By Andrew Bahlmann
As the US presidential election nears, the prospect of Donald Trump returning to office raises significant questions about the global economic landscape.
For South Africa, Trump's potential re-election could have multifaceted implications, particularly in areas such as the economy, mergers and acquisitions (M&A) activity, and the overall ease of doing business.
Trump's economic policies during his first term were characterised by a strong emphasis on protectionism, with a focus on “America First”. Should he return to office, South Africa might face similar policies, potentially leading to tighter trade conditions.
Trump's approach to trade often involved tariffs and renegotiating trade agreements to favour US interests. This could be aggravated by the close ties the previous South African government forged with US protagonists, such as Russia, China and Iran, and its anti-Israeli stance. This may consequently pose challenges for South African businesses in an “America First” environment.
The M&A landscape could be influenced in a range of ways and sectors by a Trump presidency. Historically, Trump's administration implemented tax reforms that encouraged repatriation of profits held overseas by American companies. This influx of capital could potentially lead to increased M&A activity as US companies seek to invest or acquire assets abroad. For South African firms, this could mean more opportunities for cross-border deals, particularly if American companies look to diversify their portfolios in sub-Saharan Africa.
On the other hand, Trump's unpredictable approach to international relations and trade could inject uncertainties that make cross-border transactions more complex. Companies may face increased scrutiny and regulatory hurdles impacting the feasibility and attractiveness of potential deals.
American technology giants, such as data centre managers flush with repatriated cash, might look to invest in high-growth markets such as Africa, which are coming off a low base. South Africa, with its burgeoning tech ecosystem, has already become a hotspot for such investments.
Agriculture is a critical sector in many African economies, and American agribusinesses could see Africa as a prime opportunity for expansion to improve food security on the continent. With the additional capital from repatriated profits, a large US agribusiness might invest in South African agricultural companies, seeking to leverage advanced American farming technologies in the cold chain and practices to increase productivity.
American companies specialising in infrastructure might target Africa for new projects, particularly in light of the new government’s stated objective of increasing infrastructure investment to battle poverty. For instance, a US construction giant might see the benefit of entering into joint ventures with South African construction firms to develop large-scale infrastructure projects such as roads, bridges, railways or energy facilities. Such deals could enhance South Africa's infrastructure, promote economic growth, and provide significant employment opportunities.
The energy sector in particular could see notable M&A activity, especially with American firms looking to diversify their energy portfolios and South Africa’s need to expand generation and distribution. South Africa, with its rich natural resources and growing renewable energy sector, could attract US investments. An example could be major US energy companies acquiring stakes in South African renewable energy projects, such as wind or solar farms.
Health is another sector that could benefit from increased M&A. American pharmaceutical and health-care companies might look to partner with or acquire South African health-care firms to tap into the continent's growing health-care market. For instance, a US pharmaceutical company could target African biotech firms specialising in vaccines or treatments for diseases prevalent in Africa.
The ease of doing business in South Africa could come under the spotlight. If Trump continues to prioritise bilateral agreements over multilateral trade deals, South Africa may need to navigate new trade negotiations to secure favourable terms. This could result in both opportunities and challenges, depending on how well the South African government can align its policies with US interests and steer away from some of our current friends.
Should we make the right moves, a Trump focused on countering China's influence could present opportunities for South Africa to leverage its strategic position in Africa to attract US investment and strengthen bilateral ties.
The South African government’s announcement that it will loosen restrictions on inward-bound skills will consequently come at a good time – signalling that South Africa is open for business.
Trump's foreign policy approach, marked by a mix of unpredictability and assertiveness, could reshape geopolitical dynamics in ways that affect South Africa. A more isolationist US stance might lead to reduced American engagement in international development programmes, which could impact aid and investment flow into South Africa.
The potential re-election of Donald Trump could have significant and varied impacts on South Africa. While there may be opportunities in terms of increased M&A activity and strategic alignment, the challenges posed by protectionist trade policies and geopolitical uncertainties cannot be overlooked.
Andrew Bahlmann is the chief executive of Corporate & Advisory, Deal Leaders International.
BUSINESS REPORT