Surge in mergers and acquisitions proves Africa’s allure

The past decade has been a period of unprecedented growth for Africa. With investors looking for alternative markets in which to place their wealth, and with the meteoric rise of Asian economies such as China and India, there was fresh money — and the appetite — to invest in Africa.

Mergers and acquisitions worth about $276-billion have taken place on the continent since 2006.

A recent publication by the business analysis group Mergermarket, in collaboration with Nedbank and Ecobank, outlines the scope of these mergers and acquisitions.

According to the report, Deal Drivers Africa 2013, almost 1 650 merger and acquisition (M&A) deals have taken place in Africa since 2006.

The total worth of these is about two-thirds of South Africa's entire gross domestic product (GDP).

African mergers and acquisitions peaked in 2007 but have remained "relatively steady" since then, the report states.

188 deals
Last year, 188 deals took place with a total value of $33-billion. In 2013, merger and acquisition activity has "remained strong". In the first three quarters of the year, there were 115 deals with a value of $26.6-billion.

Mergers and acquisitions in Africa have "held up well, even at times of global economic uncertainty", the report states. It attributes the consistent activity to a number of factors, but of key importance is the continent's high economic growth rate.

Africa's "consistently high rates of growth — and corresponding rates of return — have been a key attraction for investors", it says. GDP growth for sub-Saharan Africa came in at just below 5% in 2012. "This compares very favourably with growth in the world's advanced economies of just 2.1%."

And this performance is likely to continue: the International Monetary Fund forecasts that African GDP growth in 2013 will be 5.5% and will grow to 6% in 2014.

By contrast, advanced economies are forecast to grow by 1.2% and 2.2% in 2013 and 2014, the report says.

Apart from high growth rates, investors have been attracted by the increasing diversification of Africa's economies.

Untapped investment opportunities
"As well as nurturing increased economic stability, this diversification has created untapped investment opportunities in areas such as financial services and business services," it states.

Then there is the continent's burgeoning middle class. There are now more than one billion middle-class consumers in Africa, and the promise of the ever-deepening consumer pocket is luring more and more foreign interest.

"When you add to the mix efforts made by the region's governments to improve regulatory regimes, it is no surprise that African M&A is surging," says the report.

"Meanwhile, although political risks are present (and well documented) in some countries in the region, taking a longer-term view, Africa is considerably more stable than it has ever been."

The energy, mining and utilities sectors have made up the lion's portion of merger and acquisition deals during the period under review, dominating both the number of deals made and the value of the transactions.

Between 2006 and 2011, the report states, these sectors made up 284 of the deals (21% of the total) and had a combined value of $60-billion.

Asian buyers dominate bigger-ticket transactions
In the past two years, the percentage of the number of deals stayed the same at 21%, but the value of the deals made by this sector has surged to $32-billion — "over half of the total value of all M&A since the beginning of 2012", it states.

Asian buyers have dominated these bigger-ticket transactions. "Indeed, seven out of the top 10 deals of 2013 have been in the energy, mining and utilities sectors and, in three of these deals, the acquirer was Chinese," the report says.

The biggest-value deal in those sectors, with a price tag of $4.2-billion, was China National Petroleum Corporation's acquisition of a 28.57% stake in energy company Eni East Africa Spa. The second- and third-biggest deals in the sector were also acquisitions by Chinese firms.

Furthermore, Indian energy giant ONGC Videsh Limited was involved in two major acquisitions in Mozambique for deepwater well drilling, amounting to $5.1-billion.

However, the report says, despite Chinese and Indian acquisitions dominating the year's deals and the prominence of the energy, mining and utilities sectors, the largest deal in 2013 has been in the telecommunications industry.

The agreement was made by Dubai-based Emirates Telecommunications, which spent $6-billion to acquire a 53% stake in Maroc Telecom of Morocco.

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Thalia Holmes
Thalia Holmes

Thalia is a freelance business reporter for the Mail & Guardian. She grew up in Swaziland and lived in the US before returning to South Africa.

She got a cum laude degree in marketing and followed it with another in English literature and psychology before further confusing things by becoming a black economic empowerment (B-BBEE) consultant.

After spending five years hearing the surprised exclamation, "But you're white!", she decided to pursue her latent passion for journalism, and joined the M&G in 2012. 

The next year, she won the Brandhouse Journalist of the Year Award, the Brandhouse Best Online Award and was chosen as one of five finalists from Africa for the German Media Development Award. In 2014, she and a colleague won the Standard Bank Sivukile Multimedia Award. 

She now writes and edits for various publications, but her heart still belongs to the M&G.     

Related stories


Subscribers only

How smuggled gold destined for Dubai or Singapore has links...

Three Malagasy citizens were apprehended at OR Tambo International airport, but now the trail is found to connect to France and Mali

How lottery execs received dubious payments through a private company

The National Lottery Commission is being investigated by the SIU for alleged corruption and maladministration, including suspicious payments made to senior NLC employees between 2016 and 2017

More top stories

Sounding the alarm on shack fire losses

A tech solution to fires in informal settlements comes with insurance that pays out the victims of these blazes

Debunk the lies of anti-vaxxers

There’s more than enough to be suspicious about with Big Pharma, but know your enemy

From the land of the free to the country of...

Democracies are fragile entities that are often captured and exploited by populists, to the detriment of all concerned

Africa’s make-or-break moment

The African Continental Free Trade Area could transform Africa’s economic prospects and end its dependence on commodity exports

press releases

Loading latest Press Releases…