AFRICA’S GREENFIELD OPPORTUNITY

Global developments unearthed and analysed indicate that the chemical compounds sector is increasingly being driven by Environmental, Social, and Governance (ESG) concerns. It additionally indicates that decarbonisation is usually a key rationale behind the investments (and divestments) in the sector, except for Africa the place investments understandably lagged once more this year.
These are the findings of the newest Chemicals Executive M&A Report for 2022 launched by global management consulting firm Kearney, now in its ninth edition.
“The reasoning for this is because there are simply not that many attractive goal firms with suitable ESG credentials obtainable to acquire for chemicals organizations looking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner at the agency.
As the least industrialized continent, where as a lot as 600million people nonetheless reside without electrical energy, Africa’s chemical trade is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical substances sector is a key element of Africa’s economic system. A giant advanced business, with numerous sub-sectors, Africa’s chemical industry is intrinsically interlinked with other sectors – fuels, pharmaceuticals, plastics, and manufacturing, to call a quantity of.
The sector is responsible for key outputs and crucial commodities alongside several industries’ entire value chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for round 25% of producing 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 within the global chemicals sector have resulted in a strong investor urge for food for M&A targets with good ESG credentials, allowing Africa’s chemical corporations that embrace ESG to place themselves to draw funding.
“Although realistically Africa will still need to harness its abundant hydrocarbon-based power reserves to stay economically competitive, there are proven strategies to make even fossil-fuel burning services cleaner and more sustainable, leading to important reductions in carbon emissions, similar to 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 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 via applied sciences like carbon capturing and sequestration (CCS).
Echoing world trends, African National Oil Companies (NOCs) continue to characteristic prominently within the chemical industry 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 more recently Namibia, who’ve traditionally focussed on the extraction, production, and supply of crude oil products, are actually considering the diversification of their product portfolios as part of their future-proofing efforts. This should begin to show leads to the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of energy products further alongside the value chain.
“We may due to this fact see a spate of acquisitions of services that produce petrochemicals, ammonia, and fertilisers, for example, by these NOCs over the coming years. These acquisitions would function synergistically alongside their present oil and gas-focussed strategies,” he says.
There are indicators that Africa is set to take ownership of beneficiation and manufacturing and turn into a net exporter of chemicals, well-poised to provide the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical compounds sector businesses should navigate the mega-trends of speedy population growth, climate change, digitisations and decarbonisation. pressure gauge and vitality giants, and NOCs, are repositioning themselves to remain related 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 chemicals trade worldwide.”
For extra data, go to www.kearney.com
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