AFRICA’S GREENFIELD OPPORTUNITY

Global trends unearthed and analysed point out that the chemicals sector is more and more being pushed by Environmental, Social, and Governance (ESG) concerns. It also signifies that decarbonisation is commonly a key rationale behind the investments (and divestments) in the sector, except for Africa where investments understandably lagged again this year.
These are the findings of the newest Chemicals Executive M&A Report for 2022 released by world administration consulting agency Kearney, now in its ninth version.
“The reasoning for this is because there are simply not that many enticing target companies with suitable ESG credentials available to amass for chemical compounds organizations seeking to make investments and consolidate on the continent,” explains Prashaen Reddy, Partner on the agency.
As the least industrialized continent, the place up to 600million individuals still live with out electrical energy, Africa’s chemical business is emergent, and its markets are immature compared to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemicals sector is a key component of Africa’s financial system. A giant complicated business, with numerous sub-sectors, Africa’s chemical business is intrinsically interlinked with other sectors – fuels, pharmaceuticals, plastics, and manufacturing, to name a quantity of.
The sector is responsible for key outputs and essential commodities alongside several industries’ entire value chains.
In South Africa, the continent’s most developed chemical market, the sector accounts for around 25% of producing gross sales. (Chemical and Allied Industries’ Association: https://home.kpmg/za/en/home/industries/chemicals.html)
ESG and decarbonisation increasingly being the dominant rationales behind M&A offers within the world chemical compounds sector have resulted in a robust investor appetite 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 energy reserves to stay economically aggressive, there are proven methods to make even fossil-fuel burning facilities cleaner and extra sustainable, leading to significant reductions in carbon emissions, similar to using low-carbon gasoline, low-carbon hydrogen and low-carbon ammonia,” Reddy elaborates.
เกจไนโตรเจนsumo has a chance to leap forward of the curve, by building sustainability and green design rules into new chemical facility developments from the outset, and by working to decarbonise current offerings through technologies like carbon capturing and sequestration (CCS).
Echoing international trends, African National Oil Companies (NOCs) continue to function prominently within the chemical trade M&A house.
“Chemicals M&A exercise has been relatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ corresponding to Nigeria, Angola, and more lately Namibia, who’ve historically focussed on the extraction, production, and provide of crude oil products, are now considering the diversification of their product portfolios as part of their future-proofing efforts. This should begin to present ends in the medium-term,” explains Reddy.
These new opportunities arising are in downstream beneficiation of energy merchandise further alongside the value chain.
“We could due to this fact see a spate of acquisitions of facilities that produce petrochemicals, ammonia, and fertilisers, for instance, by these NOCs over the coming years. These acquisitions would function synergistically alongside their present oil and gas-focussed strategies,” he says.
There are signs that Africa is decided to take possession of beneficiation and manufacturing and turn out to be a web exporter of chemical compounds, well-poised to provide the mature markets of Asia, the EU, the USA, and its emergent ones.
“Today’s chemical substances 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 stay relevant in a greener future. We hope to see Africa’s emergent chemical substances sector leading the cost towards an environmentally and socially sustainable chemical compounds industry worldwide.”
For more info, visit www.kearney.com
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