AFRICA’S GREENFIELD OPPORTUNITY

Global tendencies unearthed and analysed indicate that the chemicals sector is more and more being driven by Environmental, Social, and Governance (ESG) issues. It additionally indicates that decarbonisation is usually a key rationale behind the investments (and divestments) in the sector, aside from Africa the place investments understandably lagged once more this 12 months.
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 edition.
“The reasoning for this is because there are simply not that many attractive target companies with suitable ESG credentials out there to amass for chemical compounds organizations looking to invest and consolidate on the continent,” explains Prashaen Reddy, Partner at the firm.
As the least industrialized continent, the place as much as 600million people nonetheless live with out electrical energy, Africa’s chemical trade is emergent, and its markets are immature in comparison to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemicals sector is a key part of Africa’s economic system. A giant complex trade, with diverse sub-sectors, Africa’s chemical industry is intrinsically interlinked with different sectors – fuels, prescribed drugs, plastics, and manufacturing, to name a couple of.
The sector is liable for key outputs and crucial commodities along several industries’ whole worth chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 25% of manufacturing 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 international chemicals sector have resulted in a powerful investor urge for food for M&A targets with good ESG credentials, allowing Africa’s chemical companies that embrace ESG to place themselves to draw funding.
“Although realistically Africa will nonetheless have to harness its ample hydrocarbon-based power reserves to remain economically aggressive, there are proven strategies 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 gasoline, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
Africa’s nascent chemical compounds 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 present choices via applied sciences like carbon capturing and sequestration (CCS).
Echoing international trends, African National Oil Companies (NOCs) proceed to characteristic prominently in the chemical industry M&A house.
“Chemicals M&A activity has been comparatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ such as Nigeria, Angola, and more just lately Namibia, who have traditionally focussed on the extraction, manufacturing, and provide of crude oil merchandise, are actually contemplating the diversification of their product portfolios as part of their future-proofing efforts. This should start to present ends in the medium-term,” explains Reddy.
เกจอาร์กอน arising are in downstream beneficiation of power products additional alongside the worth chain.
“We could therefore 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 determined to take possession of beneficiation and manufacturing and turn out to be a net exporter of chemical substances, 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 rapid population expansion, local weather change, digitisations and decarbonisation. Traditional chemical and vitality giants, and NOCs, are repositioning themselves to remain related in a greener future. We hope to see Africa’s emergent chemicals sector leading the charge in the direction of an environmentally and socially sustainable chemical substances business worldwide.”
For extra data, go to www.kearney.com
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