GOLDMAN Sachs expects a surge in deal activity in South Africa this year, with its local CEO predicting broad-based growth across sectors as the economy begins to benefit from structural reforms and rising commodity prices.
“We expect activity across the board and our pipeline has broadened across sectors,” Simon Denny, CEO of Goldman Sachs South Africa told Bloomberg News. “Mining will continue to be a big theme this year and there are growing benefits to scale.”
Platinum prices have more than doubled over the past 12 months while gold has risen about 73%, spurring transactions including the merger of Anglo American and Teck Resources and the spinoff of Valterra Platinum from Anglo. “We are in the late stage of a commodity boom, with gold spiking and platinum prices rebounding strongly — that should also be a needed windfall for the South African government,” Denny said.
South Africa’s economy has expanded by less than 1% annually for a decade, hampered by corruption and crumbling infrastructure.
Reforms addressing power shortages and opening the freight-rail network to private operators have begun to lift investor confidence, though the central bank forecasts growth of only 1.4% this year and 1.9% next — well below the IMF’s global average projections of 3.3% and 3.2% respectively.
“It remains fragile, and maybe still not moving at the pace we would want it to, but it is happening,” Denny told the newswire.
President Cyril Ramaphosa has set a target of 3.5% growth by 2030, requiring an estimated R1.6 trillion in public infrastructure spending and a further R3.2 trillion from private investors, said Bloomberg News. Financial services, property, digital infrastructure and industrials are all expected to see consolidation, while the consumer sector faces both offensive and defensive deal-making pressures amid competition from low-cost online rivals, it said.
