sector is liable for key outputs and essential commodities along a quantity of industries’ whole worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 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 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 still have to harness its plentiful hydrocarbon-based vitality reserves to remain economically aggressive, there are proven methods to make even fossil-fuel burning services cleaner and extra sustainable, resulting in significant reductions in carbon emissions, similar to the usage of low-carbon gasoline, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemicals 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 present offerings through applied sciences like carbon capturing and sequestration (CCS).
Echoing international tendencies, African National Oil Companies (NOCs) continue to feature prominently in the chemical industry M&A house.
“Chemicals M&A exercise has been comparatively quiet in Africa over the past 12 months. Africa’s oil-rich nations’ similar to Nigeria, Angola, and extra recently Namibia, who have 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 begin to show leads to the medium-term,” explains Reddy.
These new alternatives arising are in downstream beneficiation of power products further along the worth chain.
“ เพรสเชอร์เกจ could 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 function synergistically alongside their current oil and gas-focussed strategies,” he says.
There are indicators that Africa is decided to take possession of beneficiation and manufacturing and become a net exporter of chemicals, well-poised to produce the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical substances sector businesses must navigate the mega-trends of fast inhabitants enlargement, local weather change, digitisations and decarbonisation. Traditional chemical and power giants, and NOCs, are repositioning themselves to stay relevant in a greener future. We hope to see Africa’s emergent chemical compounds sector leading the cost in direction of an environmentally and socially sustainable chemical compounds industry worldwide.”
For extra information, visit www.kearney.com
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