South African companies are no exception when it comes to recognising the many merger and acquisition (M&A) opportunities available on the African continent and in the past year was, together with China, Africa‟s most active cross-border acquirer, accounting for 46% of acquisitions. India followed next. In its recently released survey, Thompson Reuters reported that “With its outbound mergers and acquisitions (M&A) expected to rise in the year ahead, South African companies continue to pursue opportunities across the continent. After South Africa, Nigeria and Ghana, with their current strong economic growth, are expected to be the next most active cross-border acquirers over the next 12 months in Africa.”
Entry into, and expansion within, the African continent is regarded by many multinational corporations as essential to their continued existence, justifying the business risk with the lure of high rewards. While the political environment in Sub-Saharan Africa has never been as stable as its is now, improved fiscal, regulatory and financial conditions, have combined to push investor confidence to an all time high.
This, however, does not detract from the fact that international companies still find doing business in most of Africa challenging. From regulatory complications, corruption, the lack of transparency and the often uncertain political terrain, having a local partner with know-how can make all the difference to a successful acquisition or merger.
South Africa has long been considered the „gateway‟ to doing business in the rest of Africa with South African firms pushing the message that it is a wiser choice to enter the rest of the continent via them, given their local knowledge and know-how. Many South African firms have taken this a step further by establishing a presence, whether through affiliations or established offices, in select African countries thereby enjoying on-the-ground assistance which clearly has immense benefit. It is difficult to enter as an outsider and immediately know where to go, what to do and even more importantly, how it is done. The experience of doing business in Africa and the business connections offered by South African firms can make a significant difference to the success of operations and investments in other African countries.
To mitigate some of the risks that arise from doing business in Africa, it is essential to have an understanding of the law and regulation in a country in which a business is considering doing business or investing. Legal due diligence initially is usually far more effective than remedial legal advice after the event. Furthermore, while at the extreme a contract may "not be worth the paper it is written on", a well drafted one, based on clear, consistent and reliable advice on local law and regulation with legal risk mitigation provisions contained in it, will greatly assist. Therefore, it is very important to choose an advisor who has experience and a relationship with a wide network of people who can be relied upon to provide professional advice at a reasonable cost.
In addition, the well-established infrastructure found in South Africa and the high standards of living make it easier for foreigners to feel at home here as opposed to more foreign, and therefore different, African countries.
South Africa‟s hand-holding offers peace of mind and with its immense experience and established networks, it makes absolute sense as a partner for any business looking to explore M&A opportunities in the rest of Africa.