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DealMakers - 2020 Annual

Dealmaking in sub-Saharan Africa (SSA) – 2020 in review and predictions for 2021

Q&A with Christo Els

Christo Els WWWW-0390-01.jpg
Christo Els

Both in terms of value and volumes, deal activity in sub-Saharan Africa (SSA) in 2020 was less than 2019 levels.

Nigeria was an outlier country in SSA, which showed an uptick in deal activity in 2020 from 2019, with key deals in the tech/fintech, automotive and construction industries. The Nigerian government also enacted some investor friendly laws in 2020.

Was there as much deal activity in 2020 as there was in 2019?

Did deals fall apart in 2020 from the impact of COVID-19, as much as expected?

Surprisingly, not many of the deals that we have been working on were cancelled due to COVID-19. Some of the deals that were already underway paused, but they have not been abandoned. We saw a slight freeze in activity across SSA after initial lockdowns were announced, but then an uptick in the second quarter.

Do you expect there to be a big uptick in deal activity in 2021, to pre-pandemic levels?

Although vaccines offer some hope for returning to a pre-pandemic deal-making environment, there is likely to be ongoing uncertainty in the market for some time still.  2021 will continue to be disrupted and sluggish, especially for the countries on the tail end of acquiring access to vaccines (mostly developing countries). A return to pre-pandemic deal activity levels may only be likely in 2022.

How were industries affected by COVID-19?

Most negatively impacted by the pandemic were probably retail, transport, construction, insurance, hospitality, leisure and energy. The oil and gas and non-core infrastructure industries have also been stifled.

The industries that experienced a positive outcome in 2020 were probably TMT, healthcare, online retail and fintech. These industries will continue to thrive in 2021, especially the tech industry.

What deal activity do you think we will see in 2021?

The deals we are likely to see continue and rising in 2021 are those linked to companies facing the consequences of COVID-19: distressed M&A, restructuring (or optimisation) and selling off non-core assets or under-performing assets. Of course, some businesses have done well and are looking for opportunities, but they may be cautious about entering into M&A transactions too early in the cycle.

I think we may also see some PE investors looking for good opportunities in SSA. They may even focus investment into the most challenged sectors.  These sectors will inevitably bounce back in the long run, and could offer good long-term returns.

Within the challenged sectors, you may also see some sector consolidation. Competition authorities in SSA will be keeping an eye on any consolidation, which may impact the deal terms.

We may also see some foreign entities buying up shares on locally listed markets. We have seen the weaker Rand and asset prices creating some interest in South African equities during the latter half of 2020.

What are the core challenges to deal-making during COVID-19?

In the early stages, I think that there were concerns related to how complex negotiations could be had without in-person meetings, and how proper due diligence could be conducted. But, using technology, I think dealmakers and advisers alike quickly adjusted to the new normal. A lot of lessons were learned during the pandemic. I think that, in future, people will be much more purposeful about what they need to do in person, and what they can do remotely.  This will inevitably impact business travel.

The main issue, I think, dealmakers are facing now remains the pricing of deals. So much uncertainty in the market, related to both a pandemic and a global recession, makes it a challenging task. Old ways of determining value simply don’t apply. Issues related to timing and implementation dates have also been less predictable with lockdowns and closures of public offices and regulators.

I also think that there is a risk of an increase in post-M&A disputes where completed deals deliver below expectation.  This occurred in the wake of the 2008 financial crisis. There may be many buyers and sellers looking to contractually mitigate this risk.

What are the possible positive spins for SSA in 2021?

The new US administration seems focused on encouraging US trade and investment into Africa. I also think China may make a quicker recovery from the effects of the pandemic and will have continued interest in investing in Africa.

Brexit may result in new (and possibly better) trading terms being agreed with certain African countries.

The African Continental Free Trade Area agreement (AfCFTA) – effective from 1 January 2020 – could enhance regional trade between African countries, and may drive the growth of domestic manufacturing.

Christo Els, Senior Partner, Webber Wentzel.


This year, Christo celebrates his 25th year at the firm where he has spent his entire professional career as an M&A lawyer. Christo was named by DealMakers as Joint DealMaker of the Year, 2011 with five further nominations between 2010-2015.

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