CAPE TOWN - The South Africa Investment Conference (SAIC) next month takes place as Baker McKenzie’s Global Transactions Forecast predicts that the economy will strengthen in 2020-21, which would support a modest recovery in deal-making activity ahead.
The second SAIC, to be held on November 5 to 7 with the theme “Accelerating Economic Growth by Building Partnerships”, aims to mobilise R1.2trillion in new investments by 2023. The first, held last October, saw R300billion committed in South Africa by local and international investors.
Trade and Industry Minister Ebrahim Patel said yesterday: “Bold reforms have been made to support investment as we look forward to partnering local and international investors to turn more investment commitments into bankable projects at SAIC 2019.”
The president’s economic adviser, Trudi Makhaya, said: “Over the past year the government has made steady progress on making it easier to do business, by focusing on factors that contribute to the country’s improved competitiveness,” she added.
According to the 2019 World Economic Forum Global Competitive Index, released last week, South Africa ranks number 1 out of 141 nations in budget transparency, which, she said, illustrated a “robust and transparent political governance system.”
Morne van der Merwe, Baker McKenzie’s head of corporate/M&A, said yesterday that the high value of merger and acquisition (M&A) deals in the first half of 2019 could signal the beginning of a change in sentiment, even though there remained “a lot of work yet to be done” to ensure that investors feel comfortable to capitalise on the many opportunities in the country.
South African M&A deal values rocketed 347percent in the first half of 2019 to $16.6bn (R245bn) from $3.7bn in the first half of 2018.
Deal volume, however, fell by a quarter to 136, compared with 182 in the first half of 2018.
A number of factors have caused negative investor sentiment in South Africa in recent years, including state capture, bribery and corruption in both the private and public sector, a weak economy, poor service delivery and uncertainties prior to elections.
“In 2019 we noted a trend towards a higher value, but lower volume of M&A transactions due to the opportunities to capitalise on demand in certain sectors in South Africa. Investors usually do not mind a challenge, but they have no affinity for uncertainty. Concerns around corruption and South Africa’s ability to implement good policy are well known and have led to numerous calls for legislative reforms that encourage foreign investment, boost infrastructure development and improve governance and compliance,” said Van der Merwe.
“Market conditions and opportunities to capitalise on demand in certain sectors could be setting the scene for a trend towards high value M&A transactions going forward,” he added.
“The good news is that South Africa’s commitment to improving the local investment environment, combined with signs of future economic improvement, have resulted in higher M&A value and volume predictions in South Africa in 2021 and 2022,” he said.
Wildu du Plessis, Baker McKenzie's South African head of capital markets, said: “Investors have been waiting for political and economic stability to return to South Africa however, with an economic recovery forecast, trade tensions easing and South Africa and Africa beginning to benefit from new global and regional trade agreements, the forecast points to a recovery in capital markets in South Africa in the next few years,”
Baker McKenzie forecast that by 2020 the situation looked set to improve with $211million predicted to be raised in South Africa. In 2021, Initial Public Offerings worth $634.7m are forecast for South Africa, rising to $912.3m in 2022.