DealMakers AFRICA 2020 Annual

From the editor's desk

According to the World Bank, the COVID-19 pandemic and associated lockdowns saw the continent experience its first recession in 25 years. Repeated outbreaks across the region suggest that the pandemic will likely remain a very real concern for some time to come.

 

Africa is a challenging region, managing uncertainty, economic volatility and other country risks is difficult enough – the pandemic served to add another layer of complexity. But the continent is also resilient, and even with the uncertainty around COVID-19, its unique circumstances make it a hot-bed of innovation.

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The pandemic has turbocharged the mindset and so enabled the digital revolution now being experienced by the African regions, fuelled by various factors which were present prior to the pandemic – from the high penetration of smartphones to telecommunication infrastructure and the use of mobile payments, which are reportedly higher here than anywhere else in the world.

Africa’s technology sector is still relatively small, though it represents one of the highest growth areas for venture capital investment. Fintech companies dominated funding rounds in Africa, with the big four collecting the lion’s share (c.80%) of capital – Kenya, Nigeria, Egypt and South Africa.

The total value of deals for 2020 recorded by DealMakers AFRICA (excluding South Africa and failed deals) lays bare the knock taken by the industry. While the number of transactions announced rose marginally to 489 (464 in 2019), the value of deals halved to US$7,72 billion ($15,54 billion). The increase in deal flow reflects activity in
the private equity space, particularly in Kenya and Nigeria where PE transactions accounted for 54% and 59% respectively of total deals in those countries (page 3).

Interestingly, only 14% of deals recorded were between South Africa and the rest of the continent. The majority of these cross-border transactions were with Southern Africa (51%), followed by West Africa (27%). To this point, the largest local deal by value (page 4) was the reverse takeover of Namibia’s Legal Shield by South African-listed Conduit Capital for $594,76 million.

According to PwC (Africa Capital Markets Watch 2020), African equity capital markets’ activity in 2020 was the lowest it has been in the past decade, recording a decline in both volume (23%) and value (2%), compared with 2019. Not surprising then that for a second year DealMakers AFRICA is unable to provide a meaningful league table in this space.

The free flow of trade expected to be brought about by the African Continental Free Trade Area (AfCFTA) is considered to be an essential element of Africa’s pandemic recovery. It will take some time for intra-Africa trade to flow smoothly and at sustainable volume levels. When trade does flow effectively, the benefits for economies across the continent will be significant. African integration makes regional platform plays a reality, added to by foreign investor interest, as a result.

Sadly, DealMakers AFRICA’s plans to host the 2021 event in Lagos did not materialise. Despite the reduced value of M&A activity, the fact that sizeable and complex deals were announced at all is testament to the hard work and perseverance by the teams of people who drive this industry. If investors are to make the most of opportunities presented and navigate the uncertainty, economic volatility and other country risks, advisers on the ground are a pre-requisite. The aim of the DealMakers AFRICA is to identify, for investors, those incountry advisers who can remove the layers of complexity.

Marylou Greig