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

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