GETTING THE MIX RIGHT

GETTING THE MIX RIGHT

CHEMICAL IMBALANCES

“If the chemical and performance technologies industry in the year 2020 was to be summarised in a single word, that word would be ‘disruption’. Some companies surged, for example, makers of disinfectants and diagnostic reagents, while others struggled—those exposed to automotive, refining, and construction end markets to name but a few. However, whether gearing up to meet sudden spikes in demand or struggling to survive, both outcomes resulted in major disruption,” said Paul Harnick and Gillian Morris, Global Head of Chemicals and Performance Technology, and Strategy Advisor at KPMG, respectively.

The global disruption was felt in South Africa, with hopes that 2021 would be kinder to the local chemicals sector. The local industry is the largest on the continent, contributing 5% to GDP. It’s the third largest manufacturing sector in South Africa, manufacturing chemicals used for a wide range of goods services, with sales figures reaching R23-billion in October 2021.

The beginning of the year saw the industry bouncing back, with the volume of basic chemicals produced increasing in April, May and June. Unfortunately, the four months that followed saw production of basic chemicals drop. Production of other chemical products was less consistent, up in April, May and September, but down in June, July, August and October. Sales grew, year-on-year in April, for all chemicals, with growth continuing into the close of the year, although not as significant as early 2021.

Disruption can be good, and one of the positive outcomes of the Covid-19 pandemic is how it is pushing the chemicals sector to integrate more technological solutions into their business.

Harnick and Morris identified the growth of digitalisation as one of the majortrends that would make 2021 different to 2020, when the pandemic was at itspeak and lockdown restrictions were at their tightest: “The 2021 digital focuswill be on modifying structures and processes—connecting across front, middle,and back offices—so that information flows easily between each. This helpsensure access to all appropriate information for decision-making, planning, andsupport. A connected enterprise will likely require greater adoption of emergingtechnologies such as robotic automation, artificial intelligence, machinelearning, and natural language processing. These investments will pay back ingains in revenue and efficiency—and better service to the customer.”

PRODUCTS MANUFACTURED

The chemicals sector supplies other sectors who use chemical products to manufacture their own, including:

Textiles

Agro-processing

Automotive

Plastics

We may not even realise the extent to which chemicals are integral to the goods and service we use everyday. Some of the uses for chemical products include:

Personal care (e.g. emulsifiers, thickeners, stabilisers, emollients)Water treatment (e.g. chlorine gas, flocculants, defoamers)

Animal Nutrition and Agriculture (e.g. phosphates, minerals, amino acids) Food (ingredients) Pharmaceutical (e.g. enzymes, nutraceuticals) Construction (e.g. coatings, solvents, adhesives)

DEPARTMENT OF TRADE ANDINDUSTRY VISION 2035

The Department of Trade andIndustry (DTI) aims for a compound annual growth rate of 6% until2035 and 50% employment growth. The DTI recognises that local chemicals producers lag behind and plan to support the industry in competing with global sector leaders.

The DTI sets out the followinginterventions:

1. Regulatory and legislative clarity

2. Supportive incentive Economic growth

3. Market promotion and alignment4. Reduce non-tariff barriers alignment

4 . Reduce non-tariff barriers

5. Tariff review .

SALES AND PRODUCTION

Percentage change in volume of basic chemicals produced in 2021:

Up 17.9% in April Up 6.2% in May Up 8.5% in June Down 2.6% in July Down in 19% in August Down 1.7% in September Down 24.4% in October

Percentage change in volume of other chemical products produced in 2021:

Up 23.5% in April Up 3% in May Down 4.8% in June Down 19.6% in July Down 22% in August Up 6.2% in September Down 8.4% in October

Percentage change in sales, year-on-year, for basic chemicals:

Up 49.8% in April Up 10.8% in October

Percentage change in sales, yearon-year, other chemical products:

Up 28.8% in April Down 6.1% in October