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) 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 year.
These are the findings of the newest Chemicals Executive M&A Report for 2022 released by international management consulting firm Kearney, now in its ninth edition.
“The reasoning for it’s because there are simply not that many engaging target firms with appropriate ESG credentials available 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, the place up to 600million folks still stay 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 chemicals sector is a key element of Africa’s economy. A giant advanced industry, with numerous sub-sectors, Africa’s chemical trade is intrinsically interlinked with other sectors – fuels, prescribed drugs, plastics, and manufacturing, to name a few.
The sector is answerable for key outputs and essential commodities alongside several industries’ whole 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 within the world chemical compounds sector have resulted in a robust investor urge for food for M&A targets with good ESG credentials, permitting Africa’s chemical firms that embrace ESG to position themselves to draw funding.
“Although realistically Africa will nonetheless have to harness its abundant hydrocarbon-based vitality reserves to stay economically aggressive, there are proven methods to make even fossil-fuel burning amenities cleaner and more sustainable, leading to vital reductions in carbon emissions, similar to using low-carbon fuel, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical substances sector thereby has an opportunity to leap ahead of the curve, by building sustainability and green design principles into new chemical facility developments from the outset, and by working to decarbonise present offerings by way of technologies like carbon capturing and sequestration (CCS).
Echoing international trends, African National Oil Companies (NOCs) proceed to characteristic prominently within the chemical business M&A area.
“Chemicals M&A exercise has been comparatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ similar to Nigeria, Angola, and more recently Namibia, who’ve historically focussed on the extraction, production, and provide of crude oil merchandise, at the second are considering the diversification of their product portfolios as part of their future-proofing efforts. This should begin to present leads to the medium-term,” explains Reddy.
Stunning arising are in downstream beneficiation of energy merchandise additional alongside the worth chain.
“We could therefore see a spate of acquisitions of amenities that produce petrochemicals, ammonia, and fertilisers, for instance, by these NOCs over the approaching years. These acquisitions would function synergistically alongside their present oil and gas-focussed strategies,” he says.
There are indicators that Africa is decided to take ownership of beneficiation and manufacturing and become a internet exporter of chemical substances, well-poised to supply the mature markets of Asia, the EU, the USA, and its emergent ones.
Building blocks should navigate the mega-trends of speedy population expansion, local weather change, digitisations and decarbonisation. Traditional chemical and vitality giants, and NOCs, are repositioning themselves to stay relevant in a greener future. We hope to see Africa’s emergent chemicals sector leading the cost in course of an environmentally and socially sustainable chemical substances industry worldwide.”
For more data, go to www.kearney.com
Share

Leave a Comment