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DealMakers - Q3 2023 (released November 2023)


M&A in South Africa 2023: navigating trends, challenges, and opportunities

by Doron Joffe, Julius Oosthuizen, Sanushka Chetty, Cheván Daniels, Isaac Fenyane, Sanjay Kassen, Nkosi Tshabalala and Tracy Van Wyk | ENS

South Africa’s M&A landscape has undergone significant shifts so far in 2023, shaped by a com-bination of global economic factors, domestic challenges, and other evolvin
g opportunities. The ENS team explores the current state of M&A in South Africa, highlighting the trends, challenges and opportunities that define the market.


Trends and Sentiment
The global M&A arena has exper-ienced a slowdown due to rising inflation and geopolitical challenges, and South Africa is no exception. Anxiety has permeated the M&A market, with various factors con-tributing to the prevailing appre-hension. Ongoing global conflicts, soaring commodity prices, inflation, rising living costs, higher lending rates, and the Federal Reserve’s policy decisions have all played a role in creating an unpredictable environment.

South Africa’s economic landscape mirrors these global trends, characterising 2023 as a year of uncertainty. The potential shift away from the U.S. dollar in international trade among BRICS nations further adds to market instability.

doron joffe.jpg
Doron Joffe
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Julius Ooshuizen
sanushka chetty.jpg
Sanushka Chetty
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Isaac Fenyane
sanjay kassen.jpg
Sanjay Kassen
nkosi tshabalala.jpg
Nkosi Tshabalala
chevan daniels.jpg
Cheván Daniels
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Tracy van Wyk

However, signs of hope have emerged with recent interest rate hikes plateauing, and cooling inflation rates within the target range of 3 to 6%. Despite the challenges, it’s anticipated that South Africa’s M&A market will gradually recover in tandem with global economic improvements.

Challenges and Opportunities
Several factors have impacted the M&A landscape in South Africa, including:

  • The socio-economic environment

  • Regulatory changes

  • Technological developments

  • Continued recovery from the COVID-19 pandemic

  • Economic stagnation 

  • High REPO rates 

  • Substantial unemployment rates


Other domestic challenges, like load shedding, have also played a role, creating both obstacles and new opportunities within the energy sector.

Generally, South African regulators have been efficient in assessing deals, despite resource and capacity constraints occasionally presenting some challenges. In spite of the uncertainty, there are still opportunities for savvy dealmakers, particularly in the mid-market segment, where undervalued targets abound due to the economic downturn.

Those with a higher appetite for risk may find opportunities in distressed assets and restructurings, as the market seems to have hit a low point and is gradually on the path to recovery. Addressing prevailing uncertainties and regulatory challenges will be crucial to restoring confidence and fostering growth in the M&A sector.

Private Equity
In contrast to the slowdown in M&A, the private equity sector in South Africa is dynamic, with high activity observed in various industries, including real estate, technology, manufacturing, FMCG, security, telecommunications, alternative energy, and more.

There is a growing trend of private equity firms investing in non-descript businesses alongside technology. While technology businesses may have high cash burn rates, more stable industries often present more mature market opportunities that require investment to reach the next level.

Private equity funds continue to seek opportunities in South Africa, especially in areas where the public sector faces limitations. Alternative and renewable energy projects are gaining traction, driven by the country’s energy crisis and the increasing focus on ESG-friendly industries.

A noteworthy trend is private equity firms showing interest in founder-owned businesses, with some larger funds expanding their focus to pan-African investment opportunities, particularly in infrastructure and data centres. Despite rigorous competition and public interest requirements, black-owned private equity funds are leveraging their status to incorporate B-BBEE initiatives, while foreign buyers are incorporating employee share ownership schemes in their deals to align with B-BBBE and South African Competition Authorities’ expectations.

Equity Capital Markets
Equity Capital Markets (ECM) in South Africa have recently witnessed a surge in delistings from the JSE. 2023 has also seen a new trend emerge, with companies opting for primary listings on larger international exchanges, such as the Nasdaq or NYSE, while retaining secondary inward listings on the JSE. This transition is driven by the deeper pools of investors and superior liquidity offered by these international exchanges, as well as concerns about the JSE’s ability to accurately represent share value.

Despite the delisting trend, smaller and medium-cap companies are exploring alternative stock exchanges like A2X. Capital raising strategies are evolving, with companies initiating disposals to raise necessary capital and refine their business models.

Opportunities lie in other African nations as well, where South African enterprises can find appealing investment destinations. Initiatives for multinational South African firms’ listings within these nations highlight the need for heightened competition within the ECM. Key sectors ripe for exploration include mining, technology and telecoms. Despite challenges, the ECM landscape offers opportunities, particularly as international capital markets rebound. The JSE recently announced a simplification project aimed at creating a more investor-friendly listing environment by stream-lining listing rules, and this move is set to boost ECM activity.

As these trends continue to shape South Africa’s M&A, private equity, and equity capital markets, adaptability and market awareness will be essential for success. Despite the challenges of 2023, optimism remains that the market will gradually recover and begin to thrive in the near future. The hope is that South Africa’s M&A landscape will regain its vibrancy, offering new opportunities for dealmakers and investors alike.  

Joffe and Oosthuizen are Heads, Chetty, Daniels, Fenyane, Kassen, Tshabalala and Van Wyk are Executives in Corporate Commercial | ENS.

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