The following brief discussing our M&A predictions in Africa in 2021 accompanies our latest global M&A report, M&A in 2021, which you can download here.

Covid and its consequences  

It is still too early to know the full impact of COVID-19 given the heterogeneity of the continent, the uncertainty surrounding the evolution of the pandemic and the effectiveness of the global response to mitigate its impact on the world’s economy.

While the continent appears to have been relatively spared from a health perspective compared to Europe or America, on the economic front the pandemic has halted the African momentum of recent years. Growth projections have been revised downward and FDI flows are forecast to decrease by up to 40%, potentially reaching their lowest level since 2005 according to the UN Conference on Trade and Development (UNCTAD). Initial lockdown measures unleashed a wave of force majeure declarations and several ongoing projects have either been suspended or slowed down. Although we have not seen a massive exodus of investments, the COVID-19 crisis has led many investors to postpone new investments or search for safer havens.

A closer analysis reveals that the crisis has not affected all sectors equally. The travel and tourism industries have been hit particularly hard which could prompt restructuring operations, whereas several IT and communications companies have prospered, coupled with an emerging and renewed interest in gold mining projects.

Overall, despite an initial decline in the number of M&A transactions compared to last year, we are starting to see more M&A notably in Africa’s oil and gas industry, as cash-rich companies look to leverage opportunities, while other companies look to improve their balance sheets.

Climate change and energy transition

With the energy transition high on investors’ agenda worldwide, the shift away from fossil fuels in terms of investment priorities has been felt across the continent as well. Following the 2016 Paris Agreement, more and more countries have been submitting ambitious nationally determined contributions (NDCs), targeting less pollution and a cleaner environment over the next few decades. The most recent submission was made by Angola in November 2020, where it has pledged to reduce its greenhouse gas emissions by up to 35% unconditionally by 2030, no mean feat for a country whose largest export (by some way) is oil and gas. Nigeria, another oil and gas giant, has targeted 30GW of power generation by 2030, 30% of which is expected to come from renewables.

In response to the shift away from fossil fuels by these countries, international financial bodies (such as the World Bank, the EIB and the AfDB) have prioritised the financing of renewable projects, with some pledging to halt all investment in fossil fuels going forwards. This change in direction is beginning to be replicated by the key industry players, including traditional upstream oil and gas companies, some of whom have begun to redeploy capital into more sustainable projects primarily as a means of diversifying their portfolio, but also in response to the direction that the industry is heading.

Start-ups leading the charge

For many years Africa has been touted as the world’s growth market especially for smaller, start-up business that are able to nimbly plug a gap in the market in a much more efficient way than any local or governmental authority would be able to organise. This trend has only continued to increase, and its impact during the last 12 months has been even more important, as various countries across Africa have been impacted by COVID restrictions which have changed the way in which individuals and businesses are able to operate.

Important investments in different sectors have ranged from mobile payment solutions and digital banking (allowing consumers to transfer money without a need to physically interact), impact investing, and increasing electrification and access to energy in more rural areas of Africa. Some recent deal announcements from 2020 include:

  • Chipper Cash’s (mobile-based, P2P payment services app) $30million fundraising which included an investment from Jeff Bezos
  • Stripe’s (San Francisco company that offers online payment solutions for businesses) acquisition of Nigerian start-up Paystack for $200m+ (similar profile)
  • The EU’s investment and partnership (through its Emergency Trust Fund for Africa) with the impact investing group Investisseurs & Partenaires to launch “I&P Acceleration in Sahel”, a program aimed at supporting the growth and development of 300+ start-ups and small businesses in the Sahel and Lake Chad Basin
  • Greenlight Planet (Chicago-based company that offers solar home systems in Kenya, Tanzania, Uganda and Nigeria) securing a funding of $90 million from several financial institutions, including the Commonwealth Development Corporation, the Netherlands Development Finance Corporation, Norfund and ARCH Emerging Markets Partners

ESG and compliance focus

Scrutiny over energy projects in Africa has increased due to several high profile disasters and controversies in recent years. This situation is challenging in countries with poor regulation where companies arguably have an even greater responsibility to implement ESG standards in their supply chains. Indeed, media coverage relating to human rights and ESG controversies will often influence investment policy decisions. ESG factors are being used to scrutinise mining and oil & gas companies as global efforts to promote sustainability and the energy transition are rising. According to the rating agency Fitch, natural resources companies are more likely to have their credit rating affected by ESG issues. Likewise, there has been a strong trend in divestments of coal-based projects, often seen as the ‘dirtiest’ of investments, as demonstrated by investors recently withdrawing from the Thabametsi coal-based power plant project in Limpopo South Africa and the Lamu Coal Plant in Kenya.

For some commentators, social issues dominate ESG initiatives as opposed to a focus on the “E”, and more specifically on climate change in European finance. This appears to be in response to immediate social needs such as poverty that investors have to address in emerging markets. Although greenwashing is a risk for African markets, these markets also represent a great opportunity to develop green infrastructure that does not yet exist.

African countries and companies are amongst the fastest-growing in the world with a big infrastructure development potential but, for many international investors, Africa still poses a risk. Moreover, Africa has not yet reached its full potential regarding the adoption of widespread ESG criteria in all sectors, notably in respect of the development of voluntary or mandatory measures to incorporate ESG factors into its various national legislation. However the importance of ESG is growing as investors seek businesses with long-term sustainable strategies. In Africa, ESG data, which focuses on transparency in an environment with a high degree of uncertainty and sometimes controversy, creates clarity for both foreign and local investors. Focusing on sustainability and meeting the ESG expectations of investors, local communities and customers could play both as safeguards against environmental, human rights and governance risks but also as a business strategy which could increase market valuation and return on capital.

Africans investing in Africa

The diversity of African businesses can sometimes be overlooked, despite the fact that Africa is home to 400+ fast-growing companies with a revenue of $1 billion+ (according to McKinsey) covering not just the resources sector, but also financial services, food and agri-processing, manufacturing, telecommunications, and retail.

With the collapse of FDI, the confidence of local investors in their own countries’ ability to recover has been a major boon for African countries. This confidence is born from both an intimate knowledge of their respective country and from a form of patriotic optimism.

While economists are anticipating Africa’s first recession since last century, home-grown entrepreneurs’ investing activity despite the crisis contrasts with the caution of their international counterparts. Some governments have realised the potential they represent and are implementing policies to promote national, regional or even continental champions, such as Morocco and Nigeria. This ambition is also reflected in recent legislation on local content that tends to support local businesses. The need for increased manufacturing and processing activities in Africa, as well as the recent African Continental Free Trade Area may help to reinforce this trend.

Decrease in foreign aid 

As a result of COVID’s disastrous effects on the economies of many developed countries worldwide, some countries have announced that they will be slashing their foreign aid budgets for 2021, with some notable examples being the UK decreasing its budget by around £4bn (effectively lowering it from 0.7% to 0.5% of GDP) and the EU reducing its foreign aid budget to €70.8bn (down from the forward-looking target of €79.2bn in 2018).

This is slightly counterbalanced by the increased spending on overseas COVID-relief aid that has taken place this year, with the EU for example (through its Emergency Trust Fund for Africa) committing a package of €110m to aid North Africa with its COVID relief response. This aid has been replicated around the world by other intergovernmental organisations, such as the African Development Fund.

The news is not all doom and gloom however. With increasing confidence coming off the back of encouraging vaccine news and planned rollouts, the outlook for 2021 is looking rosier and will hopefully turn out to be truer than the predictions for 2020.

For further information please contact any of the lawyers below, or your usual Herbert Smith Freehills contact:

Rudolph du Plessis
Rudolph du Plessis
Partner, Johannesburg
+27 10 500 2623
Rebecca Major
Rebecca Major
Partner, Paris
+33 1 53 57 78 31
Ross Lomax
Ross Lomax
Partner, Johannesburg
+27 10 500 2685
Monde Coto
Monde Coto
Senior Associate, Johannesburg
+27 10 500 2622
Firas Albani
Firas Albani
Associate, Paris
+33 1 53 57 78 55
François Adao
François Adao
Avocat, Paris
+33 1 53 57 13 54



Authors: Justine Sweet and Mandy Hattingh

The Ministry of Environment, Forestry and Fisheries appears to be taking proactive measures to expedite the regulatory processes which underpin the development of energy related infrastructure. On 17 July 2020, Minister Creecy, the Minister of Environment, Forestry and Fisheries (the “Minister”), published various notices commencing public consultations on the intention to identify geographical areas important for the development of:

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Authors: Justine Sweet and Amanda Hattingh

On Friday, 19 June 2020, under the Carbon Tax Act, 2019, the Minister of Finance (the Minister) published:

  1. The Regulations on the Greenhouse Gas Emissions Intensity Benchmark prescribed for purposes of section 11 of the Carbon Tax Act (the Emission Intensity Benchmark Regulations) (GN697 in GG43452);
  2. The Regulations on the Allowance in respect of trade exposure in respect of carbon tax liability under section 10 of the Carbon Tax Act (the Trade Exposure Regulations) (GN690 in GG43451); and
  3. A Notice in respect of Renewable Energy Premium for purposes of symbol “B” in formula contained in section 6(2) of the Carbon Tax Act (the Notice) (GN692 in GG43453). This notice provides the renewable energy premium in respect of various renewable sources including biomass, concentrated solar power, onshore wind, solar photovoltaic and landfill.

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Authors: Peter Leon, Patrick Leyden, Ernst Muller and Amanda Hattingh

Last week StatsSA (South Africa’s official statistics authority) announced that South Africa’s economy contracted by 0.6 per cent during Q3. It is likely to contract further in Q4 as a further round of electricity blackouts occurs as a result of Eskom load shedding. The economy’s current travails are mainly driven by a contraction in the mining, manufacturing and transport sectors. The mining sector, in particular, contributed 6.1 per cent less in this quarter to the country’s Gross Domestic (GDP) Product following a decrease in production of platinum group metals, coal and iron ore.

StatsSA’s announcement followed that of the International Monetary Fund (IMF) in its Article IV Mission to South Africa on 25 November 20191 that South Africa’s medium term growth outlook remained subdued. The IMF explained this was largely due to stagnant private sector investment and exports coupled with declining productivity. This dearth of investment (both foreign and local) is in turn driven by a lack of reform to address weaknesses in the business climate, including regulatory constraints, labour market rigidities and inefficient infrastructure.

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Authors: Peter Leon, Patrick Leyden and Matthew Burnell




The mineral resources sector is primarily regulated by statute and in terms of the Mineral and Petroleum Resources Development Act, 28 of 2002 (MPRDA).

Black economic empowerment (BEE) in the mining industry is regulated under the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (Mining Charter III). Mining Charter III came into force on 1 March 2019 and significantly increased BEE threshold requirements in respect of ownership, procurement and employment equity. To understand the extent of the BEE obligations for South Africa’s mining industry, regard must also be had to the Implementation Guidelines for the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (Guidelines), which the Minister of Mineral Resources and Energy (Minister) published on 19 December 2018.

In addition, prospecting and mining activities are regulated by various environmental and health and safety laws which are considered in more detail in section 9.

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Authors: Silke Goldberg, Ben Rubinstein and Dr Matthew Burnell

In a 2019 global survey, 1,250 CEOs rated environmental / climate change risk the single biggest threat to business growth.


The race is on for businesses to understand their environmental impact and to manage the legal risks to succeed in a lower-carbon future.

Our report, which gathers insights from our global experts, considers the political, regulatory and commercial pressures arising from climate change, looks at the steps for ensuring that risk management practices measure up to the climate change challenge, and examines the benefits for businesses in all sectors that lead the transformation and innovate toward a lower-carbon future.

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We were told that the carbon tax would come into effect from 1 June 2019. However, as the date drew nearer it seemed unlikely as the Carbon Tax Bill had not been signed by the President, the regulations needed to implement the Act were not finalised, the conflicts between the Bill and the proposed climate change legislation had not been resolved and, in fact, the greenhouse gas emission levels were well below predicted levels due to a sluggish economy. Despite these concerns the President signed the Bill and confirmed that the Act would come into effect as planned. Government lived up to their promise.

Since then, the practicalities of trying to implement, budget and cater for the tax are becoming a reality for many companies. On their behalf, business and industry associations are expressing opposition to the tax for the grounds set out above. National Treasury has remained resolute in its decision to implement the tax, indicating that the concerns mentioned will be resolved by the time the tax is payable.

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Author: Dr Matthew Burnell 

We have recently come across decisions made by Regional Managers within South Africa’s Department of Mineral Resources (“DMR”) in terms of sections 24P (Financial provision for remediation of environmental damage) and 28 (Duty of Care) of the National Environmental Management Act (“NEMA”). The Regional Manager does not have the requisite authority to make decisions in terms of these sections and, as a result, any such decisions are unlawful and can be challenged and overturned or (in certain instances) revoked.

Section 24P – Financial provision for remediation of environmental damage

Section 24P regulates financial provision for remediation of environmental damage arising from prospecting or mining activities. Prior to 2 September 2014, financial provisioning was regulated by section 41 of the Minerals and Petroleum Resources Development Act (“MPRDA”) read with regulations 53 and 54 of the MPRDA Regulations. These sections and regulations requires that a prospecting / mining right applicant make financial provision for the rehabilitation of negative environmental impacts arising from their mining activities. If the right holder fails to fulfil their remediation obligations in terms of the Environmental Management Plan / Programme, the DMR could implement these obligations using the financial provision.

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