AFRICA’S GREENFIELD OPPORTUNITY

Global developments unearthed and analysed indicate that the chemical compounds sector is increasingly being pushed by Environmental, Social, and Governance (ESG) concerns. It also signifies that decarbonisation is usually a key rationale behind the investments (and divestments) in the sector, except for Africa where investments understandably lagged once more this 12 months.
These are the findings of the most recent Chemicals Executive M&A Report for 2022 launched by global administration consulting firm Kearney, now in its ninth edition.
“The reasoning for it’s because there are simply not that many enticing goal companies with suitable ESG credentials obtainable to accumulate for chemicals organizations seeking to invest and consolidate on the continent,” explains Prashaen Reddy, Partner at the firm.
As the least industrialized continent, where up to 600million individuals still reside 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 substances sector is a key part of Africa’s economy. A giant advanced industry, with numerous sub-sectors, Africa’s chemical business is intrinsically interlinked with other sectors – fuels, prescribed drugs, plastics, and manufacturing, to name a quantity of.
The sector is liable for key outputs and essential commodities alongside a quantity of industries’ entire worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 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 deals in the world chemicals sector have resulted in a robust investor appetite for M&A targets with good ESG credentials, permitting Africa’s chemical companies that embrace ESG to position themselves to attract funding.
“Although realistically Africa will nonetheless have to harness its abundant hydrocarbon-based energy reserves to stay economically aggressive, there are proven methods to make even fossil-fuel burning amenities cleaner and extra sustainable, resulting in vital reductions in carbon emissions, similar to using low-carbon gasoline, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical substances sector thereby has a chance to leap forward of the curve, by constructing sustainability and green design principles into new chemical facility developments from the outset, and by working to decarbonise current offerings through applied sciences like carbon capturing and sequestration (CCS).
Echoing world tendencies, African National Oil Companies (NOCs) proceed to function prominently within the chemical trade M&A area.
“Chemicals M&A activity has been relatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ such as Nigeria, Angola, and extra recently Namibia, who’ve traditionally focussed on the extraction, production, and provide of crude oil products, are actually contemplating the diversification of their product portfolios as part of their future-proofing efforts. This ought to start to present leads to the medium-term,” explains Reddy.
เพรสเชอร์เกจ arising are in downstream beneficiation of energy merchandise further along the value chain.
“We may therefore see a spate of acquisitions of amenities that produce petrochemicals, ammonia, and fertilisers, for instance, by these NOCs over the coming years. These acquisitions would function synergistically alongside their present oil and gas-focussed strategies,” he says.
There are signs that Africa is determined to take possession of beneficiation and manufacturing and turn out to be a web exporter of chemical substances, well-poised to supply the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical substances sector companies must navigate the mega-trends of speedy population enlargement, climate change, digitisations and decarbonisation. Traditional chemical and power giants, and NOCs, are repositioning themselves to remain relevant in a greener future. We hope to see Africa’s emergent chemical substances sector leading the charge in the path of an environmentally and socially sustainable chemical compounds business worldwide.”

For more information, go to www.kearney.com

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