Despite M&A uptick, many investors still on the fence

While merger and acquisition (M&A) activity targeting African countries increased by 74.1% compared to the US$-3.1billion announced in the second quarter, the current environment poses a threat to South Africa’s attractiveness for investors.

Gasant Orrie, Cape managing partner and director of corporate and commercial practice at Cliffe Dekker Hofmeyr (CDH), says that while there has been an uptick in terms of inward-bound M&A activity in the latter half of the year, South Africa faces several challenges amid its political and economic uncertainties.

“South Africa has several challenges that have the potential to deter investment, such as policy uncertainty in certain key sectors, the current technical recession and continued slow economic growth, concerns about corruption, and the instability of several state-owned enterprises,” says Orrie.

That said, Orrie believes that the country also has several positive factors that still provide a level of comfort for investors. Referring to CDH’s latest Doing Business in South Africa Report — an annual publication that explores the country’s commercial legal landscape — Orrie explains that the attractiveness of a destination is in part determined by the country’s legal framework, political landscape and infrastructure.

“South Africa has a robust infrastructure network including sophisticated financial, legal and telecommunications sectors, good airport transport connectivity, and a corporate governance framework that meets international best practice.

“Further, Africa as a whole is a region of abundant resources and opportunities. It has a growing labour force, increased connectivity and infrastructure, and many African markets and sectors are underdeveloped. South Africa, having one of the most developed economies in Africa, can thus be seen not only as a destination for investment itself, but also a gateway to investment in the rest of Africa.”

Orrie believes that government’s renewed commitment to certain policy regulations has positively contributed to the increase in M&A activity for the second half of the year. “The signing of the R56-billion Renewable Energy Independent Power Procurement Programme highlights government’s positive commitment to policy decisions, which has and should continue to result in an inflow of investment into the country’s energy sector.”

There have also been several positive steps taken by the legislature to encourage foreign investment in the country, he adds. “The new International Arbitration Act (IA Act), for example, came into effect on December 20 2017 and will assist South African businesses and investors in the private sector in resolving their disputes in a cost-effective and timeous manner.

“This makes South Africa an attractive venue for parties around the world to resolve their commercial disputes. The IA Act will encourage investment in South Africa, as investors in the private sector will have a secure mechanism through which their commercial interests are protected by law, which is on par with international best practice.”

However, Orrie points out that there are many investors who have adopted a “let’s wait and see” approach. “Uncertainty regarding the security of property rights and how land reform will be achieved in South Africa continues to limit near-term investment. In addition, it could ultimately lead to a more pronounced fall in investment should the final terms of land reform be particularly onerous for investors. Where South Africa lands on the issue in the upcoming months and years will be a determinative factor regarding investor confidence.

“The outcome of the 2019 National Elections, their effect on the political landscape and potential policy decisions for the next five years will also play an important role for investors who are currently sitting on the fence,” Orrie concludes. 

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.

Guest Author

Related stories


Subscribers only

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

Pandemic hobbles learners’ futures

South African schools have yet to open for the 2021 academic year and experts are sounding the alarm over lost learning time, especially in the crucial grades one and 12

More top stories

What the Biden presidency may mean for Africa

The new US administration has an interest and much expertise in Africa. But given the scale of the priorities the administration faces, Africa must not expect to feature too prominently

Zuma, Zondo play the waiting game

The former president says he will talk once the courts have ruled, but the head of the state capture inquiry appears resigned to letting the clock run out as the commission's deadline nears

Disinformation harms health and democracy

Conspiracy theorists abuse emotive topics to suck the air out of legitimate debate and further their own sinister agendas

Uganda: ‘I have never seen this much tear-gas in an...

Counting was slow across Uganda as a result of the internet shutdown, which affected some of the biometric machines used to validate voter registrations.

press releases

Loading latest Press Releases…