AFRICA’S GREENFIELD OPPORTUNITY

Global tendencies unearthed and analysed indicate that the chemical compounds sector is more and more being driven by Environmental, Social, and Governance (ESG) issues. 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 once more this yr.
These are the findings of the newest Chemicals Executive M&A Report for 2022 launched by global administration consulting firm Kearney, now in its ninth version.
“The reasoning for it is because there are merely not that many enticing target companies with appropriate ESG credentials available to amass for chemical compounds organizations looking to invest and consolidate on the continent,” explains Prashaen Reddy, Partner at the agency.
As the least industrialized continent, the place up to 600million folks nonetheless live without electricity, Africa’s chemical business is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical compounds sector is a key element of Africa’s economic system. A massive complex industry, with various sub-sectors, Africa’s chemical business 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 along several industries’ complete value chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 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 offers within the global chemical substances sector have resulted in a powerful investor appetite for M&A targets with good ESG credentials, permitting Africa’s chemical companies that embrace ESG to position themselves to draw funding.
“Although realistically Africa will nonetheless have to harness its abundant hydrocarbon-based power reserves to remain economically competitive, there are proven strategies to make even fossil-fuel burning services cleaner and extra sustainable, resulting in significant reductions in carbon emissions, similar to the use of low-carbon gas, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical substances sector thereby has a possibility 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 technologies like carbon capturing and sequestration (CCS).
Echoing world developments, African National Oil Companies (NOCs) continue to function prominently in the chemical industry M&A area.
Research &A exercise has been comparatively 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 supply of crude oil products, are now contemplating 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.
These new alternatives arising are in downstream beneficiation of power merchandise additional along the worth chain.
“We might due to this fact see a spate of acquisitions of facilities that produce petrochemicals, ammonia, and fertilisers, for instance, by these NOCs over the approaching years. These acquisitions would function synergistically alongside their current oil and gas-focussed strategies,” he says.
There are indicators that Africa is set to take ownership of beneficiation and manufacturing and become a net exporter of chemical compounds, well-poised to supply the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemicals sector companies must 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 remain relevant in a greener future. We hope to see Africa’s emergent chemical compounds sector leading the cost in the course of an environmentally and socially sustainable chemical substances industry worldwide.”
For more data, go to www.kearney.com
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