Global developments unearthed and analysed point out that the chemical substances sector is increasingly being driven by Environmental, Social, and Governance (ESG) considerations. It also signifies that decarbonisation is often a key rationale behind the investments (and divestments) in the sector, apart from Africa the place investments understandably lagged again this year.
These are the findings of the most recent Chemicals Executive M&A Report for 2022 released by global management consulting agency Kearney, now in its ninth edition.
“The reasoning for it’s because there are merely not that many engaging target companies with suitable ESG credentials out there to amass for chemicals organizations seeking to invest and consolidate on the continent,” explains Prashaen Reddy, Partner on the agency.
As the least industrialized continent, the place up to 600million folks nonetheless stay without electrical energy, Africa’s chemical industry is emergent, and its markets are immature in comparability to its Asian, European, and Middle Eastern counterparts.
Nevertheless, the chemical substances sector is a key component of Africa’s economy. A giant complex trade, with diverse sub-sectors, Africa’s chemical business is intrinsically interlinked with different sectors – fuels, prescribed drugs, plastics, and manufacturing, to call 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 round 25% of manufacturing sales. (Chemical and Allied Industries’ Association:
ESG and decarbonisation more and more being the dominant rationales behind M&A deals within the world chemical substances sector have resulted in a powerful investor urge for food for M&A targets with good ESG credentials, allowing Africa’s chemical corporations that embrace ESG to place themselves to attract funding.
“Although realistically Africa will nonetheless need to harness its ample hydrocarbon-based vitality reserves to remain economically aggressive, there are confirmed methods to make even fossil-fuel burning facilities cleaner and extra sustainable, leading to 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 chemicals sector thereby has a chance 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 current choices through technologies like carbon capturing and sequestration (CCS).
Echoing international tendencies, African National Oil Companies (NOCs) proceed to characteristic prominently within the chemical trade M&A space.
“Chemicals M&A activity has been comparatively quiet in Africa over the previous 12 months. Africa’s oil-rich nations’ corresponding to Nigeria, Angola, and extra lately Namibia, who have historically focussed on the extraction, production, and supply of crude oil products, are actually 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 energy merchandise further alongside the value chain.
“We could subsequently see a spate of acquisitions of amenities 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 decided to take ownership of beneficiation and manufacturing and turn out to be a net 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 companies must navigate the mega-trends of fast inhabitants expansion, climate change, digitisations and decarbonisation. Traditional chemical and vitality giants, and NOCs, are repositioning themselves to stay related in a greener future. We hope to see Africa’s emergent chemical substances sector main the cost in direction of an environmentally and socially sustainable chemicals trade worldwide.”
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