South Africa occupies an integral role in the global chemicals sector
Amid global geopolitical uncertainty, Africa and the Middle East might be the only regions to drive merger & acquisition (M&A) growth in the global chemical industry this year. This is according to Partner at A.T.Kearney Johannesburg François Santos.
His comments come as the global management consultancy found a relatively positive outlook for global chemical M&A. Surveying chemical industry executives, A.T.Kearney found that just under 40% expect a spike in M&A this year, while just over 41% expect it to plateau at a very high level.
However, A.T.Kearney predicts that growth in the sector is likely to slow considerably for a variety of factors. A handful of major deals such as the Bayer acquisition of Monsanto and the Lide-Praxair merger, appear to have driven down the worth of pending deals by as much as 67%.
Similar dips can be seen in the number of announced deals, which have fallen by 10%, taking them lower than the average for the whole decade. According to A.T.Kearney’s Global Lead of the Chemicals practice Thomas Rings, international uncertainty has a lot to do with these faltering numbers.
“In this environment, executives view the lack of global GDP growth as a major impediment to M&A activity,” he said. Nevertheless, the chemicals market in Africa and the Middle East are likely to keep the global chemicals market afloat. This is according to François Santos of A.T.Kearney Johannesburg.
“We do not foresee large deals in South Africa in 2020, except for discrete asset disposals. On the other hand, South Africa participated indirectly in megadeals in 2019 as one of the regions being internally consolidated and we expect this trend to continue in 2020,” he said.
South Africa is currently battling its own GDP woes, which significantly affect the likelihood of an increase in deal activity. Much like chemicals, the commodities market is also affected by this scenario. The mining sector, for instance, has been struggling with falling prices in recent years.
