South Africa's M&A landscape sees renewal as capital markets rebound
In South Africa, there has been stronger interest in capital markets as M&A activity remains prevalent.
Tawanda Karombo
South Africa's mergers and acquisitions landscape (M&A) is being shaped up by cross-border consolidation, portfolio optimisation by multinational corporations, and renewed private equity interest at a time there is fresh impetus across the African continent's capital markets.
In an interview with Business Report this week, Yvonne Ike, head of Sub Saharan Africa at Bank of America Merrill Lynch, said capital markets in Africa 'entered 2025 with cautious optimism'.
Ike said this was due to the confluence of stabilizing macroeconomic fundamentals, greater foreign exchange flexibility in some economies, and improving debt sustainability.
All this was 'helping rebuild investor confidence' across regional markets, Ike said.
'At the same time, governments are re-engaging with international capital markets after a prolonged hiatus, and local listings are regaining traction, particularly in sectors tied to infrastructure, telecoms, and energy transition,' said Ike.
'There's also rising interest in privatizations and public-private partnerships, which is helping to deepen capital markets across key economies.'
In South Africa, there has been stronger interest in capital markets as M&A activity remains prevalent.
Bank of America's country executive for South Africa, Anthony Knox, emphasised that local M&A activity was currently 'being shaped by cross-border consolidation, portfolio optimization by multinationals, and renewed private equity' interest.
He said deal flows were increasing in South African sectors such as fintech, commodities, industrials and renewables.
'There's also a clear push among corporates to simplify group structures, unlock trapped value, and pursue carve-outs — which is driving strategic M&A, IPOs and secondary sell-downs,' explained Knox in an interview with Business Report.
He added that South Africa remains 'active in both debt and equity capital markets, supported by a robust institutional base and a pipeline of state and corporate funding' needs.
He said though that activity in South Africa's equity capital markets while more selective, has seen stronger secondary flows and growing block trade interest in the past few months.
In the outlook, analysts at Bank of America is expecting a renewed push for the restructuring of South African State-owned enterprises and possibly reforms as well as private sector-led infrastructure investment.
Ongoing activity in tech and energy M&A is also anticipated, with the overall outlook for South Africa's capital markets remaining constructive although further impetus will be hinged on local and international economic stability.
On regional markets, Ike believes that there will be continued return by sovereigns to the global bond markets under more disciplined frameworks.
Privatization and strategic IPOs are also seen entrenching in North and East Africa while greater foreign exchange flexibility and macro reforms is projected to unlock new capital flows.
As of the first quarter of 2025, about $6.7 billion has been raised through African Eurobond and dollar-denominated instruments.
Sovereigns such as Côte d'Ivoire, Benin and Egypt have led this charge, marking 'a meaningful recovery from the subdued levels of 2023, as frontier issuers cautiously return to the market amid easing global rates and improving macro economic' conditions.
'South Africa remains the most sophisticated and liquid capital market on the continent, supported by its deep domestic institutional investor base, active M&A environment, and regulatory strength,' said Knox.
Since the formation of the GNU, there has been a marked improvement in the sentiment toward South Africa, pushing CDS and government bond spreads tighter and valuations higher.'
Investors focused on South Africa and Egypt had already showcased growing appetite for investment-grade local corporates in telecoms, utilities, and infrastructure.
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