Global trends unearthed and analysed indicate that the chemical substances sector is more and more being driven by Environmental, Social, and Governance (ESG) concerns. It also indicates that decarbonisation is often a key rationale behind the investments (and divestments) within the sector, except for Africa where investments understandably lagged again this 12 months.
These are the findings of the latest Chemicals Executive M&A Report for 2022 launched by world management consulting agency Kearney, now in its ninth version.
“The reasoning for this is because there are simply not that many enticing goal companies with appropriate ESG credentials out there to accumulate for chemical compounds organizations seeking to invest and consolidate on the continent,” explains Prashaen Reddy, Partner on the firm.
As the least industrialized continent, where as a lot as 600million individuals still stay without electrical energy, 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 economic system. A massive complex industry, with diverse sub-sectors, Africa’s chemical industry is intrinsically interlinked with different sectors – fuels, prescription drugs, plastics, and manufacturing, to name a quantity of.
The sector is responsible for key outputs and crucial commodities along several 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 increasingly being the dominant rationales behind M&A deals within the international chemical compounds sector have resulted in a strong investor urge for food for M&A targets with good ESG credentials, permitting Africa’s chemical companies that embrace ESG to position themselves to draw funding.
“Although realistically Africa will still must harness its ample hydrocarbon-based power 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, such as using low-carbon fuel, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical compounds sector thereby has a chance to leap forward of the curve, by building sustainability and green design ideas into new chemical facility developments from the outset, and by working to decarbonise current choices through technologies like carbon capturing and sequestration (CCS).
Echoing global trends, African National Oil Companies (NOCs) proceed to function prominently in the chemical business M&A area.
“Chemicals M&A exercise has been relatively quiet in Africa over the past 12 months. เพรสเชอร์เกจไฮดรอลิค -rich nations’ similar to Nigeria, Angola, and more lately Namibia, who have traditionally focussed on the extraction, production, and supply of crude oil merchandise, are actually contemplating the diversification of their product portfolios as a part of their future-proofing efforts. This should begin to show results in the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of vitality products additional alongside the value chain.
“We could 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 current oil and gas-focussed methods,” he says.
There are signs that Africa is set to take ownership of beneficiation and manufacturing and turn into a net exporter of chemical compounds, well-poised to produce the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical compounds sector companies should navigate the mega-trends of speedy population expansion, local weather change, digitisations and decarbonisation. Traditional chemical and vitality 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 the direction of an environmentally and socially sustainable chemical compounds industry worldwide.”
For more information, go to www.kearney.com