DealMakers AFRICA Q2 2020
From the editor's desk
The impact of the COVID-19 pandemic on the African continent is far reaching; the freeze on foreign investment, revenue streams from tourism and financial aid and the postponement in implementation of critical regulatory legislation and processes have had a knock-on effect on all sectors of Africa’s economies. Sadly, while advanced economies have available to them, large stimulus packages to see them through this crisis, African governments do not have fiscal buffers and savings. Debt relief and concessional loans from the International Monetary Fund and the G20 are not nearly enough to deal with the fallout.
The pandemic has laid bare the inability of the region’s social infrastructure to adequately handle the pressure placed on water, sanitation, education and health by this existential threat. That being said, there have been benefits associated with the pandemic. The lockdown of traditional economies has seen the fast-tracking of the digital economy, long-delayed governance reforms are back on the table and renewed public-private collaboration has been witnessed across many of the regions.
The value of deal activity in Africa (excluding South Africa) for H1 2020 plunged to US$6,40 billion off 224 transaction, when compared with the US$87,4 billion recorded in H1 2019 (page 3). With heightened profitability pressures on investors in the COVID-19 environment, M&A activity is unlikely to recover until equity valuation volatility settles.
By region, East and West Africa were the most active with 63 deals each. Unsurprisingly, Kenya and Nigeria recorded the most deals within their respective regions at 34 deals ($140,4 million) and 39 deals ($197,9 million) respectively. By value, North Africa led the tables at $2,6bn off just 35 deals, though this is misleading as the Saudi Telecom acquisition of a 55% stake in Vodafone Egypt is valued at $2,4 billion (page 4). Interestingly private equity and venture capital transactions, which are included in the regional numbers, represent 43% of the continent’s deal activity during the period under review. These deals were most prominent in East Africa, with 33 investments followed by West Africa (31) and North Africa (23).
The African Continental Free Trade Area (AfCFTA) which was due to take effect from July 2020, giving Africa’s internal trade the mega-jolt needed, has been postponed to January 2021 due to the slow pace of negotiations complicated further by the COVID-19 pandemic.
In July DealMakers AFRICA announced the intention to extend coverage of legal regulatory changes in Africa with the launch without prejudice AFRICA. The magazine without prejudice was first launched 20 years ago and has become South Africa’s leading corporate law magazine, examining matters of interest to attorneys, advocates, businessmen and investors. without prejudice AFRICA will aim to provide investors who have an interest in the laws of the various African regions as it pertains to business, with current quality updates. The magazine will be produced quarterly as a run-of-book in DealMakers AFRICA.