Examining BHP's $39 Billion Offer for Anglo American: Insights into the South African Economy

900 Words | 7 Min Read

This week, our focus shifts to the potential mega mining merger brewing between industry giants BHP and Anglo American.

However, beyond the scope of this proposed merger lies a deeper examination of the implications it holds for the South African economy, uncovering significant lessons worth exploring and touching on prospects for current students and emerging professionals looking to make their mark on the business landscape.

Current Affairs

BHP Billiton’s $39 Billion Merger Proposal To Acquire Anglo American : A Scary Prospect For South Africa

BHP an Australian mining company recently submitted an all-share merger offer of $39 billion to Anglo American, however the offer was swiftly rejected on the grounds that Anglo believes the offer does not accurately reflect the company’s value. This indicates that the merger although initially rejected is far from impossible and gives way to a length merger negotiation process.

This possible mega-merger would see the BHP group rise to a $200 billion valued mining major with an estimated top line revenue of $84 billion per year.

It’s important to note that this merger also has many facets which from a South African perspective raises a massive concern.

Disinvestment In South Africa

BHP’s merger proposition comes as a result of their operations in regards to copper supplies, a lucrative material in light of the push toward renewable energy as it is widely used in the production of renewable energy tech.

The statement above made by BHP raises large concerns regarding the effect of the merger on the mining industry in South Africa and the knock-on effect thereof, especially considering that the mining industry accounts for a major portion of exports and the overall GDP of the country.

BHP proposes that Anglo Platinum and Kumba Iron Ore would continue to operate as independently listed South African companies. However, with the loss of the Anglo group as a support basis and figurehead, there would be a hefty risk and threat of downscale in operations especially when factoring that BHP would likely push the top customers acquired to their higher margin Australian and global operations - leaving the South African companies with a smaller overall pool of clients. This would ultimately harm the country both based on exports and the fact that downscaling would be highly possible, which is detrimental as the mining sector employs a tremendous amount of people in the country.

However, It remains for the Competition Commission to approve any possible future merger and thus this allows some leverage to negotiate terms which would favour the South African economy.

This merger is a MUST to keep up to date on, be sure to be on the look out for news regarding any updates!

Where Do Accountants Come Into Play:

The positions held by Chartered Accountants, as business leaders, ultimately gives them the ability to combat the effect of disinvestment in South Africa.

Let’s take a look at the role they play:

1. Strategic Leadership: Chartered accountants often hold leadership positions within organisations, providing them with a platform to influence strategic decisions. By advocating for the localisation of supply chains and the development of value-added industries within South Africa, CAs can contribute to long-term economic sustainability.

2. Partnership Building: CAs can leverage their networks and expertise to foster partnerships between businesses, government agencies, and other stakeholders. These partnerships can facilitate investment in local industries, promote innovation, and create opportunities for collaboration and knowledge sharing.

3. Value Chain Optimisation: CAs possess skills in financial analysis and risk management, which can be instrumental in optimising value chains and enhancing operational efficiency. By identifying opportunities for value creation and cost reduction within local industries, CAs can help businesses unlock their full potential and compete more effectively in the global market.

4. Job Creation: By promoting the development of local industries and value-added processes, CAs can contribute to job creation and skills development within South Africa. This, in turn, can help alleviate unemployment and foster economic inclusivity, ultimately driving social and economic progress.

5. Export Expansion: CAs can support businesses in expanding their export capabilities by providing financial and strategic guidance. By tapping into international markets and diversifying export channels, South African businesses can access new revenue streams and enhance their competitiveness on the global stage.

6. Ethical Leadership: As trusted advisors, CAs have a responsibility to uphold ethical standards and promote integrity in business practices. By advocating for sustainable and responsible business conduct, CAs can help build trust with stakeholders and strengthen South Africa's reputation as a reliable and ethical trading partner.

7. Continuous Learning and Development: CAs can stay abreast of emerging trends and best practices in business management through continuous learning and professional development. By acquiring new skills and knowledge, CAs can enhance their effectiveness as business leaders and drive positive change within their organisations and the broader economy.

By taking a proactive approach to economic development and leveraging their expertise, chartered accountants can play a crucial role in shaping the future of South Africa's business landscape and driving sustainable growth for the benefit of all stakeholders.

This thinking is heavily touched on in Bruce Whitfield’s book “Genius”, a great book worth reading with great insight into some prospects for the South African business landscape.

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