Global tendencies unearthed and analysed indicate that the chemical substances 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) in the sector, apart from Africa where investments understandably lagged once more this yr.
These are the findings of the most recent Chemicals Executive M&A Report for 2022 released by global management consulting firm Kearney, now in its ninth edition.
“The reasoning for this is because there are merely not that many engaging target companies with suitable ESG credentials out there to accumulate for chemical substances organizations looking to invest and consolidate on the continent,” explains Prashaen Reddy, Partner at the firm.
As the least industrialized continent, where up to 600million folks nonetheless live with out electrical energy, Africa’s chemical industry is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemicals sector is a key component of Africa’s financial system. A giant advanced trade, with various sub-sectors, Africa’s chemical industry is intrinsically interlinked with other sectors – fuels, prescribed drugs, plastics, and manufacturing, to name a few.
The sector is liable for key outputs and crucial commodities alongside several industries’ entire worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for round 25% of manufacturing 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 in the global chemical compounds sector have resulted in a robust investor urge for food for M&A targets with good ESG credentials, permitting Africa’s chemical companies that embrace ESG to place themselves to draw funding.
“Although realistically pressure gauge 10 bar will nonetheless have to harness its abundant hydrocarbon-based vitality reserves to remain economically aggressive, there are confirmed strategies to make even fossil-fuel burning services cleaner and extra sustainable, leading to significant reductions in carbon emissions, such as the usage of low-carbon fuel, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemicals sector thereby has an opportunity to leap ahead of the curve, by constructing sustainability and green design ideas into new chemical facility developments from the outset, and by working to decarbonise present choices via applied sciences like carbon capturing and sequestration (CCS).
Echoing international developments, African National Oil Companies (NOCs) continue to feature prominently in the chemical business M&A space.
“Chemicals M&A activity has been relatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ similar to Nigeria, Angola, and extra lately Namibia, who’ve traditionally focussed on the extraction, production, and supply of crude oil merchandise, are now considering the diversification of their product portfolios as a part of their future-proofing efforts. This ought to start to present results in the medium-term,” explains Reddy.
ไดอะแฟรม arising are in downstream beneficiation of vitality merchandise further alongside the value chain.
“We might subsequently see a spate of acquisitions of amenities that produce petrochemicals, ammonia, and fertilisers, for example, by these NOCs over the coming years. These acquisitions would operate synergistically alongside their current oil and gas-focussed strategies,” he says.
There are indicators that Africa is decided to take ownership of beneficiation and manufacturing and turn out to be a web exporter of chemical substances, well-poised to produce the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemicals sector companies should navigate the mega-trends of rapid population growth, local weather change, digitisations and decarbonisation. Traditional chemical and vitality giants, and NOCs, are repositioning themselves to stay related in a greener future. We hope to see Africa’s emergent chemical compounds sector main the charge in the path of an environmentally and socially sustainable chemicals business worldwide.”
For more info, visit www.kearney.com
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