In the past few years, we have seen South Africa becoming a focal point for cross border deal activity. Despite global economic uncertainty – driven by inflationary pressures, supply chain disruptions and geopolitical conflicts – the country has seen growth in international investments.
Much of this growth is driven by a shift in strategy: international companies, particularly in the manufacturing sector, are seeking to acquire local businesses to manage costs, hedge against global volatility and strengthen margins. South Africa’s comparatively lower operating labour costs, skilled workforce and strategic access to the wider African market make it an attractive destination for investment.
Importantly, from our observations, we have noted that many recent acquisitions have been underpinned by pre-existing commercial relationships. Global companies with established supplier or customer connections in South Africa are leveraging these relationships to deepen their presence and use these acquisitions to expand their presence across the continent. In this sense, cross-border activity is often driven by strategy as much as by opportunity.
However, successful execution of cross-border transactions requires careful consideration of local dynamics that can directly influence the deal. From our experience, these include, but are not limited to:
- Broad-based black economic empowerment (B-BBEE) – This is integral to doing business in South Africa. Compliance is a major driver of market access, influencing procurement opportunities and customer relationships. Incorporating B-BBEE structuring into deal planning from the outset is critical to unlocking long-term value.
- Competition commission scrutiny – South Africa’s Competition Commission adopts a broader approach than many global regulators, assessing not only market concentration, but also public interest. Preparing a strong case that demonstrates benefits for the South African economy is often essential to achieving approval.
- Currency and infrastructure realities in South Africa – The volatility of the South African Rand can materially affect valuations and post deal returns. Operational realities such as load shedding, logistics bottlenecks and rising input costs must also be factored into the due diligence and valuation.
Looking ahead, the increase in cross-border transactions reflects an appreciation of South Africa’s strategic advantages. Deals are no longer opportunistic; they are increasingly structured around securing supply chains, expanding distribution, lowering costs and using acquisitions to gain footprint in Africa.
For global investors, the market presents both challenges and opportunities, and while the regulatory and operational factors require careful consideration, the potential for cost optimization, capability building and long-term growth is significant.
With the right structuring, planning and local advisory support, South Africa continues to offer an attractive environment for cross border deals.
