Global trends unearthed and analysed point out that the chemical substances sector is increasingly being pushed by Environmental, Social, and Governance (ESG) considerations. It additionally signifies that decarbonisation is commonly a key rationale behind the investments (and divestments) in the sector, except for Africa the place investments understandably lagged again this yr.
These are the findings of the latest Chemicals Executive M&A Report for 2022 released by global management consulting firm Kearney, now in its ninth edition.
“The reasoning for it is because there are merely not that many enticing goal firms with appropriate ESG credentials out there to amass for chemicals organizations looking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner on the agency.
As the least industrialized continent, the place as much as 600million folks still reside with out electricity, Africa’s chemical trade is emergent, and its markets are immature in comparison to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical substances sector is a key component of Africa’s financial system. A massive complex business, with diverse sub-sectors, Africa’s chemical trade is intrinsically interlinked with other sectors – fuels, pharmaceuticals, plastics, and manufacturing, to name a couple of.
The sector is answerable for key outputs and essential commodities along a number of industries’ complete value chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for round 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 global chemical substances sector have resulted in a powerful investor appetite for M&A targets with good ESG credentials, allowing Africa’s chemical corporations that embrace ESG to position themselves to attract funding.
“Although realistically Africa will nonetheless must harness its ample hydrocarbon-based vitality reserves to stay economically competitive, there are proven methods to make even fossil-fuel burning amenities cleaner and extra sustainable, leading to important reductions in carbon emissions, such as the usage of low-carbon gasoline, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical compounds 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 choices through applied sciences like carbon capturing and sequestration (CCS).
Echoing international developments, African National Oil Companies (NOCs) proceed to function prominently within the chemical business M&A space.
“Chemicals M&A activity has been comparatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ corresponding to Nigeria, Angola, and more just lately Namibia, who have traditionally focussed on the extraction, production, and provide of crude oil products, are actually considering the diversification of their product portfolios as a part of their future-proofing efforts. First ought to start to show leads to the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of vitality merchandise further along the worth chain.
“We might therefore 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 present 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 internet exporter of chemical compounds, well-poised to provide 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, climate change, digitisations and decarbonisation. Traditional chemical and power giants, and NOCs, are repositioning themselves to stay related in a greener future. Triple hope to see Africa’s emergent chemical substances sector main the charge in the path of an environmentally and socially sustainable chemicals business worldwide.”
For extra info, go to www.kearney.com
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