AFRICA’S GREENFIELD OPPORTUNITY

Global trends unearthed and analysed point out that the chemical substances sector is increasingly being driven by Environmental, Social, and Governance (ESG) issues. It also indicates that decarbonisation is often 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 most recent Chemicals Executive M&A Report for 2022 released by world management consulting agency Kearney, now in its ninth version.
“The reasoning for it’s because there are merely not that many enticing goal corporations with suitable ESG credentials obtainable to acquire for chemical compounds organizations trying to invest and consolidate on the continent,” explains Prashaen Reddy, Partner on the agency.
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 in comparison to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical substances sector is a key part of Africa’s financial system. A large complicated industry, with diverse sub-sectors, Africa’s chemical business is intrinsically interlinked with different sectors – fuels, pharmaceuticals, plastics, and manufacturing, to name a couple of.
digital pressure gauge is responsible for key outputs and essential commodities along a number of industries’ whole 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 deals in the global chemicals sector have resulted in a robust investor urge for food for M&A targets with good ESG credentials, allowing Africa’s chemical companies that embrace ESG to place themselves to attract funding.
“Although realistically Africa will still have to harness its ample hydrocarbon-based energy reserves to stay economically competitive, there are confirmed methods to make even fossil-fuel burning facilities cleaner and extra sustainable, resulting in significant reductions in carbon emissions, corresponding to the use of low-carbon fuel, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical compounds 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 via applied sciences like carbon capturing and sequestration (CCS).
Echoing world developments, African National Oil Companies (NOCs) proceed to feature prominently within the chemical business M&A area.
“Chemicals M&A exercise has been comparatively quiet in Africa over the past 12 months. Africa’s oil-rich nations’ similar to Nigeria, Angola, and extra recently Namibia, who’ve traditionally focussed on the extraction, production, and supply of crude oil merchandise, are actually considering the diversification of their product portfolios as part of their future-proofing efforts. This ought to begin to present leads to the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of energy merchandise additional along the worth chain.
“We may therefore see a spate of acquisitions of services that produce petrochemicals, ammonia, and fertilisers, for example, by these NOCs over the approaching years. These acquisitions would operate synergistically alongside their present oil and gas-focussed methods,” he says.
There are indicators that Africa is determined to take possession of beneficiation and manufacturing and become a internet exporter of chemicals, well-poised to provide the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical substances sector businesses must navigate the mega-trends of rapid population growth, local weather change, digitisations and decarbonisation. Traditional chemical and energy 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 path of an environmentally and socially sustainable chemical substances industry worldwide.”

For more information, visit www.kearney.com

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