DealMakers AFRICA Q1 2020
From the editor's desk
Many of Africa’s economies will face tough and challenging years ahead; the International Monetary Fund (IMF) is calling the potential economic effects of the COVID-19 pandemic the worst economic downturn since the Great Depression.
UNCTAD, the United Nations’ body dealing with trade, investment and development issues, estimates that the continent’s overall Foreign Direct Investments (FDI) inflows will shrink by 15%. Investments affected most will be those in energy and primary industries, due to the oil price drop, as well as the airline and tourism industries, due to travel cancellations and bans. Africa will also experience foreign capital outflows due to COVID-19.
According to the African Development Bank, the contraction of sub-Saharan economies will cost the region between US$35bn and $80bn due to output drop and the global fall in oil prices, and commodity prices in general. Oil giants Angola and Nigeria have already seen revenues tumble.
The IMF, the private-sector arm of the World Bank, has projected that sub-Saharan economies are likely to contract by 16% due to blanket lockdowns, with most African governments having adopted emergency policy measures to protect public health and stop the spread of COVID-19. As a result of the pandemic, the gross domestic product (GDP) of Nigeria and South Africa are expected to shrink by 3.4% and 5.8% respectively, and the potential to spark a food security crisis in Africa, depending on disruptions in food supply chains, is high. The World Bank believes agricultural production could potentially contract up to 7%, and food imports could decline by as much as 25%. The report says that, because of this black swan event, 160 million people will end up in poverty, with 60 million people in extreme poverty globally.
Every crisis presents opportunities and the coronavirus pandemic, though tragic, is no exception. Governments should use these unprecedented times to adopt progressive industrial policies that could create inclusive, prosperous and sustainable societies in the long-term by shifting reliance on commodities towards developing industrial capabilities, with a focus on growth in the health and pharmaceutical sectors.
The total value of deals captured by DealMakers AFRICA for Q1 2020 (excluding South Africa and failed deals) was US$4,48 billion from 98 transactions up from $3,42 billion (77 transactions) in Q1 2019. The largest deal by value for the quarter was the acquisition by Saudi Telecom Company of a 55% stake in Vodafone Egypt valued at $2,4 billion. The largest deals in West Africa and East Africa by value was the disposal by MTN of a 49% stake in Ghana Tower Interco B.V. and Uganda Interco B.V. to AT Sher Netherlands Coöperatief for $523 million. Analysis at a regional level showed East Africa as the most active with 36 deals followed by West Africa with 28 and Southern Africa with 20 deals for the quarter. Kenya, Nigeria and Namibia led the field in their respective regions.
The ambitious initiative of the African Continental Free Trade Area (AfCFTA) agreement, which creates a single market for goods and services, and a customs union with free movement of capital and business travellers – the world’s largest, given Africa’s 1.2 billon population and combined GDP of over $2.5 trillion – was due to come into effect on 1 July 2020. As a result of the COVID-19 global pandemic, this has been postponed, with a new date yet to be confirmed by the African Union Commission.