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Civil unrest threatens to choke M&A-linked investment in South Africa

The value of mergers and acquisitions (M&A) in the first half 2021 (H1 2021) soared in South Africa, and the deal value also increased in Nigeria in the first six months of 2021, but Kenya experienced a slight decrease in both deal value and volume in H1 2021.

This is according to Baker McKenzie’s latest analysis of Refinitiv data, which shows that the value of M&A transactions in South Africa in H1 2021 amounted to US$52-billion, with 169 deals announced in the period.

Compared to the first half of 2020, transactions volumes decreased by 8%, but deal value increased by 958% in the first half of 2021.

Refinitiv data shows that the volume of domestic transactions increased slightly to 80 deals, a 10% increase year on year (Y-o-Y). Domestic transactions in South Africa in H1 21 were worth US$46.7-billion, a dramatic 2148% increase year-on-year (Y-o-Y). Further, cross-border transactions increased 17% Y-o-Y to 89 deals, with deal value surging 251% to US$ 5.4-billion.

Market researchers at Baker McKenzie in Johannesburg say the recent civil unrest in parts of Kwa-Zulu Natal and Gauteng is a threat to progress made as far as foreign investment is concerned.

They add that industries most impacted by the unrest include the industrial, manufacturing and transportation (IMT), consumer goods and retail, energy, mining and infrastructure and real estate sectors.

Marc Yudaken, Partner in the Corporate/M&A Practice at Baker McKenzie says: “Many businesses in these sectors have been badly impacted by the pandemic and some might not be able to recover from the damage caused by the unrest. Even for investors in these sectors that have an appetite for risk, this might be too much to digest, and they could be put off plans capitalise on the post-COVID boom in South Africa. It is difficult to quantify at this stage, but if deals are cancelled, losses due to the withdrawal of foreign investment could potentially run into hundreds of millions of rands.”

“However, we should take into account that the country is resilient and if stability returns quickly, investors will likely go ahead with current plans. As such, it will be important for the authorities to act quickly and charge the alleged perpetrators of the unrest. This will aid in the recovery. Further, images of ordinary South Africans participating in the clean-up have not gone unnoticed and send a powerful message to the rest of the world that the majority of citizens want stability and are standing together against rampant destruction."

Yudaken adds that despite the excellent start to 2021, the unrest in South Africa threatens to impact the positive strides made in terms of foreign investment into the country in the first six months of this year.

“For the sake of South Africa's post-pandemic recovery, the turmoil engulfing our country has to be ended before investors are forced to seek less risky alternatives. Foreign investors will only ramp up their investments if they are confident their assets are safe. They need political and economic certainty and must have confidence that there is rule of law in the countries in which they invest."

According to Refinitiv data, high technology companies were the primary targets for inbound deals in South Africa, with 12 transactions, representing a 200% in deal volume Y-o-Y and a deal value of US$160-million, an increase of 1997% when compared to the same period last year.

Wildu du Plessis, Head of Africa for Baker McKenzie, explains, “It’s no secret that African consumers have shown a growing reliance on technology across multiple platforms, even well before the pandemic struck. The growth of the digital economy across the continent has naturally been accelerated by the pandemic and this unabated demand for technology has caused extensive cross-sector disruption, with the financial, energy, transport, retail, health and agricultural sectors all seeking opportunities to expand their tech infrastructure in order to acquire the necessary skills and innovation needed to keep up with demand. Fintech is also a popular tech sector for investment across Africa and specifically in South Africa, Kenya and Nigeria, with health-tech, mobility and agritech also attracting growing interest.

“It looks like South Africa is leading the way in terms of high value deals in the tech sector and we expect this tech M&A trend to continue as the continent gears up to operate in the post-pandemic new normal,” he says.

The United States was the primary investor for South African companies, with 16 deals (an increase of 60% Y-o-Y) valued at US$ 496-million (an increase of 340% Y-o-Y). This was helped by TPG Capital LP’s US$ 200-million acquisition of Airtel Africa Plc-Mobile (telecommunications) announced in March 2021. The largest inbound deal in H1 2021 was Temasek Holdings (Pte) Ltd’s (Singapore) US$ 500-million acquisition of Leapfrog Investments (financials), also announced in March 2021.


Twenty-eight deals were recorded in Nigeria in the first half of 2021, and deal value amounted to US$ 1-billion. Compared to the first half of 2020, transaction volume rose by 17% and deal value soared by 267%.

Refinitiv data reveals that domestic transactions decreased by 15% to 11 deals, but deal value increased by 342% Y-o-Y to US$ 726-million. Cross-border transactions increased 13% Y-o-Y to 17 deals, with deal value rising 8% to US$ 296-million. Financial companies were the prime targets for inbound deals, with four transactions showing a 100% increase Y-o-Y and deal value of US$ 10 million, a 327% increase year on year.

Once again, the US served as the primary investor for Nigerian companies, with four deals worth US$ 13 million. The largest inbound deal into Nigeria in H1 2021 was Mwendo Holdings BV’s (South Africa) US$ 182 million acquisition of Blue Lake Ventures Ltd (Media and Entertainment), announced in June 2021.

Du Plessis notes that while US investors have shown interest in Africa for some time, under President Biden, the general consensus is that US engagement with African countries is focusing on strengthening relationships in a strategic, co-operative way. It has been noted that Biden will continue with successful bipartisan programmes implemented by his predecessors, as well as further encouraging US trade and investment in the continent. Considering that US companies were the top investors in two of Africa’s largest economies in the first half of 2021, dealmakers are clearly comfortable with Biden’s approach to Africa.


In H1 2021, deal making in Kenya decreased by 14% with 18 deals in the period and deal value decreased by 96% to US$ 11 million. Financial companies were the prime targets for inbound deals with five transactions, representing a 150% increase Y-o-Y, with deals valued at of US$ 11 million, a 78% decrease Y-o-Y.

Nigeria served as the primary investor for Kenyan companies with three deals. The largest inbound deal into Kenya in H1 2021 was Liberty Holdings Ltd’s (South Africa) USD 8 million acquisition of Liberty Kenya Holdings Plc (insurance), announced in March 2021.

Du Plessis adds that the decrease in M&A volume and value in Kenya in H1 2021 is expected to be temporary as the country continues to implement pandemic recovery policies, including a vaccine rollout strategy for the adult population with a planned completion date of mid-2022.

“The country’s reputation as an East African investment hub, in addition to its strong technology capabilities, means that it is just a matter of time before Kenya takes up its rightful place as one of the top target countries for technology transactions in Africa.” 

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