Despite geopolitical and economic uncertainty across the globe caused by US President Donald Trump and his vacillating position on trade tariffs, among other decisions with far-reaching ramifications, Africa is still an attractive investment destination.
Andrew Bahlmann, CE of corporate and advisory at Deal leaders International, explained that, given the potential headwinds from rising US nationalism under a second Trump administration, South Africa's deal flow presents a complex picture.
“From a global perspective, South Africa has historically been viewed by many international investors as a key entry point into the broader sub-Saharan African market,” said Bahlmann.
This, Bahlmann said, was due to the country’s relatively developed infrastructure, sophisticated financial sector and established legal frameworks, which have often made it a more familiar and less risky initial investment destination.
“While specific deals might be influenced by current political nuances, the strategic importance of South Africa as a gateway to a significant growth region could continue to underpin M&A activity, particularly for investors with a long-term African strategy,” said Bahlmann.
Although uncertainty may initially dampen some investment appetite, particularly from US-based entities, Africa's long-term potential as a growth market could counterbalance these concerns, said Bahlmann.
Hari Chaitanya, head of investor services for Africa at Standard Bank Corporate and Investment Banking, said institutions are doubling down on their Africa exposures as they are hungry for yield and better risk diversification. “This is a trend that has been facilitated by the region’s growing index inclusion, diminished concerns about market risk and eased foreign exchange headwinds,” he said.
According to the World to Africa survey study by The Value Exchange, in partnership with Standard Bank, investors from North America and the Middle East are looking at increasing their presence in Africa.
“Africa’s growth story is no longer a distant aspiration but a dynamic reality, driven by investment flows, expanding portfolios, and a shift in global perception. With Institutional investors and asset managers at the forefront, the continent is experiencing unprecedented momentum, marked by 40% increase in mid-tier allocations and a remarkable 75% growth in assets under management expected in coming years,” said Chaitanya.
Chaitanya added that this surge underscores Africa’s emergence as a core strategy for global markets, fuelled by its rich resources, growing digital economy, youthful population, and the promise of economic integration through initiatives like African Continental Free Trade Area”.
Deal leaders International has identified some M&A trends for 2025, which Bahlmann said highlighted Africa's inherent attractiveness.
- The African Continental Free Trade Area is poised to fuel cross-border deals, particularly in technology and natural resources.
- The burgeoning tech sector, especially fintech, will continue to draw global investors.
- ESG considerations will drive investments in renewable energy.
- Private equity and sovereign wealth funds are expected to play a significant role in consolidating key sectors like infrastructure and healthcare.
- Regulatory shifts promoting business-friendly environments will also stimulate deal activity.
Bahlmann noted that it was crucial to remember that political relationships don't always directly correlate with business decisions. He said that Deal leaders International’s own pipeline of deals showed that there were still strategic opportunities.
“While a cautious approach is warranted given the unpredictable global environment, South Africa, alongside other African markets, presents compelling opportunities. The underlying economic drivers and evolving regulatory landscape suggest that strategic M&A and private equity deals will continue, regardless of short-term political fluctuations,” said Bahlmann.
IOL