Andrew Bahlmann, MD: Deal Leaders Africa


It is without question that the costs of the Covid-19 pandemic, in terms of both lives and livelihoods, will be immense. Already, South Africa is feeling the impact of a Moody’s sovereign debt downgrade to junk status (finally), a sharply weaker currency and rattled equity markets. Add to this the early indications of a roughly 10% drop in GDP this year plus upwards of 1 million jobs lost, and the prognosis looks particularly gloomy.


But, in times of crisis such as these, there exists opportunity. When we zoom out and consider the big picture, there are some inspiring – and often unexpected – signs of progress. Good news, if you will.


  1. When we work as a team and with a defined purpose, we are extraordinarily capable of getting things done. Thus far, government’s response to the Covid-19 crisis has been exemplary (and surely the envy of some developed nations!) Communication has largely been clear and rational, and although it remains very early, we have used the time ‘bought’ as a result of the changes announced early on, together with the lockdown wisely. While this has been a government-led effort, President Ramaphosa’s approach of social compacting has been noticeable throughout.
  1. A side-effect of this crisis and the resultant reprioritisation of spending is that there is simply no more money to bail out South African Airways (SAA). Indeed, this much was clear in Finance Minister Tito Mboweni’s February budget where the R16.4 billion allocated to the airline over the next three years was earmarked solely for the repayment of debt. The Covid-19 pandemic has forced government’s hand and it now has to make a simple choice between funding a state-owned airline into perpetuity or spending this money where it is more needed. The importance of arriving at the decision to shut down SAA (it will in all likelihood be liquidated, following a failed business rescue process) must not be underestimated. Not only will this free up additional money in the fiscus, it should set a precedent when it comes to other state-owned vanity projects.
  1. Although Eskom has not been able to continue its so-called ‘deep-cycle’ philosophy maintenance during the countrywide lockdown, it has used this time to shut down unnecessary plants due to a substantial drop in demand. This has enabled it to do routine and low-level repairs, boosting maintenance to upwards of 9000MW of capacity from a normal level of under 4000MW. The utility has cautioned that power cuts were likely to resume post the lockdown, but at least Eskom will be on the front foot. When load shedding typically hits, Eskom barely has the room to perform even routine maintenance, which impacts plant reliability thus further increasing the risk of additional unit trips. It is this elevated risk that sees prolonged period of load shedding, from which it is difficult to recover. Separately, the ‘clarity’ created by the lack of fiscal space should see a focused effort to resolve Eskom debt problem, after years of kicking the can down the road.
  1. The licensing of emergency spectrum by the Independent Communication Authority of South Africa (ICASA) in just weeks is a phenomenal step forward for the sector and the broader economy. The allocation, to Vodacom, MTN, Telkom and Liquid Telecom, is temporary and will be used by the operators to deal with unprecedented network demand during the pandemic. However, this has illustrated how wasteful the decade of inaction and dithering by the regulator and government has been, considering this emergency release was allocated within weeks. The formal allocation should take place later this year and this will remove a major bottleneck for broader economic growth.
  1. Treasury and Minister Mboweni are intent to implement the structural reforms spoken about since last year. The crisis may yet have afforded them the necessary political capital to get a number of these adopted by Cabinet. The second phase of Treasury’s economic policy response to the Covid-19 pandemic explicitly states that its interventions will be “supported by an economic recovery plan (structural reforms) and a set of reforms within the fiscal system”. The original paper by Treasury, “Economic transformation, inclusive growth, and competitiveness: Towards and Economic Strategy for South Africa” sees an additional two- to three-percentage points added to growth along with a million new jobs if the proposed reforms are implemented. Many of these reforms will help offset the looming unemployment disaster caused by the pandemic, and we expect this to accelerate their implementation. Over time, we expect these reforms to lower the cost and complexity of doing business, as well as increase the growth potential of our country.


So far, the country’s well-regarded and well-capitalised financial system remains an important asset during a chaotic time. This removes a potential distraction in the coming months.


When we look back in a few years, we hope that this crisis has indeed not been squandered and that our economy and growth prospects look fundamentally different – and more positive – as a result of a completely unexpected global pandemic. Then, we will have used the opportunities provided to our advantage.




Deal Leaders Africa is a boutique M&A advisory firm working with the owners of privately-owned businesses to effectively manage their wealth out of their company. As the African alliance partner to the Pandea Global M&A Network, the company is capable of unlocking extensive local and international acquirer and investor networks.


By bringing on only two to three new clients a month, a professional and experienced team supports and guides the seller – and the seller only – along the daunting and challenging path of selling a business successfully. The Sandton-based advisory firm is currently managing more than 30 transactions in multiple industries, successfully attracting both local and international acquirers to its clients’ businesses. By focusing on businesses with turnovers in excess of R100 million per annum, the Deal Leaders Africa portfolio aligns to the majority of local and international investment strategies.