African mergers and acquisitions

When thinking about mergers and acquisitions involving African companies, the assumption is often that the acquired firm is African and that the acquisition partner came from outside of Africa.

Statistically speaking, this guess is well grounded. However, African companies are no strangers to being on the longer end of the lever, and as the chart illustrates that hasn’t been more the case in 2022 than for a number of years.

Data from the White & Case M&A Explorerindicates that in terms of M&A investment value outside of the continent by African companies, 2022 has been a stand-out year to date. 

The energy, mining and the utilities sectors saw the largest investment value ($7bn) with African companies as the bidders in 2022. 

Pharma, medical and biotech, was in second place ($5bn).

South African companies led the way in 2022 in terms of total deal value ($14b) and deal volume (19), while the highest value of all closed deals was made with Canadian and UAE companies.

Source: White & Case M&A Explorer


Pandemic redraws FDI outperformers map

In 2021, Costa Rica, the UAE and North Macedonia were the world’s best FDI performers relative to the size of their economies

In the 7th edition of the Greenfield FDI Performance Index, Costa Rica entrenched its global leadership as the country that attracts the most foreign direct investment (FDI) relative to the size of its economy, thus proving the resilience of its investment proposition in the wake of the Covid-19 pandemic. The UAE and North Macedonia also showed their strength, coming in second and third respectively.

The pandemic redrew the map of the world’s best FDI outperformers relative to the size of their global gross domestic product (GDP). 

In this respect, Costa Rica is both an outperformer and an outlier as the only Latin American country in the top 10, which is dominated by major business hubs such as the UAE and Singapore, and countries in emerging Europe. 

On the other hand, African countries paid the highest price as investment flew back to the safety of OECD countries. 

In 2019, as many as five African countries featured in the top 10; two years later, none of them made it.

China sits bottom of the index as the lowest scoring country. 

The world’s second largest economy, the Asian powerhouse has struggled to recover its investment appeal in the wake of the pandemic, with FDI dropping to record low levels both in 2020 and 2021 despite the overall GDP bouncing to pre-Covid levels already by the end of 2020.

While Costa Rica’s GDP has not quite recovered to the levels recorded in 2019, 2021 brought the country its largest number of recorded FDI projects since 2003. 

Software and IT services makes up 31% of FDI projects recorded in 2021.

The Middle East was the only region in which all locations have a score greater than 1.0. 

However, despite the region’s excellent ability to attract FDI, it only has one country place in the top 10.

The UAE’s score has improved for the third consecutive year.

North Macedonia climbed the most places of all countries analysed, rising an impressive 41 places. 

FDI into the country was hit hard during the pandemic, falling by 67% between 2019 to 2020. 

Its recovery and growth of FDI attractiveness went hand-in-hand with the country’s Nato membership, which was announced in March 2020, and the country’s continuing negotiations with EU members to officially start its EU membership talks, which eventually were launched in July. In 2021, the country attracted major projects in renewable energy, as well as in the software and IT sector. 


The 2021 index contains 9 African countries, and continues a trend that has seen African nations appear less in the index compared to the previous edition – only countries with 10 or more FDI projects in the full year are considered. 

Of those included, only Egypt (1.0) and Tanzania(1.4) saw their scores increase from 2020.

South Africa had an unfortunate year in that while FDI increased, its economic growth outpaced investment, resulting in a drop in this year’s index.

This article first appeared here.


WTO’s Goods Trade Barometer is slap bang in the middle in June 2022

The WTO’s Goods Trade Barometer is a composite leading indicator for world trade, providing real-time information on the trajectory of merchandise trade relative to recent trends. 

The latest reading of 100 coincides exactly with the baseline value of the index, indicating on-trend trade expansion.

The volume of world merchandise trade plateaued. The slowdown in Q1 only partly reflected the impact of the conflict in Ukraine, which broke out in late February. Lockdowns in China also weighed heavily on trade in Q1. 

The components of the goods barometer are a mixed bag, with most indices showing on trend or below trend growth.

The forward-looking export orders index (100.1) is on trend but has turned downwards. 

The automotive products index (99.0) is only slightly below trend but has lost its upward momentum. 

Indices for air freight (96.9) and electronic components (95.6) are below trend and pointing down, while the raw materials index (101.0) has recently risen slightly above trend. 

The main exception is the container shipping index (103.2), which has risen firmly above trend as shipments through Chinese ports have increased with the easing of COVID-19 restrictions.

The latest barometer reading is consistent with the WTO’s most recent trade forecast from April, which predicted 3.0% growth in the volume of world merchandise trade in 2022. 

However, uncertainty surrounding the forecast has increased due to the ongoing conflict in Ukraine, rising inflationary pressures, and expected monetary policy tightening in advanced economies. 

Source: WTO


Global Current Account Balances Widen Amid War and Pandemic

The war in Ukraine and resulting increase in commodity prices are expected to contribute to a further widening this year.

The lingering pandemic and Russia’s invasion of Ukraine are dealing a setback to the global economy. 

This is affecting trade, commodity prices, and financial flows, all of which are changing current account deficits and surpluses.

Global current account balances – the overall size of deficits and surpluses across countries – are widening for a second straight year, according to the IMF’s latest External Sector Report. 

After years of narrowing, balances widened to 3% of global gross domestic product in 2020, grew further to 3.5% last year, and are expected to expand again this year.

Larger current account balances aren’t necessarily negative on their own. 

But global excess balances – the portion not justified by differences in countries’ economic fundamentals, such as demographics, income level and growth potential, and desirable policy settings, using the IMF’s revised methodology – could fuel trade tensions and protectionist measures. That would be a setback for the push for greater international economic cooperation and could also increase the risk of disruptive currency and capital flow movements.

Pandemic effects in 2021

The pandemic widened global current account balances, and it’s still having an asymmetric impact on countries depending, for example, on whether they are exporters or importers of tourism and medical goods.

The pandemic and associated lockdowns also shifted consumption to goods from services as people reduced travel and entertainment. 

This also widened global balances as advanced economies with deficits increased goods imports from emerging market economies with surpluses. 

In 2021, the IMF estimates that this shift increased the United States deficit by 0.4% of GDP and contributed to an increase of 0.3% of GDP in China’s surplus.

Surplus economies like China saw also increases due to greater shipments of medical goods that often flowed to the US and other deficit economies. 

Surging transportation costs also contributed to widening global balances in 2021.

War and tightening in 2022

Commodity prices are one of the biggest drivers of external positions, and last year’s rally in oil prices from pandemic lows affected exporters and importers asymmetrically. 

Russia’s February invasion of Ukraine exacerbated the surge in energy, food, and other commodity prices, widening global current account balances by raising surpluses for commodity exporters.

Monetary policy tightening is driving currency movements as rising inflation is leading many central banks to accelerate the withdrawal of monetary stimulus. 

Revised expectations about the pace of the US monetary tightening brought about sizable currency realignment this year, contributing to the projected widening of balances.

Capital flows to emerging markets were disrupted so far in 2022 by increased risk aversion triggered by the war, with further outflows amid changing expectations about the increased pace of monetary tightening in advanced economies. 

Cumulative outflows from emerging markets have been very large, about $50 billion, with a magnitude that’s similar to outflows during March 2020 but a pace that’s slower.

The IMF’s outlook for next year and beyond is for a steady decline of global current account balances as pandemic and war impacts moderate, though this expectation is subject to considerable uncertainty. 

Global current account balances could continue to widen should fiscal consolidation in current account deficit countries take longer than expected. 

Moreover, the stronger dollar could widen the US current account deficit and increase global current account balances.

Other factors that could widen these balances include a prolonged war that keeps commodity prices elevated for longer, the varying degrees of central bank interest-rate increases, and greater geopolitical tension causing economic fragmentation, disrupting supply chains, and potentially triggering a reorganization of the international monetary system.

A more fragmented trade system could either increase or decrease global balances, depending on how trade blocs are reconfigured. 

Either way, though, it would reduce technology transfers, and decrease the potential for export-led growth in low-income countries and thus unambiguously erode welfare gains from globalization.

Policy priorities

The war in Ukraine has exacerbated existing trade-offs for policymakers, including between fighting inflation and safeguarding economic recovery and between providing support to those affected and rebuilding fiscal buffers. 

Multilateral cooperation is key in dealing with the policy challenges generated by the pandemic and the war, including to tackle the humanitarian crisis.

Policies to promote external rebalancing differ based on individual economies’ positions and needs. 

For economies with larger-than-warranted current account deficits that reflect large fiscal shortfalls, such as the US, it’s critical to reduce government deficits with a combination of higher revenue and lower spending.

Rebalancing is a different proposition for countries with excessive surpluses, such as Germany and the Netherlands, which can be reduced by intensifying reforms that encourage public and private investment and discourage excessive private saving, including by expanding social safety nets in some emerging markets.

This article first appeared here.


The OECD’s South Africa Economic Snapshot

Rather insightful presentation and analysis from the latest OECD Economic Survey of South Africa.

Download the full report and more here: