International conference: 82nd International Atlantic Economic Conference

South Africa - 21 November 2017

Title: Drivers for inorganic growth methods through mergers and acquisitions in the freight and logistics industry of South Africa
Author(s): De Villiers, C., Bezuidenhout, H. & Grater, S.

Abstract:
This study aims to determine the multidisciplinary aspects that are driving foreign direct investment (FDI) through inorganic growth methods, with a specific focus on mergers and acquisitions in the freight and logistics industry of South Africa. Considering the fast-growing nature of the freight and logistics industry globally at the infrastructure, policy and intercontinental levels, it is becoming crucial for large international multinationals and policymakers to have an information-based understanding of the current trends surrounding mergers and acquisitions in the industry.

The South African logistics sector is showing a strong theoretical sectorial shift towards an oligopolistic economy, with strong market consolidation and foreign take-overs. The last decade has seen substantial multinational interest in the South African logistics sector. The paper aims to understand the drivers and motives of this pattern. Drawing from a practical case study and augmented by interviews with some of the affected CEOs, the results indicate a strong interest among firms to inorganically grow their global footprint into Africa, with South Africa being the point of entry. South African logistics firms are viewed as being better suited to deal with the infrastructure, corruption, management and trade facilitation challenges in Africa and therefore they become prime M&A targets. Riding the post-2008 commodity boom, South African logistics companies have expanded into the entire Sub-Saharan Africa region and developed in-house skills and resources to deal with this complex logistics environment. The favourable exchange rate for dollar- and euro-based firms has made South African firms very attractive from an investment point of view. The results of the study also help to advance the discussion on foreign ownership and its influence on established local firms.

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