South Africa’s Business Deals Slow Down as Political Uncertainty Clouds Investment

South Africa’s business deal activity is grinding to a halt, with corporate mergers, acquisitions, and infrastructure projects stalling as political uncertainty and global economic headwinds weigh on investor confidence.

Despite record-high corporate cash reserves, major deals remain off the table, according to Yasmin Masithela, CEO of Absa Group’s corporate and investment banking unit. She attributes the slowdown to uncertainty surrounding South Africa’s budget vote and the fragile coalition government, which has left businesses hesitant to commit to long-term investments.

A Climate of Uncertainty Stalling Business Growth

The African National Congress (ANC) formed a coalition government after losing its outright majority in last year’s election. However, tensions within the coalition—particularly with the Democratic Alliance (DA)—have flared over budget proposals, including potential VAT increases.

This uncertainty has created a ripple effect, significantly reducing dealmaking activity in the country.

“We are actually not seeing big M&A deals, big infrastructure deals coming out in our pipelines in South Africa,” said Masithela in an interview in Johannesburg.

Corporate Caution: Waiting for Clarity

Masithela noted that businesses are reluctant to move forward with mergers and acquisitions (M&A) without clear direction from the government.

“We expected we would see consolidations in different business markets, but no one’s going to be doing an M&A deal now because you need relative clarity,” she explained.

Even requests for short- and long-term financing have declined, as businesses choose to wait for a more predictable economic environment before making major financial commitments.

Global Trade Tensions Add to Investor Jitters

The hesitation among South African businesses isn’t just driven by domestic politics. Masithela pointed to rising global economic challenges, including concerns over U.S. President Donald Trump’s trade policies, which are making South African investors more risk-averse.

With so much uncertainty, many companies are pausing expansion plans, preferring to hold onto cash reserves rather than take financial risks.

Optimism Beyond South Africa’s Borders

While South Africa’s business deal flow remains sluggish, Masithela remains optimistic about opportunities elsewhere on the continent.

Absa’s corporate and investment banking unit anticipates middle single-digit earnings growth in 2025, largely driven by expansion in Ghana, Kenya, and Nigeria—markets that show greater stability and growth potential compared to South Africa.

“I’m actually quite optimistic and that’s why I think we will still see growth because the markets that we are in are pivoted to actually getting the benefit of growth,” she said.

Renewable Energy: A Silver Lining?

One bright spot in Absa’s strategy is renewable energy investment. The bank plans to leverage its expertise in the renewables sector to expand across Africa, particularly in Zambia.

“We started the renewables business and got really good at it in South Africa, and we are seeing that journey in other parts of Africa,” Masithela explained.

By focusing on sovereign risk management and sustainable energy projects, Absa sees potential for strong returns in other African economies, even as South Africa’s business environment remains uncertain.

South Africa’s Deal Drought Shows No Signs of Ending Soon

As South Africa grapples with political turbulence and global economic shifts, businesses remain hesitant to engage in major deals. Until greater clarity emerges from the government and global markets stabilize, M&A activity and infrastructure investments in the country are likely to remain subdued.

For now, investors and corporate leaders are watching and waiting, uncertain of when South Africa’s business climate will regain its footing.

{Source BusinessTech}

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