Global tendencies unearthed and analysed point out that the chemicals sector is increasingly being pushed by Environmental, Social, and Governance (ESG) issues. It also indicates that decarbonisation is usually a key rationale behind the investments (and divestments) within the sector, apart 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 management consulting firm Kearney, now in its ninth edition.
“The reasoning for it’s because there are merely not that many enticing 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 people still reside with out electricity, Africa’s chemical industry is emergent, and its markets are immature in comparison to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemicals sector is a key component of Africa’s economic system. A large complex industry, with numerous 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 answerable for key outputs and crucial commodities along several industries’ whole worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 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, allowing Africa’s chemical corporations that embrace ESG to position themselves to draw funding.
“Although realistically Africa will nonetheless need to harness its plentiful hydrocarbon-based vitality reserves to remain economically competitive, there are proven strategies to make even fossil-fuel burning services cleaner and more sustainable, resulting in vital reductions in carbon emissions, corresponding to the utilization of low-carbon fuel, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical substances sector thereby has an opportunity to leap forward of the curve, by constructing sustainability and green design ideas into new chemical facility developments from the outset, and by working to decarbonise current offerings through technologies like carbon capturing and sequestration (CCS).
Echoing global tendencies, African National Oil Companies (NOCs) proceed to feature prominently in the chemical industry M&A area.
“Chemicals M&A exercise has been comparatively quiet in Africa over the past 12 months. Africa’s oil-rich nations’ corresponding to Nigeria, Angola, and more lately Namibia, who have traditionally focussed on the extraction, production, and supply of crude oil merchandise, are actually considering the diversification of their product portfolios as part of their future-proofing efforts. This should begin to present ends in the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of vitality merchandise additional along the value chain.
“We might therefore see a spate of acquisitions of amenities that produce petrochemicals, ammonia, and fertilisers, for instance, by these NOCs over the approaching years. These acquisitions would operate synergistically alongside their present oil and gas-focussed methods,” he says.
There are indicators that Africa is determined to take possession of beneficiation and manufacturing and turn out to be a web exporter of chemicals, well-poised to produce the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemicals sector businesses should navigate the mega-trends of speedy inhabitants growth, local weather change, digitisations and decarbonisation. Traditional chemical 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 towards an environmentally and socially sustainable chemicals trade worldwide.”
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