For a long time, Africa has been a center for foreign investment in emerging market enterprises. A new trend, however, is beginning to develop: African business are engaging in greater and greater intra-African merger and acquisition activity. In 2014, global African merger and acquisition activity was valued at $11b and intra-African merger and acquisitions activity was valued at $4b. In 2015, global African merger and acquisitions activity was valued at $9b, but intra-African merger and acquisitions activity surged to $15b.
While recent trends have made Africa the second most attractive investment destination in the world, a diversification of investments has begun to reshape the continent’s economy. In the early 2000s, six of the ten fastest growing national economies came from Africa. The reason: Africa has tremendous natural resources and the early 2000s saw a huge boom in commodity prices. Now, with commodities down, many African nations are struggling to keep their economies afloat. Enter the new generation of intra-African merger and acquisitions. 2015 saw a number of large intra-African merger and acquisitions in the telecom and financial sectors. Nigeria’s second largest mobile phone firm will soon acquire acquire the wireless company Comium Cote d’Ivoire for $600 million. And Atlas Mara, a financial firm founded by a Ugandan entrepreneur, will acquire a 45% stake in Banque Populaire du Rwanda. Atlas Mara also purchased a 75% stake in Rwanda Development Bank in 2014.
2016 will hopefully be a resilient year for a continent hit by slumping commodity prices. The biggest deal announced so far, the South African investment firm Brait’s planned acquisition of British retailer New Look, is valued at $3b. And while a few deals hardly support an entire continent’s economy, the transition of Africa being a destination for foreign investment to an environment of organic growth is significant. The next few years will be critical for African enterprises to establish themselves as sustainable players in the global economy. In the best case scenario, Africa is able to diversify it’s economy while commodity prices are low, so that when prices rebound, Africa and it’s strengthened firms will be able to take advantage of them.