82nd International Atlantic Economic Conference

October 13 - 16, 2016 | Washington, USA

Drivers of FDI through mergers and acquisitions in the freight and logistics industry of South Africa

Saturday, October 15, 2016: 10:20 AM
Henri Bezuidenhout, Ph.D. , School of Economics, North-West University, Potchefstroom, South Africa
Sonja Grater, Ph.D. , North-West University, Potchefstroom, South Africa
Chantelle De Villiers, Masters , Steinweg Bridge Shipping, Johannesburg, South Africa
This study aims to determine the multidisciplinary aspects that are driving foreign direct investment (FDI) through inorganic growth methods, with specific focus on mergers & acquisitions in the freight & logistics industry of South Africa. Considering the fast growing nature of the freight and logistics industry globally at an infrastructure, policy and intercontinental level, it becomes crucial for large international multinationals and policy makers to have an information-based understanding of the current trend of 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 saw substantial multinational interest in the South African logistics sector. We aim to understand the drivers and motives of this pattern using a case study-based approach, augmented with interviews with some of the affected CEO’s. The results indicate a strong interest in firms to inorganically grow their global footprint into Africa, with South Africa being the point of entry. South African logistics firms are viewed as better suited to deal with the infrastructure, corruption, management and trade facilitation challenges in Africa and therefore they become prime merger and acquisition (M&A) targets. Riding the post 2008 commodity boom, South African logistics companies expanded greatly 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 made the South African firms very attractive from an investment point of view. The results of this study contributes to further the discussion about foreign ownership and the influence on established local firms.