Global trends unearthed and analysed indicate that the chemical substances sector is increasingly being pushed by Environmental, Social, and Governance (ESG) concerns. It also signifies that decarbonisation is commonly a key rationale behind the investments (and divestments) in the sector, aside from Africa where investments understandably lagged again this 12 months.
These are the findings of the most recent Chemicals Executive M&A Report for 2022 launched by international administration consulting firm Kearney, now in its ninth edition.
“The reasoning for this is because there are simply not that many engaging target firms with suitable ESG credentials out there to accumulate for chemical compounds organizations seeking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner on the firm.
As the least industrialized continent, where as much as 600million people still stay with out electrical energy, Africa’s chemical trade is emergent, and its markets are immature in comparability to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical compounds sector is a key element of Africa’s financial system. New complicated business, with diverse sub-sectors, Africa’s chemical trade is intrinsically interlinked with different sectors – fuels, prescribed drugs, plastics, and manufacturing, to call a number of.
The sector is responsible for key outputs and crucial commodities alongside several industries’ complete value 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 within the global chemicals sector have resulted in a robust investor urge for food for M&A targets with good ESG credentials, allowing Africa’s chemical firms that embrace ESG to place themselves to attract funding.
“Although realistically Africa will nonetheless have to harness its plentiful hydrocarbon-based power reserves to remain economically competitive, there are confirmed strategies to make even fossil-fuel burning facilities cleaner and extra sustainable, resulting in significant reductions in carbon emissions, such as the use 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 current offerings by way of applied sciences like carbon capturing and sequestration (CCS).
Echoing world developments, African National Oil Companies (NOCs) continue to characteristic prominently within the chemical business M&A house.
“Chemicals M&A exercise has been relatively quiet in Africa over the past 12 months. Africa’s oil-rich nations’ such as Nigeria, Angola, and extra just lately Namibia, who’ve historically 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 should start to present leads to the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of power merchandise further along the value chain.
“We may subsequently 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 operate 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 become 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 companies should navigate the mega-trends of fast inhabitants growth, local weather change, digitisations and decarbonisation. Traditional chemical and energy giants, and NOCs, are repositioning themselves to remain related in a greener future. We hope to see Africa’s emergent chemical compounds sector main the charge towards an environmentally and socially sustainable chemicals industry worldwide.”
For more information, go to www.kearney.com
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