By Nicola Mawson
South Africa is set to benefit from an increase in merger and acquisition (M&A) deals this year as the currency’s relative stability, companies being sensitised to conflict in the Middle East as well as Russia’s war on Ukraine, and lower costs of borrowing.
Herbert Smith Freehills’ partner in the Johannesburg office, Patrick Leyden, told Business Report that, although the volume of deals declined last year, the value improved, with the percentage gains of M&A value in Africa exceeding that of the rest of the globe.
Of the deals made, South Africa accounted for 30% of the volume and 60% of the value last year, he noted. Leyden stated that borrowing was becoming cheaper as interest rates globally came down.
In addition, he said there was a more stable global political environment as large volumes of elections were held last year and companies were becoming sensitised to political conflict boded well for the local market.
As a result, Herbert Smith Freehills sees increased M&A activity in 2025. Leyden noted that, just as global M&A was expected to increase, so, too, would deals increase locally.
He explained that the reason volume declined while value increased was because companies were seeking immediate growth and, as a result, were doing more strategic, revenue-enhancing, deals instead of bolt on acquisitions that may provide longer-term growth.
Yet, Leyden said that foreign investors would be watching the local market closely because it may take a while for the promise of the Government of National Unity to come true.
Leyden, did note, however that greylisting is still a concern and “the sooner we get out of that, the better”.
South Africa has successfully addressed 16 out of 22 requirements imposed by the Financial Action Task Force in February 2023 because it failed to meet international standards related to money laundering, terrorism financing, and proliferation financing.
Andrew Bahlmann, the CEO of corporate and advisory at Deal Leaders International, said the local currency’s “relative stability” in the face of global volatility could represent a unique window of opportunity for international investors when it comes to mergers and acquisitions.
“The currency’s historically low valuation, coupled with modest recent resilience, makes South African assets attractively priced for global players seeking value,” said Bahlmann.
Bahlmann says the rand has a reputation as being a weak currency because of decades of structural economic challenges, political uncertainty and a volatile global market have entrenched this perception.
The rand, Bahlmann said, is susceptible to global shifts such as the US Federal Reserve’s rate cutting cycle, which is expected to slow, as well as and domestic headwinds. “US policy under Trump, characterised by measures fuelling inflationary pressures, has influenced expectations of fewer rate cuts, thereby reinforcing dollar strength,” he explained.
As a result, sectors linked to exports, such as mining, manufacturing and agriculture, could benefit from favourable exchange rates, potentially boosting investor confidence, said Bahlmann.
“For the M&A market, the current environment may encourage consolidation and expansion as local firms seek international partnerships to mitigate domestic challenges,” he said.
Bahlmann added that “foreign investors can leverage the weak rand to acquire assets at a discount, while South African companies gain access to capital and expertise, creating a mutually beneficial dynamic”.
While the rand remains a fragile currency, its current positioning could present a compelling case for international investors, he said. “Strategic, well-timed investments may not only yield significant returns but also contribute to long-term economic stability in South Africa, fostering a cycle of growth and confidence in the country’s future.”
BUSINESS REPORT