Economy
Mergers, Acquisitions Activity Drops Sharply in Africa in H1 2018—Report
By Modupe Gbadeyanka
An analysis by Baker McKenzie of Thomson Reuters M&A data for Africa has revealed that in the first half of 2018, the total deal volumes and values of Merger & Acquisition (M&A) transactions in Africa fell sharply by 44 percent in deal volume and 57 percent in aggregate value, compared with the first half of 2017.
The report noted that there were 485 deals valued at $19.420 million in the first half of 2017, this dropped to 270 deals valued at $8.318 million in H1 2018.
On a positive note, intraregional cross-border deals rose twofold in terms of aggregate value from $418 million in the first half of 2017 to $1.292 million in H1 2018.
Managing Partner and Head of the Corporate/M&A Practice at Baker McKenzie in Johannesburg, Mr Morne van der Merwe, in an emailed statement made available to Business Post on Thursday, explained that, “Africa is a continent with 54 different countries, all with different economies and so it is difficult to pin down specifically what has caused the downturn in M&A activity in the first half of the year.
“Generally, inbound investment in Africa has been affected by political uncertainty and unpredictability – business does not mind challenge but has no affinity for uncertainty.
“Corruption and bad governance, as well as the strict anti-bribery and anti-corruption laws in some investor countries, such as the United States and the United Kingdom, has made investors more cautious.”
Intraregional trade
“Despite the downturn in M&A transactions, it appears that regional economies are developing and intraregional trade is doing well. East Africa is developing a strong regional focus and had almost left the Southern African region behind, although this region has come back onto the radar of late,” Mr van der Merwe noted.
He explained further that certain economies such as Ethiopia are becoming more of a discussion point as popular investor destinations in Africa because of interesting development initiatives taking place in this country.
The majority of the intraregional deals in Africa were in the High Technology Sector (cutting edge or advanced technology) which accounted for 21 percent of all deals. Interregional dealmaking value was highest in the financial sector which made up 82 percent of the total value.
There were four High Technology intraregional deals in Africa in the first half of 2018. Intraregional deals in the financial sector in H1 2018 were worth $1.056 million.
Mr Van der Merwe disclosed that the financial services sector, especially banks and insurance companies have been deploying various models for their expansion into Africa, including regionally focused strategies.
“Lessons I have picked up from these markets include that having the right local partner remains key to being successful in Africa and that it is important it to think twice before you impose your brand on a market where you have recently made an acquisition.
“This is because you may change the recently acquired company from what had made it successful in the first place. Keeping the local brand and management in place has worked very well for some in the financial services sector who have expanded into Africa,” he noted.
Mr Van der Merwe explained that events such as Barclays withdrawing from Africa had left many wondering how a financial giant like Absa would rethink its strategy and possible expansion into Africa, and it will be interesting to follow the unfolding of their strategy to position themselves as an African Bank.
“I think that expanding into the continent and having a regional approach as part of that expansion is something they are most likely thinking about very carefully,” he said.
He noted that the growth in investment in both the financial services sector and the technology sector in Africa are interlinked. Financial services organisations are becoming more dependent on investment in technology and innovation as they look to upgrade their IT systems and find news way to grow their customer bases.
Inbound
In terms of inbound cross-border transactions with other regions, Industrials was the most popular by deal volume (16 percent share of the total) with 16 deals completed in the first half of the year. Energy & Power attracted the highest share of aggregate deal value (35 percent of the total value), with deals valued at $1.493 million.
“The industrials sector is a focus area for many developing economies across the continent and the sector is well established, leading to many more opportunities than one would find in less well established sectors,” he said.
Mr Van der Merwe explained also that the extent of the power deficit in Africa is well known and increasing electricity generation, whether on-grid or off-grid, across the continent is the focus of a number of initiatives, all of which are driving investment.
In terms of foreign investors, the United States (US) was the most acquisitive in Africa, representing 18 percent of deal volume and 39 percent of deal value. The US completed 18 deals in Africa in H1 2018, worth $1.694 million.
“The US has been a significant investor in the African continent for some time. Trump’s policies have played out well for certain countries in Africa and the relationship between the US and Africa is very much focused on strategic bilateral relationships influencing the direction of investment flow,” he noted.
Outbound
In terms of outbound deals, High Technology had the highest volume of outbound interregional cross-border deals (13 percent of total deals). There were eight outbound deals in the High Technology sector in the first half of the year. Real Estate accounted for the highest share in aggregate value at 27 percent of total value of outbound deals. This sector completed $430 million worth of deals in H1 2018.
“The high number of outbound technology deals from Africa is because African tech companies are targeting offshore investments in companies that will deepen their access to new technologies, markets and talent,” he said.
The real estate sector attains prominence because of relative value of real estate as an asset class.
“As economies develop, so does real the estate sector. For example, the expanding middle class and consumerism in Africa has led to a growth in the consumer goods sector and real estate development is part of that as new shopping centres are developed.
“Also, African infrastructure development is high on the agenda across the continent and there is a big real estate element associated with that as well,” he explained.
The UK had the highest number of investors from Africa during the period H1 2018 (20 percent share), with 12 deals being completed in the first half of the year. India was the most attractive market in terms of value (46 percent of total value). African dealmakers completed transactions worth $735 million in India in H1 2018.
“The ease of doing business with the UK brought about by various factors, including, time zones, easy access, language, historical ties and familiarity has meant that investment between the UK and numerous African countries has always been good. Brexit has impacted positively on investment in that it has caused UK trade outreach initiatives to various historic trade partners,” Mr van der Merwe explained.
“With regards to India being a popular investment destination for African businesses to invest, this is because like Africa, India is a developing economy. African investors are astute in seeking out opportunities in these economies because the environment and challenges are often similar, or at least comparable.
“This makes it easier to build a relationship with local partners, which is so necessary for successful investment.
“India is also a very large economy and so huge opportunities can be accessed for investors who know where to look.
“In addition, historical ties between India and many countries in Africa adds to the familiarity and relative ease of doing business,” he added.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited rebounded by 0.46 per cent on Tuesday despite continued weak investor sentiment due to low confidence in the market.
The gains recorded yesterday were largely impacted by significant trades in First Holdco by a major shareholder of the financial institution.
In terms of price gainers and losers, the bears won the race, as 28 equities closed in the red and 24 equities ended in the green, indicating a negative market breadth index.
Learn Africa grew by 10.00 per cent to N9.90, First Holdco expanded by 9.98 per cent to N72.15, Thomas Wyatt rose by 9.80 per cent to N2.69, RT Briscoe improved by 8.68 per cent to N13.15, and Transcorp Hotels increased by 8.37 per cent to N242.00.
Conversely, International Energy Insurance lost 9.86 per cent to close at N4.66, Legend Internet slipped by 9.18 per cent to N4.45, Fortis Global Insurance decreased by 7.67 per cent to N2.77, FTN Cocoa tumbled by 7.55 per cent to N8.21, and International Breweries dropped 4.79 per cent to trade at N13.90.
Business Post reports that First Holdco led the activity chart with a turnover of 326.9 million units worth N22.3 billion. GTCO traded 22.5 million units valued at N2.8 billion, Access Holdings transacted 18.5 million units for N461.6 million, FCMB sold 16.1 million units worth N166.8 million, and Zenith Bank exchanged 15.9 million units valued at N1.7 billion.
At the close of business, a total of 634.8 million stocks valued at N53.3 billion exchanged hands in 42,494 deals versus the 523.5 million stocks sold for N22.3 billion in 59,945 deals on Monday, indicating a shortfall in the number of deals by 29.11 per cent, and a surge in the trading volume and value by 21.26 per cent and 139.01 per cent, respectively.
The All-Share Index (ASI) was up during the trading day by 1,121.33 points to 242,870.44 points from 241,749.11 points, and the market capitalisation gained N719 billion to settle at N155.849 trillion compared with the previous day’s N155.130 trillion.
Market participants will be looking forward to the release of inflation data for June 2026 by the National Bureau of Statistics (NBS) today, Wednesday, July 15.
By Adedapo Adesanya
Oil prices climbed about 2 per cent to a one-month high on Tuesday after the US reportedly reimposed a naval blockade on Iran, which will reduce oil flows from the region through the Strait of Hormuz.
Brent futures rose by $1.43 or 1.7 per cent to settle at $84.73 per barrel, while the US West Texas Intermediate (WTI) crude increased by $1.20 or 1.5 per cent to $79.34 a barrel.
Brent closed at its highest since June 12, and WTI at its highest since June 15. The closing price increase kept Brent in technically overbought territory for a second day in a row for the first time since March.
Before the Iran war, about 20 per cent of global oil supplies flowed through the strait.
US President Donald Trump stepped back from a proposal to charge a 20 per cent fee to guard the Strait of Hormuz as part of the conflict with Iran, saying he would instead seek investment deals with Gulf states.
US forces had carried out waves of attacks for the third night after Iran said it had closed the strait. President Trump on Monday reinstated a blockade of Iranian shipping and proposed the fee, but hours before the fee was to take effect, the American President said the strait was open to all shipping traffic except that of Iran.
The renewed attacks have fed doubts that a memorandum of understanding signed last month will lead to a permanent halt in the war that has disrupted global energy supplies and stoked inflation fears.
Data showed that US consumer inflation slowed more than expected in June as energy prices retreated, but financial markets still expect an interest rate hike from the Federal Reserve.
The Federal Reserve Chairman Kevin Warsh on Tuesday vowed to “do my job” if challenged by President Trump, who has said he wants the US central bank to cut interest rates and boost economic growth.
The American Petroleum Institute (API) estimated that crude oil inventories in the US fell by 564,000 barrels in the week ending July 10. In the week prior, US crude oil inventories fell by 399,000 barrels.
Although commercial crude oil inventories excluding the SPR have been falling rapidly for three months now, shedding just over 60 million barrels over the last twelve weeks, US crude inventories are only down 9.2 million barrels so far this year. The US Energy Information Administration (EIA) will release its report later on Wednesday.
By Adedapo Adesanya
The 700,000 barrels per day Dangote Petroleum Refinery has begun pricing fuel products for the local market in US Dollars amid crude supply challenges.
The company cited difficulties securing sufficient crude under the government’s Naira-for-crude programme and rising global oil prices as reasons for the development.
The Naira-for-crude programme, launched in October 2024, allowed domestic refiners to purchase crude in the local currency and reduced pressure on the foreign exchange market.
Mr Edwin Devakumar, the vice president of the Dangote Group, said the refinery had been absorbing a currency mismatch by selling products in Naira while sourcing crude in Dollars, but limited crude supply under the Naira-for-crude programme had undermined the arrangement’s viability.
Dangote has now set the ex-depot price of petrol at $0.779 per litre, diesel at $1.087 per litre and aviation fuel at $0.942 per litre, according to a pricing template circulated to marketers.
Although the Nigerian National Petroleum Company (NNPC) Limited increased Dangote’s allocation to seven cargoes in May from about five previously, the refiner has said it requires 13 to 15 cargoes a month and has been forced to import the remainder at international prices.
The decision could boost demand for Dollars among fuel marketers and make domestic fuel prices more sensitive to exchange-rate fluctuations.
Dangote Refinery is steadily ramping up operations toward full capacity after a gradual start since late 2023. In April alone, it received 21 separate crude cargoes, with all supplies coming from West Africa, mainly Nigerian crude grades, with one cargo from Cameroon; however, it boosted international cargoes in recent months.
The refinery has been broadening the range of crude grades it processes as part of its ambition to operate as a fully merchant refinery. In 2025, about 70 per cent of the refinery’s crude imports came from Nigeria, while 24 per cent originated from the United States.
Dangote plans to double the refinery’s processing capacity to 1.4 million barrels per day by the end of 2028, a level that would enable it to process about 80 per cent of Nigeria’s recent crude oil production in a single day.
