“We would expect primary activity to pick up,” JP Morgan’s managing director in South Africa Edward Bell said regarding the future of initial public offerings and fundraising activity in Africa’s biggest economy.
General elections in May saw the African National Congress receive less than 50% of the vote after having a majority rule since the formation of a democratic government in 1994. While the party led the fight against apartheid rule, it has been plagued by mismanagement and rampant corruption for years. Power outages, high unemployment, and crime have also contributed to waning support.
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It will now rule in a coalition government with the centre-right Democratic Alliance and smaller parties. The new structure has led to a wave of investments and convinced previously skeptical businesses to stay in South Africa. The government has decided to allow the private sector into the country’s electricity, freight rail, and port industries. There has also been a large increase in work permits and climate and energy legislation has been passed.
“We are in a significantly better space,” according to Investec South Africa’s CEO Cumesh Moodliar.
Some of the major announcements include ArcelorMittal’s decision to keep two steel plants that had been set to close which provide 80,000 jobs, Qatar Airways bought a stake in South African airline SA Airlink Pty, a $70m auto-parts supplier for Toyota Motor Corp which was considering leaving opened and Anglo American Plc announced a $625m iron-ore investment.
“As equity market performance and valuations return to more appropriate levels, the incentive and the ability to issue equity or IPO as business becomes a viable option,” according to Bell.
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By GlobalDataJPMorgan recently predicted that the country’s economy would grow by 1% in 2024 and 1.4% in 2025 after GDP expanded by an average of less than 1% in the past ten years.
