Global developments unearthed and analysed point out that the chemical substances sector is increasingly being driven by Environmental, Social, and Governance (ESG) issues. It also signifies that decarbonisation is often a key rationale behind the investments (and divestments) in the sector, except for Africa the place investments understandably lagged again this year.
These are the findings of the most recent Chemicals Executive M&A Report for 2022 launched by global administration consulting firm Kearney, now in its ninth version.
“The reasoning for it’s because there are merely not that many attractive goal firms with appropriate ESG credentials out there to accumulate for chemical substances organizations looking to invest and consolidate on the continent,” explains Prashaen Reddy, Partner at the agency.
As the least industrialized continent, where up to 600million people nonetheless reside without electricity, Africa’s chemical trade is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemicals sector is a key part of Africa’s economy. Guide , with various sub-sectors, Africa’s chemical industry is intrinsically interlinked with different sectors – fuels, prescribed drugs, plastics, and manufacturing, to call a number of.
The sector is answerable for key outputs and essential commodities alongside several industries’ entire worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 25% of producing 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 in the world chemicals sector have resulted in a strong investor urge for food for M&A targets with good ESG credentials, permitting Africa’s chemical corporations that embrace ESG to position themselves to attract funding.
“Although realistically Africa will still must harness its ample hydrocarbon-based energy reserves to remain economically aggressive, there are proven methods to make even fossil-fuel burning facilities cleaner and more sustainable, resulting in significant reductions in carbon emissions, similar to the utilization of low-carbon gas, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
No questions asked has a chance to leap ahead of the curve, by constructing sustainability and green design principles into new chemical facility developments from the outset, and by working to decarbonise current offerings by way of technologies like carbon capturing and sequestration (CCS).
Echoing international trends, African National Oil Companies (NOCs) proceed to feature prominently within the chemical industry M&A space.
“Chemicals M&A exercise has been relatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ such as Nigeria, Angola, and more lately Namibia, who have historically focussed on the extraction, production, and supply of crude oil merchandise, at the second are 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 alternatives arising are in downstream beneficiation of vitality merchandise additional along the value chain.
“We might therefore see a spate of acquisitions of services that produce petrochemicals, ammonia, and fertilisers, for example, by these NOCs over the approaching years. These acquisitions would operate synergistically alongside their present oil and gas-focussed methods,” he says.
There are signs that Africa is set to take ownership of beneficiation and manufacturing and turn out to be a net exporter of chemicals, well-poised to supply the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical substances sector businesses should navigate the mega-trends of fast inhabitants enlargement, local weather change, digitisations and decarbonisation. Traditional chemical and energy giants, and NOCs, are repositioning themselves to remain relevant in a greener future. We hope to see Africa’s emergent chemical compounds sector leading the charge in path of an environmentally and socially sustainable chemicals industry worldwide.”
For extra info, go to www.kearney.com
Share