in brief in the news By Jaco Visser
BUSINESS
South Africa losing out on international M&A front
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As the world grows wary of China’s ability to remain the factory of the world, South Africa – and the rest of the continent – has a limited time to enjoy the spoils. outh Africa’s attractiveness as a R1bn) values for transactions in order to realise foreign investment destination is an acceptable return on assets. It often takes declining even as the country, as the same time and effort to undertake a R1bn part of the Africa Continental Free transaction as it would a R100m one, he says. Trade Agreement (AfCFTA), offers physical “There are several acquirers and investors who access to markets in the rest of Africa. Not to are still looking into Africa, especially fintech and mention supplying manufactured goods into the software companies,” says Bahlmann. In addition, European and US markets. China’s competitiveness as a manufacturing base As the most industrialised nation on the and reliable supply chain partner is on the decline, continent, even as manufacturing is buckling under he explains. “We still have a robust skills base in poor government decisions and amid a global several industries in SA.” health pandemic, SA should be a lucrative market The problem, however, with fintech is that for mergers and acquisitions from abroad. That is, it relies on customers’ discretionary disposable however, not the case. income. Taking current-dollar GDP per capita The value of mergers and acquisitions more as a measure, sub-Saharan Africa compares than halved in the first six months of 2020 unfavourably with other emerging markets. compared with the same period a year ago – Manufacturing remains an opportunity for a from $8.2bn to $3.3bn, according to Statista region with a young population moving up the data supplied by Andrew Bahlmann, managing income ladder. director of Deal Leaders Africa. The number of Outside of strong growth opportunities in transactions slid from 160 to 132 between the SA itself, international acquirers are attracted comparable periods. to companies with established SA’s GDP, the 38th-largest in markets in the rest of Africa that The value of mergers and the world in current US dollars, would enable diversification in acquisitions more than halved was recorded as $351.4bn in revenue and currency streams, in the first six months of 2020 compared with the same period 2019, according to World Bank according to Bahlmann. a year ago – from data. Hong Kong, with almost It stands to reason then, as eight times fewer people than one of the big drivers behind the SA, had a GDP of $366bn. The AfCFTA, for SA to ensure that whole of sub-Saharan Africa had local companies’ access to the a GDP of $1.75tr – bringing SA’s rest of the continent is smooth to contribution to this region to a once the agreement kicks in on fifth of all goods and services 1 January 2021 (it was delayed produced. Manufacturing from 1 July this year due to the contributed about 12% of SA’s Covid-19 pandemic). GDP in 2020 and has been on The window of opportunity a net decline trajectory since the to cash in on the slide in China’s first quarter of last year, according to Stats SA data. competitiveness, and global supply chains’ This is the sector where steady jobs are created, wariness of the country’s dependability following and exports could be realised on a large scale. the pandemic, is but a short one. Why are these figures important in a discussion Africa is physically closer to the markets of around mergers and acquisitions (M&A)? A billionEurope and the US. Lest Africa’s leaders – judging dollar M&A target in SA will be equal to about 0.3% by their actions over the past six decades – act of GDP. In the US, with its $21.4tr economy, the in cohort and get the free trade agreement same transaction will be equal to 0.004% of GDP. implemented as soon as possible, with minimal red “One obstacle to mergers and acquisitions tape at border posts, countries such as Vietnam, in SA is the size of potential targets,” explains Indonesia and Cambodia may gather and divide the Bahlmann, adding that a number of potential spoils of manufacturing. ■ acquirers have set minimum (many in excess of editorial@finweek.co.za
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$8.2bn $3.3bn.
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Andrew Bahlmann Managing director of Deal Leaders Africa
“One obstacle to mergers and acquisitions in SA is the size of potential targets.”
finweek 27 August 2020
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