The attraction of this market to international banks is obvious: South Africa has a history of progressive legislation and economic policy, an independent judiciary and executive. Free of some of the legal, language and cultural complexities that are a feature of some African jurisdictions, South Africa is a relatively safe environment in which to invest or from which to launch or plan investments elsewhere in the region.
With local corporates looking to acquire foreign assets, international banks are well-placed to advise on foreign m&a opportunities as well as provide cheaper dollar funding for such acquisitions.
Competition is not, however, isolated to banks. PE activity in the region has proliferated in recent years. PE funds are rapidly gearing up to make new investments in the form of debt and equity. In providing debt finance, PE funds are not saddled with the capital and regulatory constraints affecting banks.
The increased competition has led to some interesting developments in the local funding market. The Head of Sales and Structuring at Investec Bank Limited, recently commented that the competition has driven Investec to become more innovative from a structuring perspective and provide novel and somewhat bespoke solutions and products to clients.
A&O seeks to work together with our clients to develop solutions. Our international network has given us the unique ability to draw on the knowledge from our colleagues practising in different jurisdictions and adapt products used in other markets to suit the local market.
Local banks are also building a presence in other key African markets. The Rand Merchant Bank arm of FirstRand Bank has, for instance, won a banking licence to operate as an investment bank as well as a licence to operate a sales and trading business in Nigeria. Many other institutions now have Africa desks as a precursor to expanding their presence further across the region.
But in reality – for banks and law firms alike – it’s about following the clients, who have their own increasingly clear Africa vision. It’s our job to stay close to them as they roll out their investment strategies across the continent.