Investment Banker Warns: Political Uncertainty Threatens South Africa’s Deal Activity

Fractured Government and Global Concerns Dampen M&A Prospects

Political instability within South Africa’s government, combined with global economic uncertainty, is significantly impacting dealmaking in Africa’s largest economy, according to a leading investment banker. Yasmin Masithela, CEO of Absa Group’s corporate and investment banking unit, highlights how these factors are suppressing business confidence despite companies sitting on near-record cash reserves.

Budget Dispute Paralyzes Business Decisions

“There are hardly any infrastructure deals in the market,” Masithela revealed in a Johannesburg interview. “We’re not seeing big M&A or infrastructure deals in our South African pipelines.” This stagnation follows last year’s election results, which forced the African National Congress (ANC) to form a coalition government with nine rival parties, including the market-friendly Democratic Alliance (DA).

The coalition’s stability is being tested by disagreements over budget proposals to increase value-added tax rates. “We always knew the first budget would be the GNU’s biggest test,” Masithela noted, referring to the Government of National Unity. “The protracted process and lack of clarity have made corporations reluctant to pursue deals.”

Global Factors Compound Local Challenges

Investor sentiment faces additional pressure from concerns about U.S. trade policies under President Donald Trump. Masithela observed that clients are hesitant to seek financing—whether short- or long-term—without greater certainty about their business trajectories.

Absa CIB projects modest earnings growth in the “middle single-digit level” for 2025, down from 6% in 2024. The bank expects stronger performance from other African markets like Ghana, Kenya, and Nigeria to drive this growth.

Renewables Offer Path Forward

Despite the challenges, Masithela remains optimistic about growth opportunities, particularly in renewable energy across Africa. “We started our renewables business in South Africa and are now expanding this expertise to countries like Zambia,” she said. “Our deep understanding of sovereign risk management positions us well to meet our targets.”

The bank’s ability to navigate complex political landscapes and risk scenarios continues to inform its positive outlook, even as South Africa’s dealmaking environment faces significant headwinds.