South Africa's TMT Sector and Bond Market Dynamics in 2025

Media Release

20 March 2024

This article was covered by TechCentral on 20 March 2025 

South Africa's TMT Sector and Bond Market Dynamics in 2025

By Conny Konopi, Senior Transactor, Debt Financing Solutions, covering the TMT sector at RMB 

In the ever-evolving landscape of South Africa's Technology, Media, and Telecom (TMT) sector, alongside its bond markets, 2024 was a year marked by significant developments and trends that are reshaping economic and investment strategies. 

Here’s an in-depth look at the key trends and their implications.

Infrastructure Expansion and Investment

The TMT sector in South Africa is witnessing a robust expansion in infrastructure, particularly in fiber networks and data centers. This infrastructure push is not only critical for economic growth but also aligns with global trends where connectivity is foundational for digital economies.

This growth is fueled by both equity and debt investments, aiming to bolster connectivity and digital infrastructure development. The sector has seen considerable consolidation, especially in fiber networks, as companies strive to enhance service delivery and expand their market reach.  While metro areas have seen considerable investment, secondary towns and lower LSM areas still a large growth area. 

FinTech and Payment Platforms

A burgeoning area within TMT is fintech, particularly payment platforms. Following the success of mobile money services, there’s a notable shift towards separating the mobile money businesses from traditional mobile network operations to capitalise on the digital payment boom. This separation seeks to streamline operations and focus on expanding digital financial services across Africa, where financial inclusion remains a significant challenge. Airtel Money announced that it intends to IPO in 2025, in a much anticipated new listing. With over 38 million subscribers, growth and EBITDA margins in high double digits it offers investors an avenue to invest behind the digitization of payments in Africa.  The evolution of these platforms as independent entities is crucial as they not only enhance consumer access to financial services but also introduce innovative solutions that could disrupt traditional banking models.

The payment platforms segment, while dominated by a few players like M-Pesa in Kenya, still holds untapped potential for innovation and diversification, especially with regulatory support to encourage new entrants. We have seen large capital raises by the likes of Moniepoint in Nigeria and strategic M&A such as Lesaka’s acquisition of Adumo and Recharger in South Africa. 

MNO value unlock

Companies like Telkom have been divesting non-core assets such as their tower portfolio to unlock value and release capital for growth. This follows on the heels of MTN selling its portfolio of towers to an independent tower operator and Vodacom separating its portfolio into a new subsidiary. The value unlock trend is not isolated to South Africa; across Africa, we observe similar patterns with international players like Mastercard partnering with major telecom operators like MTN and Orange to drive financial inclusion across Africa. The strategic retreat to core markets by some mobile operators, such as MTN selling certain of it’s West African operations, is further opening the door for new entries and consolidations, which could lead to a more competitive and diverse industry landscape.

Debt and Equity Financing Trends

With interest rates showing signs of decline, there's a noticeable pivot towards the bond market for financing within the TMT sector. Previously, general market volatility driven by elevated geopolitical risks which led to high bond rates had pushed many companies towards the loan market, but the current scenario favors bond issuances, especially Eurobonds, which offer potentially lower costs of capital, higher liquidity and longer tenors. However, this shift does not entirely starve the loan markets; there's an understanding post-COVID that maintaining access to multiple liquidity pools is essential for financial resilience.

The TMT sector enjoys significant funding interest which  has led to attractive pricing, both in loans and bonds. For borrowers, this is a reprieve from the high-rate environment that is passing. However, this also means that lenders and bond investors need to be strategic, focusing on structured products and innovative fit for purpose solutions for clients instead of just funding. 

South Africa's Unique Market Characteristics

South Africa presents a peculiar case in the global bond market due to its sophisticated financial systems despite its emerging market status. Even with credit downgrades, the South African bond market remains highly liquid, with investors and borrowers alike negotiating keenly on pricing. This environment contrasts with other African markets where macroeconomic vulnerabilities can significantly influence market dynamics.

Regulatory and Market Sentiment

Regulatory frameworks like the EU taxonomy have less direct impact in South Africa compared to Europe, but there’s a growing focus on sustainable financing which could influence future investment in TMT. The political environment, particularly post the 2024 election, has introduced a cautious optimism. Investors continue to engage with South African credits, recognising the potential for growth despite political uncertainties. The bond market, in particular, shows an imbalance with demand outstripping supply, a trend expected to persist through the end of 2024.

Looking Forward

For investors and companies within the TMT sector, the focus should be on digital infrastructure, fintech, and strategic M&A that could redefine market positions. 

The narrative in South Africa's TMT market is one of cautious expansion, strategic financial maneuvers, and a keen eye on innovation and infrastructure development. As companies navigate these trends, the balance between growth and risk management will dictate the sector's trajectory in the coming years. The funding avenues mirror the overall sector trends and strategic direction as regards cautious expansion and focus on new innovations and infrastructure development. 

This environment provides a fertile ground for both established players and new entrants to rethink strategies, leverage technology for growth, and engage with a dynamic financial market that, despite its challenges, remains one of the most sophisticated in Africa. 

ENDS