Po­lit­i­cal woes sti­fle in­vest­ment

De­spite a global boom in M&A ac­tiv­ity, it has all but ground to a halt in SA due largely to fears about po­lit­i­cal risk

Financial Mail - - MONEY&INVESTING - Tim Co­hen co­hent@busi­nesslive.co.za

Merg­ers & ac­qui­si­tions (M&A) in SA and Africa as a whole in the first half of 2018 have fallen off a cliff, de­spite an ex­plo­sion in global M&A ac­tiv­ity in the same pe­riod. Po­lit­i­cal un­cer­tainty is the main cause, ac­cord­ing to prac­ti­tion­ers.

In SA, year-to-date fig­ures from Thompson Reuters show 200 deals have taken place — about half the fig­ure for the first half of last year and the low­est in a decade.

The value of deals also halved, fall­ing to a 10-year low.

Deals have de­clined across the board, with in­bound, out­bound and do­mes­tic trans­ac­tions all well down on last year on both a vol­ume and value ba­sis.

As SA is a small mar­ket, the num­bers can be mis­lead­ing be­cause large deals of­ten skew the pic­ture. But the sur­pris­ing thing about SA’S de­cline this year is that it comes at a time when global M&A ac­tiv­ity is boom­ing.

Clem Daniel, di­rec­tor at Cliffe Dekker Hofmeyr, says that on the one hand we are see­ing pos­i­tive devel­op­ment, in the form of the

ANC try­ing to iso­late ques­tion­able mem­bers from hold­ing pub­lic of­fice and the im­ple­men­ta­tion of a state capture com­mis­sion of en­quiry. “On the other hand, do­mes­tic is­sues such as the un­ease and un­cer­tain­ties around ex­pro­pri­a­tion with­out com­pen­sa­tion and the sheer amount of ef­fort needed to put the SA econ­omy back on track are al­most cer­tainly [ham­per­ing] deal ac­tiv­ity,” he says.

Glob­ally, growing trade pro­tec­tion­ism from the US, the sit­u­a­tion in re­la­tion to Turkey, our own align­ment within Brics and our ex­po­sure un­der the African Growth Op­por­tu­nity Act are also added pres­sures in a tough en­vi­ron­ment, says Daniel.

Data from Deals In­tel­li­gence, a Thom­son

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