The value of mergers and acquisition (M&A) deals sealed in sub-Saharan Africa hit an all-time high of $44 billion last year, a Thomson Reuters Deals Intelligence Report shows, ranking South Africa as the top target and saying nothing of capital-starved Zimbabwe.
Zimbabwe’s inclusive government has often spoken of itself as sub-Saharan Africa’s capital magnet judging by the country’s yawning investment deficit opened up by 10 years of recession and political upheavals, the recent global recession and the liquidity crisis triggered by informal dollarisation.
The Deals Intelligence report says South Africa captured 54% or $23,6 billion of all capital that flowed into sub-Saharan Africa last year, followed by Nigeria (27%), Uganda (4%), Guinea (3%) and Namibia (2%).
This is a meteoric rise from 2009 when the value of M&A deals was just $17,5 billion, probably weighed down by the global recession. The rest of the region, including Zimbabwe, accounted for just 10%.
Although the report did not give reasons for the regional distribution of the investments, Zimbabwe’s poor performance despite its undisputed capital drought is often collapsed to country risk, the aggregate of political uncertainty, legal-institutional barriers and policy inconsistency.
The M&As targeted the telecommunications industry, which accounted for 30% or $12,2 billion of the transactions.
Materials or resources, financials, real estate and high technology grabbed the biggest share.
According to the report, South Africa also emerged last year as the most acquisitive sub-Saharan African nation accounting for about 93% of intra-regional deals.
The most acquisition nation of sub-Saharan companies was India, whose ranking was largely lifted by the Bharti Airtel-Zain Africa deal.
“The top any involvement Sub Saharan M&A deal for 2010 was Bharti Airtel of India acquisition of Zain Africa, a provider of wireless telecommunication services, from Zain Group, for $10,7 billion,” the report said.
“The purpose of the transaction was for Bharti Airtel Ltd to strengthen its market position in the mobile telecommunications sector in South Africa.”
The report also says Essar Group’s energy unit Essar Energy accounted for the Equity Capital Market (ECM)’s largest equity issue in 2010 when it listed on the London Stock Exchange on the back of a $1,9 billion initial public offering (IPO).
The diversified Indian company has won a bid to take over Ziscosteel from government through a strategic partnership deal that has been delayed by due diligence issues.
ECM equity issuance during the year surged 73% over 2009 to $8,3 billion, led by IPOs.