Global developments unearthed and analysed point out that the chemical substances sector is increasingly being driven 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, aside from Africa where investments understandably lagged again this yr.
These are the findings of the latest Chemicals Executive M&A Report for 2022 launched by global management consulting agency Kearney, now in its ninth version.
“The reasoning for it’s because there are simply not that many attractive target firms with suitable ESG credentials available to accumulate for chemical substances organizations looking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner at the firm.
As the least industrialized continent, the place as much as 600million people still reside without electrical energy, Africa’s chemical business 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 economy. A giant complex trade, with numerous sub-sectors, Africa’s chemical industry is intrinsically interlinked with different sectors – fuels, prescription drugs, plastics, and manufacturing, to call a number of.
The sector is responsible for key outputs and crucial commodities alongside a quantity of industries’ whole value 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 more and more being the dominant rationales behind M&A offers within the world chemicals sector have resulted in a powerful investor appetite for M&A targets with good ESG credentials, permitting Africa’s chemical corporations that embrace ESG to position themselves to attract funding.
“Although realistically Africa will nonetheless must harness its abundant hydrocarbon-based energy reserves to remain economically aggressive, there are confirmed methods to make even fossil-fuel burning amenities cleaner and extra sustainable, leading to vital reductions in carbon emissions, corresponding to the use of low-carbon gas, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemicals sector thereby has a chance to leap ahead of the curve, by constructing sustainability and green design principles into new chemical facility developments from the outset, and by working to decarbonise current choices via applied sciences like carbon capturing and sequestration (CCS).
Echoing global developments, African National Oil Companies (NOCs) proceed to feature prominently in the chemical business M&A area.
“Chemicals M&A exercise has been relatively quiet in Africa over the previous 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 actually considering the diversification of their product portfolios as a half of their future-proofing efforts. This should begin to show leads to the medium-term,” explains Reddy.
These new alternatives arising are in downstream beneficiation of power products further alongside the worth chain.
“We could due to this fact see a spate of acquisitions of amenities 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 indicators that Africa is decided to take ownership of beneficiation and manufacturing and turn into a net exporter of chemical substances, well-poised to provide the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemicals sector businesses must navigate the mega-trends of fast population growth, climate change, digitisations and decarbonisation. Traditional chemical and energy giants, and NOCs, are repositioning themselves to remain relevant in a greener future. Be the first hope to see Africa’s emergent chemical substances sector main the charge in course of an environmentally and socially sustainable chemicals business worldwide.”
For more data, visit www.kearney.com
Shareg